Holding

State Electricity Regulatory Commissions cannot entertain petitions solely on public‑interest grounds nor directly regulate distribution franchisees; investigations under Section 128 may be directed only against the distribution licensee, rendering the petition unmaintainable.

Summary

The Supreme Court examined a petition filed by an individual (respondent No.4) before the Uttar Pradesh Electricity Regulatory Commission (UPERC) seeking an investigation under Section 128 of the Electricity Act, 2003 into a Distribution Franchisee Agreement (DFA) between Torrent Power Limited (the appellant) and the distribution licensee DVVNL. The key issues were whether a State Electricity Regulatory Commission (ERC) could entertain matters solely on public‑interest grounds, whether it had jurisdiction to review the functioning of a distribution licensee’s franchise arrangement, and whether the Section 128 petition was maintainable. The Court held that ERCs derive their powers strictly from the Act and cannot act on the sole ground of public interest, nor can they directly regulate franchisees; investigations under Section 128 may be ordered only against the licensee, not the franchisee, and the petition lacked the requisite satisfaction of breach of licence conditions. Consequently, the appeal was allowed, the APTEL order set aside, and the Expert Committee report rendered ineffective.

Issues considered

Can an individual invoke the jurisdiction of a State Electricity Regulatory Commission on the basis of public interest?
Does the Electricity Act, 2003 confer jurisdiction on State ERCs to consider and adjudicate the efficacy of a distribution franchisee agreement?
Is a petition filed under Section 128 of the Electricity Act, 2003 maintainable in the present facts?
Do State ERCs have jurisdiction to review the functioning of a distribution licensee supplying electricity through a franchisee?

Legislation cited

Electricity Act, 2003s. 107, s. 108, s. 111, s. 128, s. 129, s. 130, s. 14 (seventh proviso), s. 16, s. 18, s. 181, s. 19, s. 20, s. 2(15), s. 2(17), s. 2(27), s. 61, s. 62, s. 63, s. 79, s. 82, s. 86
Uttar Pradesh Electricity Reforms Act, 1999
Uttar Pradesh Electricity Regulatory Commission (Conduct of Business) Rules, 2004s. Regulation 14, s. Regulation 5
Uttar Pradesh Electricity Regulatory Commission (Consumer Grievance Redressal Forum & Electricity Ombudsman) Regulations, 2007
Uttar Pradesh Electricity Regulatory Commission (General Conditions of Distribution License) Regulations, 2004
Uttar Pradesh Transfer of Distribution Undertaking Scheme, 2003

Headnote

Issue for Consideration i) Whether any individual can invoke the jurisdiction of a State Electricity Regulatory Commissions (ERC) on the plea of public interest. In other words, whether an ERC has the jurisdiction to consider matters in public interest; ii) Whether the Act, 2003 State ERCs to consider and adjudicate the efficacy of a distribution franchisee agreement entered between a distribution licensee and a distribution franchisee. In other words, whether ERCs have the jurisdiction to review the functioning of a distribution licensee to supply the electricity through

Subjects

Distribution franchiseeDistribution licenceeCentral and State Electricity Regulatory CommissionsJurisdictionAdjudicatory jurisdictionInput‑rate model of distribution franchiseeCommercial principlesPublic InterestElectricityAgencyConsumerDistribution Franchisee AgreementJurisdiction to review the functioning of a distribution licensee

Judgment

[2025] 7 S.C.R. 693 : 2025 INSC 838

Torrent Power Limited
v.
U.P. Electricity Regulatory Commission & Ors.
(Civil Appeal No. 23514 of 2017)
14 July 2025
[J.B. Pardiwala* and R. Mahadevan, JJ.]

Issue for Consideration
i) Whether any individual can invoke the jurisdiction of a State
Electricity Regulatory Commissions (ERC) on the plea of public
interest. In other words, whether an ERC has the jurisdiction to
consider matters in public interest; ii) Whether the Act, 2003 confers
jurisdiction on the State ERCs to consider and adjudicate the
efficacy of a distribution franchisee agreement entered between a
distribution licensee and a distribution franchisee. In other words,
whether ERCs have the jurisdiction to review the functioning of a
distribution licensee to supply the electricity through a franchisee.

Headnotes†
Electricity Act, 2003 – s.2(15), s.2(17), s.2(27), seventh proviso
to s.14, s.82, s.86, s.107, s.108, s.111, s.128, s.129, s.130, s.181,
Part VII – Whether the Electricity Regulatory Commission has
the jurisdiction to consider matters in public interest:
Held: Sections 107 and 108 respectively of the Act, 2003 mandate
the ERCs to be guided by directions in matters of policy involving
public interest as the Central/State Government may give to it
in writing – Electricity being a natural resource that vests in the
State, the provisions of the Act, 2003 keep consumers’ interest at
the core of all processes that are sought to be governed under
the Act, 2003 namely, generation, transmission and distribution of
electricity – The ERCs, being creatures of a statute, derive their
jurisdiction and powers from the provisions of that statute i.e.,
the Act, 2003 – Therefore, it would not be permissible for them
to exercise powers not expressly vested in them – As a principle
of law, the ERCs are not competent to entertain a matter on the
singular ground of public interest. [Paras 37, 38, 43, 56]

* Author
694 [2025] 7 S.C.R.

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Electricity Act, 2003 – s.128 – The respondent no.4 had preferred
a petition before the UPERC, questioning the legality, validity
and propriety of the Distribution Franchisee Agreement dated
18.05.2009 and Supplementary Agreement dated 17.03.2010
respectively (together referred to as the “DFA”) entered and
executed between the appellant (distribution franchisee) and
the respondent no.3 (distribution licensee) – Respondent no.4
prayed for an investigation u/s.128 of the Act, 2003 against
the respondent nos.2 and 3 as well as the appellant – Whether
the petition filed by the respondent no.4 u/s.128 of the Act,
2003 was maintainable in law:
Held: The respondent no.4, though, has levelled serious
allegations against the respondent no.2 and the appellant, yet
has not provided any reasons or documentation in respect of
how the appellant and respondent no.2 are in violation of tariff
orders – Further, even the Expert Committee Report dated
09.01.2017 does not shed any light on how tariff orders are
being contravened by the appellant – What is discernible is
that unless some satisfactory grounds are given for initiating
an investigation, a petition or an application u/s.128 cannot be
held to be maintainable – The ERCs are required to consider
matters in public interest wherever mandated by the Act, 2003,
i.e., in matters relating to tariff determination, procurement of
power processes, and utility/licensee management which requires
safeguarding of consumer interest alongside the commercial
principles – This Court is, therefore, of the considered view that
in the present case, the petition of the respondent no.4 filed
u/s.128 does not fulfill the parameters of satisfaction required
under the said Section. [Paras 67, 68]

Electricity Act, 2003 – ss.16, 18, 19, 20, 128 – Whether the ERCs
have the jurisdiction to review the functioning of a distribution
licensee to supply electricity through a franchisee:
Held: An ERC may not directly regulate a franchisee, it exercises
regulatory oversight over the distribution licensee’s functions and
duties, including the process of a distribution licensee delegating
some of its functions and activities to a franchisee – Further,
Sections 16, 18, 19 and 20 of the Act, 2003 respectively, prescribe
that the ERC can stipulate/review the terms and conditions under
[2025] 7 S.C.R. 695

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

which a distribution licensee may delegate its electricity distribution
responsibilities to a franchisee – Such stipulation/review occurs
as a part of ERC’s regulatory functions – It is apposite to observe
that the Act, 2003 does not provide for a direct regulatory oversight
by the ERCs in respect of the distribution franchisees – Part IV
of the Act, 2003, from Sections 12 to 24 deals with licensing
which inter-alia includes the procedure for grant of licence,
conditions of licence, actions that a licensee may not undertake,
amendment of licence, revocation of licence, sale of utilities of
licensees, directions to licensees, and suspension of distribution
licence and sale of utility – All these stipulations are to regulate
the distribution licensee – There is no such stipulation provided
to control or regulate the relationship between a licensee and
franchisee – It is well settled that the relationship between the
distribution licensee and franchisee is one of agency – As a natural
corollary, the franchisee is accountable only to the distribution
licensee, who in turn is accountable to the consumers – The Act,
2003 does not envisage direct regulatory oversight as regards
distribution franchisees and by virtue of their relationship of agency,
such franchisees can only be indirectly regulated through the
distribution licensee – Therefore, even an investigation u/s.128
can only happen in respect of a distribution licensee and not its
franchisee. [Paras 71, 72, 73, 75]

Electricity Act, 2003 – s.128 – Uttar Pradesh Electricity
Regulatory Commission (Consumer Grievance Redressal
Forum & Electricity Ombudsman) Regulations, 2007 –
Reg.5 – Uttar Pradesh Electricity Regulatory Commission
(Conduct of Business) Rules, 2004 – Reg.14 – A Distribution
Franchisee Agreement dated 18.05.2009 and Supplementary
Agreement dated 17.03.2010 respectively (together referred
to as the “DFA”) entered and executed between the appellant
(distribution franchisee) and the respondent no.3 (distribution
licensee) appointing the appellant herein as a franchisee for
distribution of electricity – Respondent No.4 (an individual)
preferred Petition No.816 of 2012 u/s.128 of 2003 Act before
the UPERC, questioning the legality, validity and propriety of
DFA – The UPERC held the petition was maintainable on the
grounds of public interest and further, ordered formation of
an Expert Committee to give findings – The APTEL held that
696 [2025] 7 S.C.R.

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petition before the UPERC was maintainable and observed
that ERCs are empowered to exercise regulatory oversight
on distribution licensees – Correctness:
Held: 1. The UPERC fell in serious error in entertaining the
petition filed by the respondent no.4 and passing the order
constituting an expert committee – The APTEL also failed to
look into the error committed by the UPERC and dismissed
the appeal filed by the appellant-herein – The impugned order
passed by the APTEL is hereby set aside – As a consequence,
the report of the Expert Committee also pales into insignificance.
[Paras 78, 79]
2. The ERCs are required to consider matters in public interest
wherever mandated by the Act, 2003, i.e., in matters relating to
tariff determination, procurement of power processes, and utility/
licensee management which requires safeguarding of consumer
interest alongside the commercial principles – This Court, therefore,
of the considered view that in the present case, the petition of the
respondent no.4 filed u/s.128 does not fulfill the parameters of
satisfaction required under the said Section – The issue whether
an investigation u/s.128 could be ordered against DVVNL or
respondent no.2, the answer in the negative – It goes without
saying that the investigation to be conducted by an authority
u/s.128 is to be limited to only two eventualities: (i) if the licensee
fails to abide by the terms of its license, and (ii) if the licensee
acts in contravention to the provisions of the Act, 2003 and the
regulations thereunder – The exposition in the aforesaid clarifies
that the threshold of “satisfaction” required to order an investigation
u/s.128 was not met by the respondent no.4 and even the Expert
Committee did not present any findings as regards these two
considerations – Insofar, regulatory oversight as regards distribution
franchisees is concerned, there is no doubt that the Act, 2003 does
not envisage direct regulatory oversight as regards distribution
franchisees and by virtue of their relationship of agency, such
franchisees can only be indirectly regulated through the distribution
licensee – Therefore, even an investigation u/s.128 can only happen
in respect of a distribution licensee and not its franchisee – This
is in consonance with the principle of agency – Any action of the
franchisee is equivalent to such action having been committed
by a distribution licensee – Therefore, only the distribution
[2025] 7 S.C.R. 697

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

licensee can be questioned for any action that its agent commits.
[Paras 68, 77, 75]

Electricity Act, 2003 – Input-rate model of distribution
franchisee – Explained:
Held: In this model, a franchisee buys electricity from a distribution
licensee at defined input point(s) at a pre-determined rate which is
annualized for consistency on a yearly basis – This pre-determined
rate that has to be paid by the franchisee to the distribution licensee
for purchase of electricity, is usually fixed by way of bids received
from private players interested in assuming the role of a franchisee –
The private party that quotes the highest rate is awarded the bid
subject to other terms and conditions of the bidding process – It
is for this reason that quoting of such annualized rates is required
even by the Ministry of Power’s “Standard Bidding Document for
Appointment of Input based Distribution Franchisee, June 2012”.
[Para 61]

Electricity Act, 2003 – Functions of Central and State Electricity
Regulations Commissions – Nature and Scope of – Discussed:
Held: Under the scheme of the Act, 2003, the Central and State
ERCs are vested with regulatory functions, tariff determination
functions, and adjudicatory functions, in particular under
Sections 79 and 86 respectively – Whilst in the exercise of
regulatory functions, the ERCs are also required to comply with
the various Regulations made by the respective Central and
State Commissions under Sections 178 and 181 respectively
of the Act, 2003 – A close reading of most of the Regulations
framed by the ERCs i.e., Regulations pertaining to Open Access,
Connectivity Regulations, Regulations on Renewable Power
Purchase Obligations etc., indicate that regulatory powers and
functions of the ERCs must be exercised in public or consumer
interest alongside commercial principles – The function of tariff
adoption or determination is also mandated to be carried by ERCs
in accordance with public interest and to safeguard consumer
needs – It is noteworthy that Section 61 of the Act, 2003 also
requires ERCs to consider commercial principles in matters of tariff
and therefore ERCs are expected to undertake a balancing act
between commercial prudence and consumer interest. [Para 48]
698 [2025] 7 S.C.R.

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Electricity Act, 2003 – ss.79, 86 – Adjudicatory jurisdiction–
Central ERC and State ERCs – Difference – Whether consumer
disputes falls within the adjudicatory jurisdiction of UPERC:
Held: Adjudicatory jurisdiction of the Central Commission is
specified under Section 79(1)(f) and is limited to adjudication
of disputes involving generating companies or transmission
licensee, in regard to matters connected with clauses (a) to
(d) – The State ERCs have a comparatively broader jurisdiction
under Section 86, to adjudicate upon all disputes between the
licensees and generating companies, without being limited to
categories specified in (a) to (d) of Section 79 – However, even
this enlarged jurisdiction of the State ERCs, more particularly the
UPERC, does not include within its fold the power to adjudicate
disputes involving consumers and by extension their grievances,
irrespective of whether such issue is raised in furtherance of
public interest. [Paras 49, 50]

Case Law Cited
Maharashtra State Electricity Distribution Co. Ltd. v. Reliance Energy
Ltd. [2007] 9 SCR 9 : (2007) 8 SCC 381 – held inapplicable.
Paschimanchal Vidyut Vitran Nigam Ltd. v. Adarsh Textiles [2014]
14 SCR 482: (2014) 16 SCC 212; M.P. Power Management Co.
Ltd. v. Sky Power Southeast Solar India (P) Ltd. [2022] 5 SCR 1 :
(2023) 2 SCC 703; Jaipur Vidyut Vitran Nigam Ltd. v. MB Power
(M.P.) Ltd. [2024] 1 SCR 909 : (2024) 8 SCC 513; All India Power
Engineer Federation v. Sasan Power Ltd. [2016] 9 SCR 901 :
(2017) 1 SCC 487; Rajeev Hitendra Pathak v. Achyut Kashinath
Karekar [2011] 10 SCR 513 : (2011) 9 SCC 541; Chiranjilal Shrilal
Goenka v. Jasjit Singh [1993] 2 SCR 454 : (1993) 2 SCC 507;
A.R. Antulay v. R.S. Nayak [1988] Supp. 1 SCR 1 : (1988) 2
SCC 602; Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor
Power Co. (India) (P) Ltd. [2017] 14 SCR 115 : (2017) 16 SCC
498 – relied on.
Energy Watchdog v. CERC [2017] 3 SCR 153 : (2017) 14
SCC 80 – referred to.
Amausi Industries Association v. Uttar Pradesh Electricity Regulatory
Commission, 2013 SCC OnLine APTEL 138; City Corporation
Limited v. Maharashtra Electricity Regulatory Commission and Anr.,
[2025] 7 S.C.R. 699

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

2024 SCC OnLine APTEL 103; Bhadreshwar Vidyut (P) Ltd. v.
Maharashtra ERC, 2024 SCC OnLine APTEL 47 – referred to.
Global Feeds Feedback Energy Distribution Company Private
Ltd. v. Govt. of Odisha, 2019 SCC OnLine Ori 205; Citizen Forum,
Maharashtra v. State of Maharashtra, 2008 SCC OnLine Bom
165 – referred to.

List of Acts
Electricity Act, 2003; Uttar Pradesh Electricity Regulatory
Commission (Consumer Grievance Redressal Forum & Electricity
Ombudsman) Regulations, 2007; Uttar Pradesh Electricity
Regulatory Commission (Conduct of Business) Rules, 2004; Uttar
Pradesh Electricity Regulatory Commission (General Conditions of
Distribution License) Regulations, 2004; Uttar Pradesh Electricity
Reforms Act, 1999; Uttar Pradesh Transfer of Distribution
Undertaking Scheme, 2003.

List of Keywords
Distribution franchisee; Distribution licencee; Central and State
Electricity Regulations Commissions; Jurisdiction; Adjudicatory
jurisdiction; Input-rate model of distribution franchisee; Commercial
principles; Public Interest; Electricity; Agency; Consumer;
Distribution Franchisee Agreement; Jurisdiction to review the
functioning of a distribution licensee.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 23514
of 2017
From the Judgment and Order dated 28.07.2016 of the Appellate
Tribunal for Electricity at New Delhi in AN No. 188 of 2015

Appearances for Parties
Advs. for the Appellant:
Ms. Deepa P Chawan, Sr. Adv., Ms. Reshma Roy, Sudhir Naagar,
Arun Kumar Nagar, Manohar Naagar.
Advs. for the Respondents:
Pradeep Misra, Daleep Dhyani, Anupam Misra, Suraj Singh, Anand
K. Ganesan, Nikunj Dayal.
700 [2025] 7 S.C.R.

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Judgment / Order of the Supreme Court

Judgment

J.B. Pardiwala, J.

For the convenience of exposition, this judgment is divided into the
following parts:

INDEX*

A. FACTUAL MATRIX .................................................................... 2

(i) Order passed by the UPERC ......................................... 7

(ii) Impugned Order passed by the APTEL ........................ 9

(iii) Report of the Expert Committee ................................... 16

B. SUBMISSIONS ON BEHALF OF THE APPELLANT .............. 27

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT NO.4 ... 29

D. ANALYSIS ................................................................................. 32

(i) Relevant provisions of the Act, 2003 ............................ 32

(ii) Whether the Electricity Regulatory Commission
has the jurisdiction to consider matters in public
interest? .......................................................................... 49

(iii) Whether the petition filed by the respondent no. 4
under Section 128 of the Act, 2003 was maintainable
in law? .............................................................................. 63

(iv) Whether the ERCs have the jurisdiction to review
the functioning of a distribution licensee to supply
electricity through a franchisee? ................................ 79

E. CONCLUSION ......................................................................... 87

* Ed. Note: Pagination as per the original Judgment.
[2025] 7 S.C.R. 701

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

1. This statutory appeal filed under Section 125 of the Electricity Act,
2003 arises from the judgment and order passed by the Appellate
Tribunal for Electricity, New Delhi (“APTEL”) dated 28.07.2016 in
Appeal No. 188 of 2015. The appeal filed by the appellant herein,
under Section 111 of the Electricity Act, 2003 (for short, the “Act,
2003”) came to be dismissed by the APTEL, thereby affirming the
order dated 16.07.2015 passed by the Uttar Pradesh Electricity
Regulatory Commission (“UPERC”).

A. FACTUAL MATRIX
2. The facts giving rise to this appeal may be summarized as under:
i. The respondent no. 4 had preferred Petition No. 816 of 2012
dated 25.07.2012 before the UPERC, questioning the legality,
validity and propriety of the Distribution Franchisee Agreement
dated 18.05.2009 and Supplementary Agreement dated
17.03.2010 respectively (together referred to as the “DFA”)
entered and executed between the appellant (distribution
franchisee) and the respondent no. 3 (distribution licensee).
The respondent no. 4 prayed for investigation of the conduct of
respondent nos. 2 and 3 respectively in appointing the appellant
herein as a franchisee for distribution of electricity in the urban
area of Agra without purportedly seeking prior approval of the
UPERC for transfer of its utility to the appellant, which is violative
of Section 17 of the Act, 2003.
ii. The appellant herein had filed the preliminary objections in the
said petition inter alia raising the grounds of jurisdiction and
maintainability of the petition, before the UPERC. The said
preliminary objections of the appellant were disposed of by
the UPERC vide its order dated 16.07.2015 on the grounds
of public interest.
iii. The appellant herein preferred an appeal bearing no. 188 of
2015 under Section 111 of the Act, 2003 before the APTEL
assailing the order dated 16.07.2015 referred to above on
inter alia twin grounds that first, the Electricity Regulatory
Commissions (“ERCs”) lack the jurisdiction under the Act,
2003 to consider issues in public interest as well as contractual
matters concerning the appointment of a distribution franchisee
702 [2025] 7 S.C.R.

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and secondly, the grievance of an individual person who is not
even a consumer is not maintainable before the ERC under
the provisions of the Act, 2003.
3. The following list of dates and events would make the picture more
clear:-

06.07.1999 The Uttar Pradesh Electricity Reforms Act, 1999 came
into force.
14.01.2000 In pursuance of a reform-restructuring exercise, the
erstwhile Uttar Pradesh State Electricity Board (“UPSEB”)
was unbundled under the first reforms transfer scheme,
into three separate entities:
• Uttar Pradesh Power Corporation Limited (“UPPCL”)
was vested with the function of Transmission and
Distribution within the State.
• Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited
[UPRVUNL] was vested with the function of Thermal
Generation within the State.
• Uttar Pradesh Jal Vidyut Nigam Limited (UPJVNL)
was vested with the function of Hydro Generation
within the State.
The trifurcation of the UPSEB was accompanied by the
financial restructuring of the State’s Power Sector utilities.
Four new distribution companies were created vide Uttar
Pradesh Transfer of Distribution Undertaking Scheme,
2003 to undertake distribution and supply of electricity in
the areas under their respective zones specified in the
scheme. These four distribution companies (“DISCOM”)
are as follow:
• Dakshinanchal Vidyut Vitaran Nigam Limited [Agra
DISCOM],
• Madhyanchal Vidyut Vitaran Nigam Limited [Lucknow
DISCOM],
• Pashchimanchal Vidyut Vitaran Nigam Limited
[Meerut DISCOM) and
• Poorvanchal Vidyut Vitaran Nigam Limited (Varanasi
DISCOM),
10.06.2003 The Electricity Act, 2003 came into force.
[2025] 7 S.C.R. 703

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

12.08.2003 The State Government notified the Uttar Pradesh
Transfer of Distribution Undertaking Scheme, 2003 for the
purpose of providing and giving effect to the provisions
for transfer of distribution undertakings of UPPCL to four
DISCOMs, one of which was the respondent no. 3 namely
Dakshinanchal Vidyut Vitran Nigam Ltd. (hereinafter
referred to as “the DVVNL”).
In pursuance to the said transfer scheme. the respondent
no. 3 namely DVVNL became a Distribution Licensee
under the provisions of the Act, 2003.
18.05.2009 Distribution Franchisee Agreement was entered into
between the appellant and respondent no. 3.
The appellant was appointed as Distribution Franchisee
by the respondent nos. 2 and 3 under Section 2(27) read
with the seventh proviso to Section 14 of the Act, 2003.
17.03.2010 A Supplementary Agreement was executed between the
appellant and respondent no. 3.
From the date of execution of Distribution Franchisee
Agreement dated 18.05.2009 and Supplementary
Agreement dated 17.03.2010, the appellant has
undertaken the work of distribution of electricity in the
urban area of Agra in terms of the said Agreements.
2012 The Writ Petition No. 49774 of 2009 with the cause title
Gharelu Vidyut Upbhokta Kalyan Samiti and others v.
State of U.P. and others was filed before the Allahabad
High Court, challenging the execution of Distribution
Franchisee Agreement dated 18.05.2009.
Similarly, another Writ Petition No. 30385 of 2012 with
the cause title Agra Mandal Vyapar Sangathan v. State
of U.P. and others was filed before the Allahabad High
Court, challenging the Distribution Franchisee Agreement
dated 18.05.2009 and Supplemetary Agreement dated
17.03.2010.
Both the aforesaid writ petitions are still pending for
consideration before the Allahabad High Court.
25.07.2012 Rama Shanker Awasthi, the respondent no. 4, filed a
petition bearing no. 816 of 2012 before the UPERC
challenging the Distribution Franchisee Agreement dated
18.05.2009 and the Supplementary Agreement dated
17.03.2010.
704 [2025] 7 S.C.R.

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03.02.2014 The UPERC heard the matter wherein the respondent
no. 3 and the appellant orally pointed out that the writ
petitions instituted before the Allahabad High Court, are
still pending. The appellant had contended therein that
because writ petitions on the same issue were pending
before the High Court, the UPERC ought not to hear
the present matter.
27.03.2014 In the meantime, the High Court passed an order in
another Writ Petition No. 2463 of 2014 with the cause
title Anoop Gupta v. Union of India and others by way
of which the said writ petition was dismissed and the
petitioner therein was permitted to intervene in the writ
petition nos. 49774 of 2009 and 30385 of 2012, already
pending before the High Court.
13.06.2014 Detailed preliminary objections were filed by the appellant
before the UPERC, raising the grounds of jurisdiction and
maintainability of the petition filed by the respondent no. 4.
30.06.2014 In the meantime, the order passed by the Lucknow Bench
of the Allahabad High Court was impugned before the
Supreme Court in Special Leave Petition No. 12556 of
2014 wherein this Court was pleased to dismiss the
Petition by permitting the appellant therein, Mr. Anoop
Gupta to withdraw the same.
16.07.2015 The UPERC passed the order for investigation of the
appellant in its role as a Distribution Franchisee under the
seventh proviso of Section 14 of the Act, 2003, holding
that the petition was maintainable.
31.08.2015 The appellant filed an appeal under Section 111 of the
Act, 2003 before the APTEL.
28.07.2016 The impugned Judgement and Order was passed by
the APTEL.

(i) Order passed by the UPERC
4. The UPERC vide the order dated 16.07.2015 held that the petition
was maintainable on the grounds of public interest and the ERCs
were empowered to look into the DFA to assess the benefits of such
franchisee for the DISCOMs as well as for the general public. In
furtherance of this finding, the UPERC ordered for the formation of
[2025] 7 S.C.R. 705

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

an Expert Committee to give its finding on the aspects of the yearly
reduction in loss levels by the appellant as well as the improvement
in collection efficiency with information as to how such benefits have
been passed on to the consumers.
5. Some of the observations made by the UPERC are reproduced
herein below:
“v. In view of above provisions, it is established that at the
time, of signing the Agreement, DVVNL was a deemed
licensee and they were authorized to sign such agreement
with its franchisee TPL for the urban area of Agra. The
provision of section 5 of the Act does not restrain DVVNL
from entering into franchisee agreement in urban area with
TPL as it only facilitates franchisee in rural area. It does not
bar franchisee in urban areas which has been facilitated
in section 2 (27) and seventh proviso of section 14 of the
Act. DWNL was further granted license on 21.1.2010 by
this Commission.
vi. As far as the issue of transfer of inventory by DVVNL
to the Franchisee, without approval of the Commission as
per section 17 pf the Electricity Act, 2003, is concerned it
is sufficiently evident from the above provisions that the
franchisee agreement does not fall under the purview of
section 17.
vii. The issue of lack of jurisdictional and maintainability of
this petition has been raised by DWNL and TPL. Although
the submissions made in this reference are primarily based
on certain ‘v, pending PILs before the Hon’ble High Court,
Allahabad but in view of Hon’ble APTEL’s specific directions
to pass the consequential orders and also as there is
no stay order from any superior Court, the Commission
concluded that the petition is maintainable and therefore,
decided to proceed with the matter. The Commission’s
jurisdiction is further reinforced in a similar case by the
Hon’ble High Court Bombay order dated 12.2.2008 [2008
(110) Bom L R 598] through which the MERC was given
mandate to judge the facts and figures, discounting factor
and stipulations etc., taken in ‘ the agreement.
706 [2025] 7 S.C.R.

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9. Issue of investigation of conduct: The franchisee has
been allowed under the provisions of the Act with the
primary object of facilitating reduction of Distribution losses
and improvement in Collection efficiency. There is no
doubt that the concept of franchisee has been promoted
in the Act to ensure better quality of supply and services
to the consumer. The Agreement must have been entered
into with these motives only. As now about five years
have passed, which is a substantial period to show the
improvements in efficiencies, the question would arise as
to whether the objectives have been met and whether the
trend of improvements are visible.
As the Commission has already concluded that the
petition was maintainable and well within its jurisdiction,
it becomes incumbent upon the Commission to further
assess the benefits of such franchisee for the Discoms
as also for general public. With this view, for preliminary
examination, vide order dated 12.5.2014 reply and data on
certain points were sought from DVVNL and TPL. DVVNL
has not made submissions on this stating that they do
not want to make any additional submission. UPPCL has
seconded this. Although TPL has made submissions but
insufficient. As the matter has already prolonged for more
than two years and about five years have lapsed since
the agreement has become effective, the Commission
decides to form a Committee with the specific purpose to
ascertain the answers to the following questions:
i. What has been the yearly reduction in loss levels since
2009-10 to till date?
ii. What has been improvement in the collection efficiency
from 2009-10 level?
iii. How much arrears have been recovered from the due
amount of 2009-10?
iv. Have the benefits of such improvements, if any, have
been passed on to the consumer and if yes, how?
Apart from above specific questions the Committee would
also examine the year wise technical and commercial
[2025] 7 S.C.R. 707

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

performance of TPL The Committee would be at liberty
to, investigate and examine any sort of data and accounts
so as to assess the performance of TPL. The work shall
be completed within two months of this order.
10. The Committee shall consists of (1) Sri Arun, Retired
Ombudsman and Director, UPPCL
(2) Sri Sandeep Das, Chartered Accountant, Park Road,
Lucknow.”

(ii) Impugned Order passed by the APTEL
6. The APTEL took a diverging opinion on the aspect of maintainability
and held that the Act, 2003 does not have any provision for entertaining
of a public interest litigation by the ERCs. However, the APTEL
was of the view that the case on hand was not a public interest
litigation at all and concluded that the petition before the UPERC
was maintainable. It was observed that the ERCs are empowered
to exercise regulatory oversight on distribution licensees. Since
the franchisees undertake distribution of electricity on behalf of the
distribution licensee then the impact of the activities of the franchisees
can be considered by the UPERC.
7. Some of the observations made by the Appellate Tribunal are
reproduced herein below:
“11.12) We are fully conscious of the fact that this Appellate
Tribunal does not have any power to entertain any public
interest litigation under the Electricity Act, 2003 because
there is no provision in the said Act to empower this
Appellate Tribunal to hear and decide the public interest
litigation. The matter in hand before us is, not really a
public interest litigation. The only purpose of the present
Petition before the State Commission is whether by giving
franchisee to Torrent Power Ltd. by a distribution licensee,
namely Respondent No.3, DVVNL, some benefit has
accrued to the consumers in general or not. What is to be
seen is whether as a result of franchisee given to Torrent
Power Ltd. the consumers of the area would be benefited
or not? If all the liability, responsibility of the “franchisee
still remain with the distribution licensee, then its- impact
is also to be considered by the State Commission.
708 [2025] 7 S.C.R.

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11.13) We are unable to accept this contention of the
appellant that this Appellate Tribunal in judgment dated
28th November, 2013 in Appeal No.239 of 2012 and batch
did not remand the matter to the State Commission, hence
the Impugned Order is manifestly erroneous and illegal.
We have already cited the relevant part of the judgment
dated 28th November, 2013, in paragraph 74, thereof this
Appellate Tribunal clearly held that since any money excess
paid or recovered from Rosa Power will necessarily be a
pass through in tariff it becomes a tariff issue. It means
that the learned State Commission is bound to decide
the said issue in the light of the observations made by
this Appellate Tribunal in the said judgment as the same
issue becomes a tariff issue, the effect on the consumers
of the State, particularly within the area of Respondent
No.3, DWNL. Thus the whole impact of the franchisee and
its consequences, are to be considered to determine the
tariff in the light as observed by this Appellate Tribunal.
11.14) The Petition No.816 of 2012 (Impugned Petition)
was filed before the State Commission under Section 128
and 129 of the Electricity Act, 2003, read with Section 26
and 27 of the UP Electricity Reforms Act, 1999, praying,
inter alia, for the following reliefs:
“29 That in view of the aforesaid facts and circumstances,
it is expedient in the interest of justice that this Hon’ble
Commission may graciously be pleased to investigate the
conduct of the Respondent No.1 and 2 for acting in sheer
disregard and gross violation of the statutory mandatory^
provisions of the Act, 2003 and declare that the utility of the
Licensee has been transferred in favour of the Respondent
No.3 without prior permission of the State Commission
as mandated by Section 17 of the Act, 2003 and further
that the Respondent No.1 and 2 acted in breach of the
License, 2000 and annul the License No.3 of 2010 dated
21.01.2010 of the Respondent No.2 in respect of Urban
Area of Agra and also agreement dated 18.05.2009 and
supplementary agreement dated 17.3.2010”.
11.15) The learned State Commission while passing the
Impugned Order appears to have thought, on the formation
[2025] 7 S.C.R. 709

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

of Committee, which should ascertain the loss level since
2009-10 till date, to ascertain the improvement in the
collection efficiency, from 2009-10 level and to see the
improvement, if any, have been passed on to consumers
in its right perspective and correctness.
11.16) We find that the franchisee system is allowed under
the Electricity Act, 2003 with the primary objective of
facilitating reduction of distribution loss and improvement in.
collection efficiency. Further the concept of franchisee has
been permitted in the Electricity Act, 2003 .to ensure better
quality of supply and services to the consumers. Apparently,
the agreement between the appellant. Torrent Power Ltd.,
franchisee and Respondent No.3, a distribution licensee
had been entered with the said motives and purposes.
Since five years had already elapsed since the agreement
and to enable the franchisee to show the improvements
the State Commission appear to be on the right path to
ascertain whether the said objectives as provided under
the Electricity Act, 2003 have been met or accomplished
and further whether the trends of improvements are visible.
11.17) The learned State Commission vide order dated
12.05.2014, i.e. more than one year before passing of the
Impugned Order sought reply and data from Respondent
No.3, DVVNL and the appellant in that regard which they
did not give. Since the said data and information as sought
by the State Commission’s order dated 12.05.2014 were
not given, the State Commission has to pass the Impugned
Order and decide to form the aforesaid Committee for the
aforesaid purposes.
11.18) On careful consideration, we are unable to accept
this contention of Mr. Pradeep Misra, learned counsel
for the Respondent, UPPCL that the petitioner Mr. Rama
Shapkar Awasthi has no locus standi to maintain the
petition because the consumers, most of the time, remain
unrepresented when such kind of decisions are taken and
only a few consumers come forward to actively participate
in such kind of proceedings. The present matter cannot
be said to be a public interest litigation by any stretch of
imagination.
710 [2025] 7 S.C.R.

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11.19) Section 61 dealing with Tariff Regulations and
Section 62 dealing with determination of tariff, of Electricity
Act, 2003 clearly specify the Terms and Conditions for
determination of tariff with certain guidelines like the factors
which would encourage competition, efficiency, economic
use of the resources, good performance and optimum
investments and further safeguarding of consumers interest
and at the same time recovery of cost of electricity in a
reasonable manner and the principles regarding efficiency
in performance. National Electricity Policy and Tariff Policy.
A proviso to Section 62 of the. Electricity Act 2003 states
that in case of distribution of electricity in the same area
by two or more distribution licensees, the appropriate
Commission may, for promoting competition among
distribution licensees, fix only maximum ceiling of tariff
for retail sale of electricity. Sub-section 2 further provides
that the appropriate Commission may require a licensee
or a generating company to furnish separate details, as
may be specified in respect of generation, transmission
and distribution for determination of tariff. Sub-section
6 to Section 62 of the Act says that if any licensee or a
generating company recovers a price or charge exceeding
the tariff determination under this Section, the excess
amount shall be recoverable by the person who has paid
such price or charge along with interest equivalent to the
Bank rate without prejudice to any other liability incurred
by the licensee. From the perusal of the provisions of
the Electricity Act, 2003, it is evidently clear that the tariff
for a distribution licensee for its area of supply shall be
determined by the respective State Commissions as
per Terms and Conditions of the Act and relevant Tariff
Regulations in compliance with the National Electricity
Policy and Tariff Policy.
11.20) We have been informed during the arguments in
this matter that in the State of Uttar Pradesh, Respondent
No.2, UPPCL, procures bulk power from various sources
and then supply it to the distribution licensees namely,
Purvanchal Vidyut Vitran Nigam Ltd., Paschimanchal Vidyut
Vitran Nigam Ltd., Madhyanchal Vidyut Vitran Nigam Ltd.
[2025] 7 S.C.R. 711

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

and Dakshinanchal Vidyut Vitran Nigam Ltd. which are the
Government Discoms besides a private Discom namely
Noida Power. All the PPAs or agreements are executed
between UPPCL and the relevant utility without any
active role of the distribution licensee of Uttar Pradesh.
A uniform tariff for the respective category of consumers
is fixed for the whole State of Uttar Pradesh viz. for each
of the Government Discoms. It means that the tariff shall
remain the same for the whole State for each Discom,
irrespective of the performance level of that Discom and
its collection efficiency. Thus the consumers category-wise
are charged the tariff at the same level. In other words,
we can elucidate that the performance of the Discom of
a particular area is never taken into account and all are
to be treated alike.
-xxx-
11.23) This Appellate Tribunal in a separate batch of
appeals, being Appeal No. 15 of 2008 & others, vide
judgment dated 09.10.2009, while dealing with the
determination of tariff for each distribution licensee, also
observed and noted as under:

“Analysis and decision
27. The determination of tariff for each distribution licensee
is based on the cost- and expenses, power availability for
the particular distribution licensee, consumer base and
consumer mix of the distribution licensee, their efficiency
of operations, distribution losses etc. etc. In order to
encourage efficient operation, it is only necessary that the
different licensees have competition amongst themselves
to carry out their operations in more efficient manner. In
view of this, this Tribunal held that the Commission may
determine differential tariff, according to the geographical
location of the, consumers, different distribution licensees
could have differential tariffs for their respective area of
operations. The letter dated September 26, 2007 from the
Government of Karnataka to Secretary, KERC relied upon
by the appellant ends with the following para.
712 [2025] 7 S.C.R.

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“In this connection, i am directed to reiterate that the
Government is not in favour of differential tariffs at this
stage. This may be brought to the notice of the Commission”
28. We are inclined to agree with the contention of the
Commission that the aforesaid letter dated September
26, 2007 relied upon by the appellant is not any policy
direction in terms of Section 108 which has not even been
quoted in the letter. This is only an innocuous suggestion.
In this view of the matter, the appeal is not allowed and
we uphold the decision of the Commission.”
11.24) Thus this Appellate Tribunal has reiterated the
view that there should be separate determination of tariff
for each distribution licensee in the State. Uniform or
common retail tariff for the several distribution licensees
is not proper and is wrong.
12) In view of the above discussion, we find and observe
that the learned State Commission is fully competent and
has jurisdiction to entertain the Petition, being Petition
No.816 of 2012, because the pleadings and reliefs sought
therein do not fall under the category of Public Interest
Litigation. Further the grievances mentioned in the said
Petition can legally be raised before a State Commission.
In this view of the matter, we do not find any illegality or
infirmity in the Impugned. Order and both these issues
are decided against the appellant. The appeal is liable to
be dismissed.

ORDER
The Instant Appeal, being Appeal No. 188 of 2015, is
hereby dismissed and the Impugned Order is hereby
affirmed. In the facts and circumstances of the matter no
cost is being imposed. The Interim Order or any other
Order, passed by this Appellate Tribunal, in this instant
Appeal are hereby discharged.
Pronounced in the open court on this 28th day of July, 2016.”
(Emphasis supplied)
[2025] 7 S.C.R. 713

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(iii) Report of the Expert Committee
8. The Expert Committee constituted in compliance with the order of
the UPERC dated 16.07.2015, gave its report on 09.01.2017. As
regards the question of how the activities of the appellant were
beneficial to the consumers, the Expert Committee gave the finding
that though the consumers were not happy with the appellant’s
services in respect of providing new connections, yet the supply of
electricity and customer service of the appellant were appreciated
by the consumers. The Expert Committee, however, also pointed
out that the financial benefits of appointing the appellant as the
distribution franchisee could not be reaped by the retail consumers
due to slow rate of reduction of distribution losses and slow growth
of collection efficiency. Nevertheless, the consumers informed the
Expert Committee about the satisfactory performance of the appellant
in reducing the duration of power failure which has resukted in better
supply of power to the consumers.
9. The findings of the Expert Committee are reproduced below:
“Findings:
As per provision of DFA, AT & C losses should be 15 % by
the end of FY 2016-17. This seems to be not achievable
on the present parameters. TPL should take more effective
steps to reduce the losses. TPL should also identify the high
loss level area by segregating it to 33/11 KV Substation
level and further to 11 KV feeder level. These steps will
help in yielding better results.
As per DFA Para 5.8.2 “If the Distribution Franchisee
fails to achieve 15% AT&C loss level based on year end
ATC Losses actually achieved at the end of 7 years from
the effective date then without prejudice to the other
actions which DVVNL can initiate against the Distribution
Franchisee under this Agreement, a penalty equivalent
to lost due to non achievement of the target shall be
recoverable by DWNL from the distribution franchisee”.
As per DFA Para 5.8.3 “The penalty amount shall be
computed similarly at the end or each year till the overall
year end ATC Loss Level of 15% is achieved by the
distribution franchisee”.
714 [2025] 7 S.C.R.

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As per DFA Para 5.8.4 “The Distribution Franchisee shall
be liable to pay the penalty amount within 30 days of the
claim made by DWNL failing which the same shall be
adjusted against the performance guarantee submitted by
the Distribution Franchisee in terms of Article 11.”
2. What has been improvement in the collection efficiency
from 2009-10 level:-
Collection Efficiency means the ratio of revenue actually
realized from the consumes (including subsidy amount if
any) and energy amount billed as per methodology.
Collection Efficiency=Revenue Realised from Consumers
(Rs) x100
Energy Billed to Consumers(R8)
Revenue billed and realized from consumers as reported
by M/s Torrent Power Ltd. (TPL) is as below.

Year Billed Collective Collection
(Rs. In Cr) (Rs. In Cr.) Eff (%)
2010-11 519.91 413.47 79.50
2011-12 535.93 504.10 94.06
2012-13 634.21 597.62 94.23
2013-14 855.09 832.01 97.30
2014-15 916.35 915.78 99.94
2015-16 1131.95 1118.60 98.82

As per para 4.5 of the annual report of F.Y. 2010-11 of
Franchisee Audit of Agra Urban Area under the control
of TPL conducted by M/s, KPMG, validated collection
efficiency for the base year FY 2008-09 has been
75.31%. Thus M/s Torrent Power Ltd has shown regular
improvement in the collection efficiency as shown above
i.e. from 79.50 in the FY 2010-11 to 98.82 in FY 2015-16.
There has been slight dip in the collection efficiency from
99.94 in F.Y. 2014-15 to 98.82 in FY 2015-16. According
to the DFA signed between DVVNL & TPL there is no
[2025] 7 S.C.R. 715

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

benchmark defined to be achieved by TPL. As such the
action taken by TPL towards the improvement in collection
efficiency seems proper.
However, it is to be noted here that collection reported
yearwise by TPL includes non - revenue items i.e. meter
damage charges, fuse charges, other SLC recoveries and
other miscellaneous revenue also. Thus, actual revenue
realized toward energy bills must be lower than the reported
collection figures. This means that the collection efficiency
mentioned in the table above shall be lower to some extent.
TPL has explained that the separation of nonrevenue
item realization is extremely difficult activity. It is therefore
necessary that realization of non – revenue items should
be kept separately in books of accounts so that Actual
Collection efficiency of TPL could be worked out.
Findings:-
Since there has be no Benchmark Collection Efficiency
figure to be achieved in DFA and TPL has regularly
improved the Collection Efficiency figure and has reached
98.82 % in FY 2015-16, the performance towards this
parameter is being achieved by TPL. However, it is
recommended that TPL should maintain the collection of
non-revenue items separately in their books of account
so that actual collection efficiency may be worked out and
monitored in future reports.
3. How much arrears have been recovered from the due
amount of 2009- 10:
As per para 8.4, 8.5 and 8.8 of DFA, M/s Torrent Power
Ltd has to recover the arrear of revenue pertaining to
DVVN of pre take over period.
“8.4 - Distribution Franchisee shall be liable to collect
the arrears from current live consumers accrued in last
month prior to effective date on account of charges for
usage of electricity. These arrears shall be collected and
remitted to DVVNL by Distribution Franchisee(DF). The
DF shall collect and remit the amount at least equivalent
716 [2025] 7 S.C.R.

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to the prevailing collection efficiency taking into account
the collection efficiency in the corresponding month of last
year including the amount already recovered.”
“8.5 - Distribution Franchisee shall make best endeavor
to collect arrears other than those specified in 8.4 from
current live consumers.”
“8.8 - Distribution Franchisee shall make best endeavor
to collect arrears accrued prior to effective date from PD
consumers.” As per DFA signed between DVVNL & TPL
revenue of pretakeover period is to be realized by TPL
and remitted to DVVNL.
As per report submitted by TPL on dt 19.10.2016, the
position is as below.
DVVNL Arrears Recovery: Rs. Cr

Period Recovery of DVVNL Arrears Recovery Total
of pro
rata
payment
Live PD Total
Consumers Consumers

2010-11 5.89 0.81 6.71 9.23 15.93
2011-12 5.61 0.50 6.11 - 6.11
2012-13 3.27 0.30 3.57 - 3.57
2013-14 1.55 0.14 1.69 4.14 5.83
2014-2015 1.25 0.10 1.34 1.50 2.84
2015-2016 1.94 0.03 197 0.45 2.42
2016-17 0.77 0.05 0.82 - 0.82
(upto Aug
2016)
Total 20.28 1.92 22.21 15.32 37.52

The statement submitted by TPL does not mention the
actual arrear opening balance as on 01.04.2010 and actual
arrear of closing 31.03.2016. TPL has only mentioned the
[2025] 7 S.C.R. 717

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

recovery position of DVVNL arrears. This does not fulfill
the requirement of review for recovery of DVVNL arrears.
During site visit on dt 01.12.2016 by Expert Committee, the
statement regarding arrears were put up by M/s Torrent
Power Ltd (TPL) and is as below.
Opening (Uploaded Data) August 2010: Rs in Crores

Service Consumers Principal LPSC Total
Status

Live 188666 927.74 439.62 1367.37

PD 18501 236.28 86.12 322.40

TD 187 1.84 0.40 2.24

Total 207354 1165.85 526.15 1692.00

Balance as on 31.10.2016

Service Consumers Principal LPSC Total
Status

Live 57818 237.09 362.43 599.52

PD 67670 780.32 656.54 1436.86

TD 7804 48.79 88.71 137.51

Total 133292 1066.21 1107.68 2178.88

According to the statement submitted by TPL total
DVVNL arrear pending for realization in Aug. 2010 is Rs.
1692.00 Cr. This arrear has increased to 2173.88 eras on
31.10.2016. TPL has explained that increase in arrears is
dye to levy of late payment surcharge on the outstanding
amount of arrears. Thus the recovery of DVVNL arrears
can be split into following.
i. What is the actual opening balance of recovery of DVVNL
arrears as on 01,04.2010.
718 [2025] 7 S.C.R.

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ii. What efforts have been made for the recovery of DVVNL
arrears.
iii. How much arrears have been recovered & remitted to
DWNL from F.Y. 2010-11 to 2015-16.
Actual opening balance of DVVNL arrears as on 01.04.2010.
M/s Torrent Power Ltd. has intimated that DVVNL has not
given the opening balance as on 01.04.2010. DVVNL has
intimated in August 2010 the arrears to be recovered as
below:

Service Consumers Principal LPSC Total
Status
Live 188666 927.73 439.62 1367.37
PD 18501 236.28 86.12 322.40
TD 187 1.84 0.40 2.24
Total 207354 1165.85 526.15 1692

Thus according to TPL, they have received the details of
Rs.1692.00 Cr. As DVVNL arrears in August 2010.
Infrastructure Advisory Report of CRISIL for the month of
September 2016 has been provided by UPPCL. According
to this report Para 1.2 (v) reads as below.
1.2(V) Arrears : The opening status of the arrears in
the Agra city was Rs.1845.0 Crores, which has now
increased to Rs.2160.99 crores permanently disconnected
consumers) in the month of August 2016. With respect
to the above quantum of arrears in the region, TPL has
been able to remit only 37.39 Cr. of arrears to DVVNL till
August 2016. There has been reduction in total principal
amount on the account of corrections and collective efforts
both from TPL & DVVNL.” However Annual Audit report
submitted by M/s KPMG for the F.Y. 2010-11, para 4.7
speaks as below.
“We have noticed In our endeavor to review the opening
level of arrear that the “opening level of arrear has not
[2025] 7 S.C.R. 719

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

been frozen till date and a final data Is not available for
audit.”
Again Annual Audit report for the F.Y. 2014-15 by KPMG
regarding opening level of arrears mentions as below:
We have noticed in our endeavor to review the opening
level of arrear that the “opening level of arrear has not been
frozen till date and a final data is not available for audit.”
From the above it is dear that TPL, CRISIL and KPMG
have different views & figures regarding actual arrears
opening balance as on 01.04.2010 to be recovered &
remitted to DVVNL. The position is alarming arid it is to
be finalisedS final figures is to be worked out and needs
to be audited and accounted for.
(ii) What efforts has been made for recovery of DVVNL
arrears:
From the report putup by TPL on dL 01.12.2016 as
mentioned above in the table it is reported that opening
(uploaded data) in August 2010 DVVNL arrears to
be recovered by TPL is Rs.1165.85 Crores (Prindpal
amount). This principal amount of arrears has come
down to Rs.1066.21 crores. This means that in more
than 06 years of operations, TPL has only recovered
(Rs.1165.85 - Rs.1066.21) Rs.99.64 Crores i.e. less than
10% of opening arrears. This figure does not include late
payment surcharge. This reflects that TPL is not interested
in recovering DVVNL arrears.
It has treen observed that module for payment of bill of
M/s. Torrent Power Ltd has the following provisions.
(i) Any payment made by consumer shall first go to arrears
outstanding towards TPL.
(ii) Balance payment shall go to current bill of the consumer.
(iii) Any extra payment done by consumer if any shall go
to DVVNL arrears. Due to this reason TPL is recovering
ail its arrears & its current bills and almost no. payment is
done by the consumer against DWNL arrears. This matter
has been examined in details and found that DVVNL
720 [2025] 7 S.C.R.

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arrears are increasing as TPL is recovering all its current
bills & arrears. Ten sample bills of consumers have been
examined & found as below (Annexure 9):

S. S.C. Amt. of October 210 October 2016
No. No. current
Bill

Amt. Amt. of Current TPL DVVNL
of TPL DVVNL
arrears arrears

1. 57016 1118.63 1061.27 293711.97 1119.01 0.38 493522.57

2. 37122 924.44 1061.82 268488.07 925.24 0.80 461116.05

3. 5915 109.51 1018.37 241256.68 275.73 165.18 413813.64

4. 91925 783.9 3171.65 135811.13 784.38 0.48 216931.80

5. 12431 297.29 946.09 109335.07 10149.01 9753.22 192531.56

6. 91935 655.22 996.86 87371.07 1420.86 761.23 136142.84

7. 37136 2415.75 1018.37 72975.26 39751.04 37256.67 128691.44

8. 55883 477.13 0.52 22838.42 477.37 0.24 40580.72

9. 17857 1459.41 0.43 11897.95 1931.89 459.43 24386.62

10. 76340 6605.07 3413.93 709.15 6606.02 0.95 2012.30

Further from the above table it Is clear that no effort is
being made to recover DVVNL arrears by TPL.
(iii) How much arrears has been recovered and remitted
to DVVNL from F.Y. 2010-11 to F.Y. 2015-16.
M/s Torrent Power Ltd. (TPL) has submitted on dt.
1.12.2016 that principal amount of DWNL arrears in August
2010 was 1165.85 Cr. This has been reduced to Rs.1066.21
Cr. as on 31.10.2016. Thus a reduction of Rs.99.64 Cr.
has been done. Against this reduction Rs.22.21 Cr. has
been shown as received by TPL as per annexure Point 3
of report submitted by TPL on dt. 19.10.2016. Difference
of Rs.99.64 and 22.21 Cr. has not been explained by
TPL in this report. These figures need verification by the
competent authorities.
[2025] 7 S.C.R. 721

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

Finding:
(a) Opening amount of DWNL arrears as on 01.04.2010
is required to be finalised immediately and audited by
competent auditors.
(b)Neither the opening balance of DVVNL arrears are
finalised nor any effort is being made to recover these
arrear by M/s. TPL.
(c) TFL should make more effort to recover DVVNL arrears
by disconnecting live consumers and other possible means
of recovery against PD consumers in consultation with
DVVNL so that arrears be liquidated by the end of F.Y.
2016-17.
(d) Recovery made by TPL towards DWNL arrears should
be verified and remitted to DVVNL account. Any adjustment
done in the arrears be properly verified so that balance
of arrears & payment made to DVVNL must match the
figures of outstanding arrears.
4. Have the benefits of such improvements, if any, been
passed on to the Consumers.
M/s Torrent Power Ltd, (TPL) has putup the details of
benefits passed onto consumers on dt. 19.10.2016 which
are annexed with the report. Pointwise comments are as
below:
Para-1. It was reported that higher input rates were quoted
by TPL which has led to reduction in ARR and resulting
into lower tariff to retail consumer. Since retail tariff rate
are same all over U.P. as such it could not be said that
TPL has contributed to reduction in retail tariff/rate.
Para-2. Reduction in distribution losses has reduced
power requirement of the city resulting into saving cost of
purchasing costly power. This point is also not correct as
the power purchase by TPL is being made from DVVNL
and on the fixed rate as provided in DFA. Higher rate could
only-be applied if the input energy level is exceeded beyond
the provisions made in DFA. As seen from the record of
input energy as put up by TPL(Annexure 4) and UPPCL
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(Annexure 8) it is almost fixed every year where as 3%
increase every year has been provided in DFA.
Input energy year wise is as below:

S.No. F.Y. Input Energy (MUs)
1. 2010-11 2114.03
2. 2011-12 2207.57
3. 2012-13 2207.94
4. 2013-14 2206.42
5. 2014-15 2148.47
6. 2015-16 2143.86
7. H1- 2016-17 1277.88

Para-3. Old network has been replaced by TPL as reported
by them. This has been seen on site and found that
improvement has been done by TPL. Following is the
Capex year wise as reported.

S.No. F.Y. Amount (Rs. In Cr.)
1. 2010-11 94.46
2. 2011-12 125.58
3. 2012-13 203.86
4. 2013-14 122.42
5. 2014-15 72.52
6. 2015-16 76.45
TOTAL 695.29

Para-4 to 14: These points are for the betterment of
services to the consumer. Work can not be verified by
the Expert Committee and a separate agency is needed
to verify the claims of TPL. However, the final outcome
can be verified by the Expert Committee. For this
reason DVVNL was requested to fix a public meeting of
consumers. On our request DWNL has arranged meeting
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

on dt. 02.12.2016 In the meeting hall of DVVNL at 12:30
p.m. Copy of press cutting is being annexed with the
report as Annexure 10.
Twenty two consumers attended the meeting. Officers from
DVVNL and TPL were also present. Consumer put up their
views before the Expert Committee (Annexure 11). Some
of them have put up their comments in writing about their
satisfaction level regarding the services rendered by TPL.
The list of comments are attached as annexure.
Feedback received by the consumers are pointing
towards a satisfactory performance of TPL, As regards
the improvement in the system upgradation is concerned,
TPL has provided following services.
1. Round the Clock Call Centre.
2. Customer Care Centre.
3. Distribution Transformer failure rate has been reduced.
4. SCADA implementation for network management.
On account of the above, duration of power failure has
reduced resulting into better supply to consumers.
Findings:
From the above it is evident that the consumers have
appreciated the working of TPL; so far as the Supply and
Customer Service is concerned. On the front of Assessment
of Capital Cost in new Connections, consumers are not
happy with the services of TPL. Also in cases where the
consumers ask for correction of old arrears of DVVNL,
the same takes a long time to settle. These areas need
to be handled in a more effective manner.”
(Emphasis supplied)

B. SUBMISSIONS ON BEHALF OF THE APPELLANT
10. The learned counsel appearing on behalf of the appellant vehemently
submitted that all that the APTEL did was to mechanically accept
the erroneous findings recorded by the UPERC. According to the
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learned counsel, there was no application of any mind at the end
of the APTEL.
11. The APTEL failed to appreciate that the DFA entered into between
the appellant and the respondent no. 3, was a contract under Section
2(27) of the Act, 2003 read with the seventh proviso to Section 14
and that the respondent no. 3 as the Distribution Licensee was the
only regulated entity.
12. The APTEL failed to appreciate that the Act, 2003 ushered in a novel
feature of appointment of franchisees under Section 2(27). The
seventh proviso to Section 14 read with Section 2(27) and Section 13
confers power on a Distribution Licensee to appoint another person
to undertake distribution of electricity for a specified area within his
area of supply (Agra in the present case) and that the Distribution
Licensee continues to remain responsible for the distribution of
electricity in such specified area of supply. Therefore, Section 2(27)
of the Act, 2003 read with the seventh proviso to Section 14 permits
a Distribution Licensee to appoint an agent for a specified area. The
agent, therefore, would not fall within the jurisdiction of the UPERC
in its capacity as a regulatory authority.
13. The APTEL erred in coming to the conclusion that the respondent
no. 4 has the locus to approach the UPERC for fulfillment of the
social obligations of the respondent no.4 as stated in the original
Petition No. 816 of 2012.
14. The APTEL erred in ignoring the settled law propounded by this
Court relating to individual consumers approaching the State ERC,
in the case of Maharashtra State Electricity Distribution Co.
Ltd. v. Reliance Energy Ltd. reported in (2007) 8 SCC 381. In the
said, case this Court categorically held that Section 86(1)(f) of the
Act, 2003 which prescribes the adjudicatory functions of the State
Commission does not encompass within its domain, complaints of
individual consumers and that it only provides that the Commission can
adjudicate upon the disputes between the licensees and generating
companies and to refer any such dispute to arbitration. This Court
affirmed that Section 86(1)(f) does not include in it a grievance of
an individual consumer.
15. The APTEL failed to appreciate the true purport and object of the
DFA entered into between the appellant and the respondent no. 3 as
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

well as the express provisions of the Act, 2003 namely Section 2(27)
read with the seventh proviso to Section 14.
16. In such circumstances referred to above, the learned counsel prayed
that there being merit in her appeal, the same may be allowed and
the impugned judgment and order passed by the APTEL be set aside.

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT NO.4
17. The respondent no. 4 has filed submissions in writing. The same
reads as under:
1. The issues raised by the Appellant are:
a) Jurisdiction of the State Commission to pass directions
against the Appellant, who is only a franchisee and not
the licensee itself; and
(b) The locus standi of the Respondent No.4 to invoke the
jurisdiction of the State Commission under the Electricity
Act, as the Respondent No.4 is not a consumer in Agra.
2. It is submitted that the above issues are erroneous and
are liable to be rejected.
3. The proceedings before the State Commission were
under Sections 128 and 129 of the Electricity Act, in
regard to violation of the provisions of Section 17, 43, 62
and the terms and conditions of the license issued to the
distribution licensee.
4. One of the primary issues raised was the supply of
power by the Respondent Nos.2 and 3 – distribution
licensees to the Appellant at a tariff, not approved by the
State Commission, and which was much lower than the
cost of supply to the Respondent Nos.2 and 3.
5. The entire annual revenue requirements/total costs and
expenses of the Respondent Nos.2 and 3 are recovered
from the tariff of the consumers in Uttar Pradesh. Therefore,
if there is a subsidized supply by the Respondent Nos.2
and 3 to the Appellant, it affects the tariff for the consumers
of the licensee.
6. The tariff for such supply by Respondent Nos.2 and 3
to the Appellant is mutually decided, without the approval
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of the State Commission. This, affecting the tariff of the
consumers, is contrary to the Electricity Act.
7. The specific allegation of the Respondent No.4 before
the State Commission was that the price of supply as
mutually decided is contrary to the Electricity Act, the terms
of the Franchisee Agreement are not in accordance with
license terms and conditions, the input price of electricity
has been decided without the audited accounts and is
undervalued, the State Commission has restrained another
distribution licensee in Uttar Pradesh from appointing an
input based franchisee.
8. The Respondent No.4 herein had sought for investigation
by the State Commission of the licensees, which are
Respondent Nos.2 and 3 herein. The prayer was not for
investigation into the affairs of the Appellant herein.
9. The powers of the State Commission under Sections
128, 129 are not adjudicatory in nature of a lis between
two parties, but the regulatory jurisdiction of the State
Commission. The role of the Respondent No.4 is to bring to
the attention of the State Commission the relevant facts. It is
for the State Commission to investigate in such manner and
pass such orders in terms of law as a regulatory authority.
10. The State Commission had by order dated 16.07.2015
only directed a report to be submitted on specific aspects
of the functioning of the franchisee agreement and the
improvements in the distribution function in the City of Agra.
11. The report was submitted by the Committee on
09.01.2017. Various issues and remedial measures were
also suggested.
12. In fact, the Appellant had itself filed a petition seeking
approval of the Infrastructure Roll Out plan before the State
Commission. In the said proceedings, the Commission by
order dated 18.12.2017 had relied on various aspects of
the Expert Committee Report on the loss reduction and
passed directions on the costs to be allowed.
13. It is submitted that the Appellant is only seeking to avoid
the scrutiny of the State Commission on the terms of the
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

Franchisee Agreement and its implementation, which has
an impact on all the consumers in the State. The impact
is not merely restricted to consumers in Agra, as the input
price being not regulated, any loss on the input price of the
Respondent Nos.2 and 3 supplying to the Appellant affects
tariff of all the consumers of Respondent Nos.2 and 3.
14. With regard to the locus of Respondent No.4 to file
a petition, it is submitted that the jurisdiction and powers
of the State Commission under Section 128 and 129 of
the Electricity Act are not adjudicatory, but inquisitive and
regulatory in nature. The proceedings under Section 128
and 129 can be undertaken even suo moto. The role of
the Respondent No.4 is only to bring to the notice of the
State Commission the factual position and that there is
violation. Any orders passed by the State Commission and
benefits if any accruing are not only qua the Respondent
No.4, but all the consumers whose tariff is affected.
15. With regard to the contention that the Appellant is
merely an agent of the Respondent Nos.2 and 3 and there
is no separate jurisdiction over the Appellant, it is submitted
that the Petition filed was against both the Appellant and
the Respondent Nos.2 and 3.
16. In fact, the petition for network roll out was filed by
the Appellant and the Respondent No.3 before the State
Commission, in which the Order dated 18.12.2017 was
passed by the State Commission.
17. When the Appellant has itself invoked the jurisdiction
of the State Commission on tariff issues, it is not open
to the Appellant to contend that the State Commission
has no jurisdiction over the affairs of the Appellant. 18.
As submitted hereinabove, the issues involved impact on
tariff and therefore is within the jurisdiction of the State
Commission.”

D. ANALYSIS
18. Having heard the learned counsel appearing for the parties and
having gone through materials on record, the following questions
fall for our consideration:
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i) Whether any individual can invoke the jurisdiction of a State
ERC on the plea of public interest? In other words, whether an
ERC has the jurisdiction to consider matters in public interest?
ii) Whether the Act, 2003 confers jurisdiction on the State ERCs to
consider and adjudicate the efficacy of a distribution franchisee
agreement entered between a distribution licensee and a
distribution franchisee? In other words, whether ERCs have the
jurisdiction to review the functioning of a distribution licensee
to supply the electricity through a franchisee?

(i) Relevant provisions of the Act, 2003
19. Before adverting to the rival submissions canvassed on either side,
we must look into few relevant provisions of law.
20. Section 2(15) of Electricity Act, 2003 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 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;”
21. Section 2(17) of Electricity Act, 2003 reads as under:
“(17) “distribution licensee” means a licensee authorised
to operate and maintain a distribution system for supplying
electricity to the consumers in his area of supply;”
22. Section 2(27) of Electricity Act, 2003 reads as under:
“(27) “franchisee” means a persons authorised by a
distribution licensee to distribute electricity on its behalf
in a particular area within his area of supply;”
23. Section 12 of Electricity Act, 2003 reads as under:
“Section 12. (Authorised persons to transmit, supply, etc.,
electricity): No person shall
(a) transmit electricity; or
(b) distribute electricity; or
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(c) undertake trading in electricity,
unless he is authorised to do so by a licence issued under
section 14, or is exempt under section 13”.
24. The seventh proviso to Section 14 reads thus:
“(…) 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: (…)”
25. Part VII of the Electricity Act, 2003 reads thus:
“TARIFF
Section 61. (Tariff regulations): The Appropriate Commission
shall, subject to the provisions of this Act, specify the terms
and conditions for the determination of tariff, and in doing
so, shall be guided by the following, namely:-
(a) the principles and methodologies specified by the
Central Commission for determination of the tariff applicable
to generating companies and transmission licensees;
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
(c) the factors which would encourage competition,
efficiency, economical use of the resources, good
performance and optimum investments;
(d) safeguarding of consumers’ interest and at the same
time, recovery of the cost of electricity in a reasonable
manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
(g) that the tariff progressively reflects the cost of supply of
electricity and also, reduces cross-subsidies in the manner
specified by the Appropriate Commission;
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(h) the promotion of co-generation and generation of
electricity from renewable sources of energy;
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of
tariff under the Electricity (Supply) Act, 1948, the Electricity
Regulatory Commission Act, 1998 and the enactments
specified in the Schedule as they stood immediately before
the appointed date, shall continue to apply for a period
of one year or until the terms and conditions for tariff are
specified under this section, whichever is earlier.
Section 62. (Determination of tariff): --- (1) The Appropriate
Commission shall determine the tariff in accordance with
the provisions of this Act for –
(a) supply of electricity by a generating company to a
distribution licensee:
Provided that the Appropriate Commission may, in case
of shortage of supply of electricity, fix the minimum and
maximum ceiling of tariff for sale or purchase of electricity
in pursuance of an agreement, entered into between a
generating company and a licensee or between licensees,
for a period not exceeding one year to ensure reasonable
prices of electricity;
(b) transmission of electricity ;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the
same area by two or more distribution licensees, the
Appropriate Commission may, for promoting competition
among distribution licensees, fix only maximum ceiling of
tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee
or a generating company to furnish separate details, as
may be specified in respect of generation, transmission
and distribution for determination of tariff.
[2025] 7 S.C.R. 731

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(3) The Appropriate Commission shall not, while determining
the tariff under this Act, show undue preference to any
consumer of electricity but may differentiate according to
the consumer’s load factor, power factor, voltage, total
consumption of electricity during any specified period or
the time at which the supply is required or the geographical
position of any area, the nature of supply and the purpose
for which the supply is required.
(4) No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except
in respect of any changes expressly permitted under the
terms of any fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating
company to comply with such procedures as may be
specified for calculating the expected revenues from the
tariff and charges which he or it is permitted to recover.
(6) If any licensee or a generating company recovers a
price or charge exceeding the tariff determined under
this section, the excess amount shall be recoverable by
the person who has paid such price or charge along with
interest equivalent to the bank rate without prejudice to
any other liability incurred by the licensee.
Section 63. (Determination of tariff by bidding process):
Notwithstanding anything contained in section 62, the
Appropriate Commission shall adopt the tariff if such
tariff has been determined through transparent process
of bidding in accordance with the guidelines issued by the
Central Government.
Section 64. (Procedure for tariff order): --- (1) An application
for determination of tariff under section 62 shall be made
by a generating company or licensee in such manner
and accompanied by such fee, as may be determined by
regulations.
(2) Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the
Appropriate Commission.
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(3) The Appropriate Commission shall, within one hundred
and twenty days from receipt of an application under
sub-section (1) and after considering all suggestions and
objections received from the public,-
(a) issue a tariff order accepting the application with such
modifications or such conditions as may be specified in
that order;
(b) reject the application for reasons to be recorded in
writing if such application is not in accordance with the
provisions of this Act and the rules and regulations made
thereunder or the provisions of any other law for the time
being in force: Provided that an applicant shall be given
a reasonable opportunity of being heard before rejecting
his application.
(4) The Appropriate Commission shall, within seven days
of making the order, send a copy of the order to the
Appropriate Government, the Authority, and the concerned
licensees and to the person concerned.
(5) Notwithstanding anything contained in Part X, the
tariff for any inter State supply, transmission or wheeling
of electricity, as the case may be, involving the territories
of two States may, upon application made to it by the
parties intending to undertake such supply, transmission
or wheeling, be determined under this section by the State
Commission having jurisdiction in respect of the licensee
who intends to distribute electricity and make payment
therefor.
(6) A tariff order shall, unless amended or revoked, continue
to be in force for such period as may be specified in the
tariff order.
Section 65. (Provision of subsidy by State Government): If
the State Government requires the grant of any subsidy to
any consumer or class of consumers in the tariff determined
by the State Commission under section 62, the State
Government shall, notwithstanding any direction which may
be given under section 108, pay, in advance and in such
manner as may be specified, the amount to compensate
[2025] 7 S.C.R. 733

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

the person affected by the grant of subsidy in the manner
the State Commission may direct, as a condition for the
licence or any other person concerned to implement the
subsidy provided for by the State Government:
Provided that no such direction of the State Government
shall be operative if the payment is not made in accordance
with the provisions contained in this section and the tariff
fixed by State Commission shall be applicable from the
date of issue of orders by the Commission in this regard.
Section 66. (Development of market): The Appropriate
Commission shall endeavour to promote the development
of a market (including trading) in power in such manner
as may be specified and shall be guided by the National
Electricity Policy referred to in section 3 in this regard.”
26. Section 82 of the Electricity Act, 2003 reads as under:
“Section 82. (Constitution of State Commission): ---
(1) Every State Government shall, within six months
from the appointed date, by notification, constitute for the
purposes of this Act, a Commission for the State to be
known as the (name of the State) Electricity Regulatory
Commission:
Provided that the State Electricity Regulatory Commission,
established by a State Government under section 17 of
the Electricity Regulatory Commissions Act, 1998 and the
enactments specified in the Schedule, and functioning
as such immediately before the appointed date, shall be
the State Commission for the purposes of this Act and
the Chairperson, Members, Secretary, and other officers
and other employees thereof shall continue to hold office,
on the same terms and conditions on which they were
appointed under those Acts:
Provided further that the Chairperson and other Members of
the State Commission appointed, before the commencement
of this Act under the Electricity Regulatory Commissions
Act, 1998 or under the enactments specified in the
Schedule, may on the recommendations of the Selection
Committee constituted under sub-section (1) of Section 85
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be allowed to opt for the terms and conditions under this
Act by the concerned State Government.
(2) The State Commission shall be a body corporate by
the name aforesaid, having perpetual succession and a
common seal, with power to acquire, hold and dispose of
property, both movable and immovable, and to contract
and shall, by the said name, sue or be sued.
(3) The head office of the State Commission shall be at
such place as the State Government may, by notification,
specify.
(4) The State Commission shall consist of not more than
three Members, including the Chairperson.
(5) The Chairperson and Members of the State Commission
shall be appointed by the State Government on the
recommendation of a Selection Committee referred to in
section 85.”
27. Section 86 of the Electricity Act, 2003 reads thus:
“Section 86. (Functions of State Commission): --- (1) The
State Commission shall discharge the following functions,
namely: -
(a) determine the tariff for generation, supply, transmission
and wheeling of electricity, wholesale, bulk or retail, as the
case may be, within the State: Provided that where open
access has been permitted to a category of consumers
under section 42, the State Commission shall determine
only the wheeling charges and surcharge thereon, if any,
for the said category of consumers;
(b) regulate electricity purchase and procurement process
of distribution licensees including the price at which
electricity shall be procured from the generating companies
or licensees or from other sources through agreements
for purchase of power for distribution and supply within
the State;
(c) facilitate intra-State transmission and wheeling of
electricity;
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with
respect to their operations within the State;
(e) promote co-generation and generation of electricity
from renewable sources of energy by providing suitable
measures for connectivity with the grid and sale of electricity
to any person, and also specify, for purchase of electricity
from such sources, a percentage of the total consumption
of electricity in the area of a distribution licensee;
(f) adjudicate upon the disputes between the licensees,
and generating companies and to refer any dispute for
arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code
specified under clause (h) of sub-section (1) of section 79;
(i) specify or enforce standards with respect to quality,
continuity and reliability of service by licensees;
(j) fix the trading margin in the intra-State trading of
electricity, if considered, necessary; and
(k) discharge such other functions as may be assigned
to it under this Act.
(2) The State Commission shall advise the State
Government on all or any of the following matters, namely :-.
(i) promotion of competition, efficiency and economy in
activities of the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry
in the State;
(iv) matters concerning generation, transmission ,
distribution and trading of electricity or any other matter
referred to the State Commission by that Government.
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
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(4) In discharge of its functions, the State Commission
shall be guided by the National Electricity Policy,
National Electricity Plan and tariff policy published under
section 3”.
28. Section 107 of the Electricity Act, 2003 reads thus:
“Section 107. (Directions by Central Government): ---
(1) In the discharge of its functions, the Central Commission
shall be guided by such directions in matters of policy
involving public interest as the Central Government may
give to it in writing.
(2) If any question arises as to whether any such direction
relates to a matter of policy involving public interest, the
decision of the Central Government thereon shall be final.”
29. Section 108 of the Electricity Act,2003 reads thus:
“Section 108. (Directions by State Government): ----
(1) In the discharge of its functions, the State Commission
shall be guided by such directions in matters of policy
involving public interest as the State Government may
give to it in writing.
(2) If any question arises as to whether any such direction
relates to a matter of policy involving public interest, the
decision of the State Government thereon shall be final”.
30. Section 111 of the Electricity Act, 2003 reads thus:
“Section 111. (Appeal to Appellate Tribunal): --- (1) Any
person aggrieved by an order made by an adjudicating
officer under this Act (except under section 127) or an order
made by the Appropriate Commission under this Act may
prefer an appeal to the Appellate Tribunal for Electricity:
Provided that any person appealing against the order of
the adjudicating officer levying any penalty shall, while
filing the appeal , deposit the amount of such penalty:
Provided further that wherein any particular case, the
Appellate Tribunal is of the opinion that the deposit of such
penalty would cause undue hardship to such person, it may
dispense with such deposit subject to such conditions as it
[2025] 7 S.C.R. 737

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

may deem fit to impose so as to safeguard the realisation
of penalty.
(2) Every appeal under sub-section (1) shall be filed
within a period of fortyfive days from the date on which
a copy of the order made by the adjudicating officer or
the Appropriate Commission is received by the aggrieved
person and it shall be in such form, verified in such manner
and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an
appeal after the expiry of the said period of forty-five days
if it is satisfied that there was sufficient cause for not filing
it within that period.
(3) On receipt of an appeal under sub-section (1), the
Appellate Tribunal may, after giving the parties to the
appeal an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting
aside the order appealed against.
(4) The Appellate Tribunal shall send a copy of every order
made by it to the parties to the appeal and to the concerned
adjudicating officer or the Appropriate Commission, as the
case may be.
(5) The appeal filed before the Appellate Tribunal under
sub-section (1) shall be dealt with by it as expeditiously
as possible and endeavour shall be made by it to dispose
of the appeal finally within one hundred and eighty days
from the date of receipt of the appeal:
Provided that where any appeal could not be disposed of
within the said period of one hundred and eighty days, the
Appellate Tribunal shall record its reasons in writing for
not disposing of the appeal within the said period.
(6) The Appellate Tribunal may, for the purpose of
examining the legality, propriety or correctness of any
order made by the adjudicating officer or the Appropriate
Commission under this Act, as the case may be, in relation
to any proceeding, on its own motion or otherwise, call for
the records of such proceedings and make such order in
the case as it thinks fit.”
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31. Section 128 of the Electricity Act, 2003 reads thus:
“Section 128. (Investigation of certain matters): ----
(1) The Appropriate Commission may, on being satisfied
that a licensee has failed to comply with any of the
conditions of licence or a generating company or a licensee
has failed to comply with any of the provisions of this
Act or rules or regulations made thereunder, at any time,
by order in writing, direct any person (hereafter in this
section referred to as “Investigating Authority”) specified
in the order to investigate the affairs of any generating
company or licensee and to report to that Commission on
any investigation made by such Investigating Authority:
Provided that the Investigating Authority may, wherever
necessary, employ any auditor or any other person for
the purpose of assisting him in any investigation under
this section.
(2) Notwithstanding anything to the contrary contained in
section 235 of the Companies Act, 1956, the Investigating
Authority may, at any time, and shall, on being directed so
to do by the Appropriate Commission, cause an inspection
to be made, by one or more of his officers, of any licensee
or generating company and his books of account; and
the Investigating Authority shall supply to the licensee or
generating company, as the case may be, a copy of his
report on such inspection.
(3) It shall be the duty of every manager, managing
director or other officer of the licensee or generating
company, as the case may be, to produce before the
Investigating Authority directed to make the investigation
under sub-section (1), or inspection under sub-section
(2), all such books of account, registers and other
documents in his custody or power and to furnish him
with any statement and information relating to the affairs
of the licensee or generating company, as the case may
be, as the said Investigating Authority may require of
him within such time as the said Investigating Authority
may specify.
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(4) Any Investigating Authority, directed to make an
investigation under subsection (1), or inspection under sub-
section (2), may examine on oath any manager, managing
director or other officer of the licensee or generating
company, as the case may be, in relation to his business
and may administer oaths accordingly.
(5) The Investigating Authority, shall, if it has been directed
by the Appropriate Commission to cause an inspection
to be made, and may, in any other case, report to the
Appropriate Commission on any inspection made under
this section.
(6) On receipt of any report under sub-section (1) or sub-
section (5), the Appropriate Commission may, after giving
such opportunity to the licensee or generating company, as
the case may be, to make a representation in connection
with the report as in the opinion of the Appropriate
Commission, seems reasonable, by order in writing—
(a) require the licensee or the generating company to
take such action in respect of any matter arising out of
the report as the Appropriate Commission may think fit; or
(b) cancel the licenece; or
(c) direct the generating company to cease to carry on
the business of generation of electricity.
(7) The Appropriate Commission may, after giving
reasonable notice to the licensee or the generating
company, as the case may be, publish the report submitted
by the Investigating Authority under sub-section (5) or
such portion thereof as may appear to it to be necessary.
(8) The Appropriate Commission may specify the
minimum information to be maintained by the licensee
or the generating company in their books, the manner in
which such information shall be maintained, the checks
and other verifications to be adopted by licensee or the
generating company in that connection and all other matters
incidental thereto as are, in its opinion, necessary to enable
the Investigating Authority to discharge satisfactorily its
functions under this section.
740 [2025] 7 S.C.R.

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Explanation.- For the purposes of this section, the
expression “licensee or the generating company” shall
include in the case of a licensee incorporated in India—
(a) all its subsidiaries formed for the purpose of carrying
on the business of generation or transmission or
distribution or trading of electricity exclusively outside
India; and
(b) all its branches whether situated in India or outside India.
(9) All expenses of, and incidental to, any investigation
made under this section shall be defrayed by the licensee
or the generating company, as the case may be, and shall
have priority over that debts due from the licensee or the
generating company and shall be recoverable as an arrear
of land revenue.”
32. Section 129 of the Electricity Act, 2003 reads thus:
“Section 129. (Orders for securing compliance): ---
(1) Where the Appropriate Commission, on the basis
of material in its possession, is satisfied that a licensee
is contravening, or is likely to contravene, any of the
conditions mentioned in his licence or conditions for grant of
exemption or the licensee or the generating company has
contravened or is likely to contravene any of the provisions
of this Act, it shall, by an order, give such directions as
may be necessary for the purpose of securing compliance
with that condition or provision.
(2) While giving direction under sub-section (1), the
Appropriate Commission shall have due regard to the
extent to which any person is likely to sustain loss or
damage due to such contravention.”
33. Section 130 of the Electricity Act, 2003 reads thus:
“Section 130. (Procedure for issuing directions by
Appropriate Commission): The Appropriate Commission,
before issuing any direction under section 129, shall--
(a) serve notice in the manner as may be specified to
the concerned licensee or the generating company; (b)
publish the notice in the manner as may be specified for
[2025] 7 S.C.R. 741

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

the purpose of bringing the matters to the attention of
persons, likely to be affected, or affected; (c) consider
suggestions and objections from the concerned licensee
or generating company and the persons, likely to be
affected, or affected.”
34. Section 181 of the Electricity Act, 2003 reads thus:
“Section 181. (Powers of State Commissions to make
regulations): --- (1) The State Commissions may, by
notification, make regulations consistent with this Act and
the rules generally to carry out the provisions of this Act.
(2) In particular and without prejudice to the generality of
the power contained in sub-section (1), such regulations
may provide for all or any of the following matters,
namely: -
(a) period to be specified under the first proviso of
section 14;
(b) the form and the manner of application under sub-
section (1) of section 15;
(c) the manner and particulars of application for licence to
be published under sub-section (2) of section 15;
(d) the conditions of licence section 16;
(e) the manner and particulars of notice under clause(a)
of subsection (2) of section 18;
(f) publication of the alterations or amendments to be
made in the licence under clause (c) of sub-section (2)
of section 18;
(g) levy and collection of fees and charges from generating
companies or licensees under sub-section (3) of section 32;
(h) rates, charges and the term and conditions in respect
of intervening transmission facilities under proviso to
section 36;
(i) payment of the transmission charges and a surcharge
under subclause (ii) of clause(d) of sub-section (2) of
section 39;
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(j) reduction of surcharge and cross subsidies under second
proviso to sub-clause (ii) of clause (d) of sub-section (2)
of section 39;
(k) manner and utilisation of payment and surcharge under
the fourth proviso to sub-clause(ii) of clause (d) of sub-
section (2) of section 39;
(l) payment of the transmission charges and a surcharge
under subclause(ii) of clause (c) of section 40;
(m) reduction of surcharge and cross subsidies under
second proviso to sub-clause (ii) of clause (c) of section 40;
(n) the manner of payment of surcharge under the fourth
proviso to sub-clause (ii) of clause (c) of section 40;
(o) proportion of revenues from other business to be utilised
for reducing the transmission and wheeling charges under
proviso to section 41;
(p) reduction of surcharge and cross-subsidies under the
third proviso to sub-section (2) of section 42;
(q) payment of additional charges on charges of wheeling
under subsection (4) of section 42;
(r) guidelines under sub-section (5) of section 42;
(s) the time and manner for settlement of grievances under
sub-section (7) of section 42;
(t) the period to be specified by the State Commission for
the purposes specified under sub-section (1) of section 43;
(u) methods and principles by which charges for electricity
shall be fixed under sub-section (2) of section 45;
(v) reasonable security payable to the distribution licensee
under sub-section (1) of section 47;
(w) payment of interest on security under sub-section (4)
of section 47;
(x) electricity supply code under section 50;
(y) the proportion of revenues from other business to be
utilised for reducing wheeling charges under proviso to
section 51;
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Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(z) duties of electricity trader under sub-section (2) of
section 52;
(za) standards of performance of a licensee or a class of
licensees under sub-section (1) of section 57;
(zb) the period within which information to be furnished by
the licensee under sub-section (1) of section 59;
(zc) the manner of reduction of cross-subsidies under
clause (g) of section 61;
(zd) the terms and conditions for the determination of tariff
under section 61;
(ze) details to be furnished by licensee or generating
company under sub-section (2) of section 62;
(zf) the methodologies and procedures for calculating the
expected revenue from tariff and charges under sub-section
(5) of section 62;
(zg) the manner of making an application before the State
Commission and the fee payable therefor under sub-section
(1) of section 64;
(zh) issue of tariff order with modifications or conditions
under subsection(3) of section 64;
(zi) the manner by which development of market in power
including trading specified under section 66;
(zj) the powers and duties of the Secretary of the State
Commission under sub-section (1) of section 91;
(zk) the terms and conditions of service of the secretary,
officers and other employees of the State Commission
under sub-section (2) of section 91;
(zl) rules of procedure for transaction of business under
sub-section (1) of section 92;
(zm) minimum information to be maintained by a licensee
or the generating company and the manner of such
information to be maintained under sub-section (8) of
section 128;
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(zn) the manner of service and publication of notice under
section 130;
(zo) the form of preferring the appeal and the manner in
which such form shall be verified and the fee for preferring
the appeal under sub-section (1) of section 127;
(zp) any other matter which is to be, or may be, specified.
(3) All regulations made by the State Commission under this
Act shall be subject to the condition of previous publication”.

(ii) Whether the Electricity Regulatory Commission has the
jurisdiction to consider matters in public interest?
35. Under Section 61 of the Act, 2003, the Central and State ERCs
are required to specify the terms and conditions for determination
of tariff, and in doing so, are required to safeguard the interests
of consumers [Section 61(d)]. Pertinently, ERCs are also required
to consider the principles enshrined under Section 61 of the Act,
2003 whilst adopting or determining tariff under Sections 62 and 63
respectively of the Act, 2003.
36. Similarly, Sections 18 and 19 respectively of the Act, 2003 empower
the ERCs to amend/alter the terms of any license (Distribution,
Transmission or Trading) issued by them or to revoke such license
in public interest. Consequently, under Section 20(1), an ERC may
direct the sale of a utility, in the public interest. These are a part of
the regulatory functions of ERCs.
37. Furthermore, Sections 107 and 108 respectively of the Act, 2003
mandate the ERCs to be guided by directions in matters of policy
involving public interest as the Central/State Government may give
to it in writing. In this context, we may refer to the decision of this
Court in the case of Paschimanchal Vidyut Vitran Nigam Ltd. v.
Adarsh Textiles reported in (2014) 16 SCC 212. We may reproduce
paras 21, 22 and 23 respectively as under:
“21. The Electricity Act, 2003 was enacted by Parliament.
Section 62 whereof confers the power upon the Commission
to determine the tariff. Section 65 of the Electricity Act,
2003 enables the State Government to grant subsidy to any
consumer or class of consumers in the tariff determined
by the State Commission under Section 62. Section 108
[2025] 7 S.C.R. 745

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

of the 2003 Act deals with the power to issue directions by
the State Government. The Commission shall be guided
by such directions in the matter of policy involving public
interest as the State Government may give to it in writing.
---xxx---
23. It is apparent from a bare reading of the aforesaid
provisions of the Electricity Act, 2003 and the Reforms
Act, 1999 that in discharge of its functions, the State
Commission shall be guided by such directions in matters
of policy involving public interest as the State Government
may give to it in writing. Such decision/direction of the State
Government in the matter of policy, subsidy and public
interest shall be final. Under Section 65 it is a prerogative
of the State Government to grant any subsidy to any
consumer or class of consumers in the tariff determined
by the Commission under Section 62. It is apparent from
the provisions contained in Sections 65 and 108 of the
2003 Act that to grant subsidy to any consumer or class
of consumers is the prerogative of the State Government
and such other direction issued in the public interest shall
be binding upon the Commission.”
38. Electricity being a natural resource that vests in the State, the
provisions of the Act, 2003 keep consumers’ interest at the core of
all processes that are sought to be governed under the Act, 2003
namely, generation, transmission and distribution of electricity.
39. Following the observation in Energy Watchdog v. CERC reported
in (2017) 14 SCC 80 that “the appropriate Commission does not act
as a mere post office...” for the purpose of tariff determination but
must ensure transparency in the procedure for such determination,
this Court, in M.P. Power Management Co. Ltd. v. Sky Power
Southeast Solar India (P) Ltd., reported in (2023) 2 SCC 703,
has observed that any impact on the electricity tariff, directly affects
consumer interest and therefore, implicates public interest and such
a concern finds statutory recognition under Sections 61 to 63 of the
Act, 2003. Para 133 reads thus:
“133. In the said case, the Court further held that the
moment the electricity tariff gets affected, the consumer
interest comes in and public interest gets affected and
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further that there is a statutory recognition for the same in
Sections 61 to 63 of the Electricity Act, 2003. Therefore,
this judgment, though in the context of a statutory appeal,
has laid down that consumer interest in tariff is intertwined
with public interest.”
40. Similarly, in Jaipur Vidyut Vitran Nigam Ltd. v. MB Power (M.P.)
Ltd., reported in (2024) 8 SCC 513, this Court reiterated the
requirement of balancing consumer interest with that of the interest
of the generators. Para 127 reads thus:
“127. It is needless to state that this Court, time and again,
in various judgments including the one in GMR Warora
Energy [GMR Warora Energy Ltd. v. CERC, (2023) 10 SCC
401 : 2023 INSC 398] has recognised the requirement of
balancing the consumers’ interest with that of the interest of
the generators. It will not be permissible to take a lopsided
view only to protect the interest of the generators ignoring
the consumers’ interest and public interest.”
41. This Court, in All India Power Engineer Federation v. Sasan Power
Ltd., reported in (2017) 1 SCC 487, while rendering the judgment in
the context of a statutory tariff appeal, has underscored that consumer
interest in tariff is intertwined with public interest. Para 30 reads thus:
“31. (…) This is for the reason that what is adopted by the
Commission under Section 63 is only a tariff obtained by
competitive bidding in conformity with Guidelines issued.
If at any subsequent point of time such tariff is increased,
which increase is outside the four corners of the PPA,
even in cases covered by Section 63, the legislative intent
and the language of Sections 61 and 62 make it clear
that the Commission alone can accept such amended
tariff as it would impact consumer interest and therefore
public interest.”
(Emphasis supplied)

42. What is pertinent to note is that all the judgments referred to
hereinabove pertain to the adoption of tariff under Section 63 of the
Act, 2003 in a manner that seeks to balance consumers’ interest
in the arena of procurement of electricity from generating stations.
The said judgments are not in respect of the relationship between
[2025] 7 S.C.R. 747

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

distribution licensees or franchisees. While consumer interest is an
important consideration in the overall scheme of the Act, 2003, it
remains to be seen whether the ERCs have jurisdiction to entertain
petitions in respect of disputes between consumers and distribution
licensees/franchisees.
43. The ERCs, being creatures of a statute, derive their jurisdiction
and powers from the provisions of that statute i.e., the Act, 2003.
Therefore, it would not be permissible for them to exercise powers
not expressly vested in them. In this context, we may refer to the
decision of this Court in the case of Rajeev Hitendra Pathak v.
Achyut Kashinath Karekar, reported in (2011) 9 SCC 541. Para
34 reads thus:
“34. On a careful analysis of the provisions of the Act,
it is abundantly clear that the Tribunals are creatures
of the statute and derive their power from the express
provisions of the statute. The District Forums and the
State Commissions have not been given any power to
set aside ex parte orders and the power of review and
the powers which have not been expressly given by the
statute cannot be exercised.”
44. An authority created by a statute must act under the statute and not
beyond it. In Chiranjilal Shrilal Goenka v. Jasjit Singh, reported
in (1993) 2 SCC 507, this Court observed thus:
“17. (…) In this country, jurisdiction can be exercised only
when provided for either in the Constitution or in the laws
made by the legislature. Jurisdiction is thus the authority or
power of the court to deal with a matter and make an order
carrying binding force in the facts. Oza, J. supplementing
the question held that the jurisdiction to try a case could
only be conferred by law enacted by the legislature. The
Supreme Court could not confer jurisdiction if it does not
exist in law. Ray, J. held that the Court cannot confer a
jurisdiction on itself which is not provided in the law. In
the dissenting opinion Venkatachaliah, J., as he then
was, lay down that the expression jurisdiction or prior
determination is a “verbal coat of many colours”. In the case
of a tribunal, an error of law might become not merely an
error in jurisdiction but might partake of the character of an
748 [2025] 7 S.C.R.

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error of jurisdiction. But, otherwise, jurisdiction is a ‘legal
shelter’ and a power to bind despite a possible error in the
decision. The existence of jurisdiction does not depend
on the correctness of its exercise. The authority to decide
embodies a privilege to bind despite error, a privilege which
is inherent in and indispensable to every judicial function.
The characteristic attribute of a judicial act is that it binds
whether it be right or it be wrong. Thus this Court laid down
as an authoritative proposition of law that the jurisdiction
could be conferred by statute and this Court cannot confer
jurisdiction or an authority on a tribunal. In that case this
Court held that Constitution Bench has no power to give
direction contrary to Criminal Law Amendment Act, 1952.
The direction per majority was held to be void.”
(Emphasis supplied)

45. In A.R. Antulay v. R.S. Nayak, reported in (1988) 2 SCC 602, in
para 91, this Court observed thus:
“91. (…) Instances of conferment of jurisdiction by specific
law are very common. The laws of procedure both criminal
and civil confer jurisdiction on different courts. Special
jurisdiction is conferred by special statute. It is thus clear
that jurisdiction can be exercised only when provided
lower either in the Constitution or in the laws made by the
legislature. Jurisdiction is thus the authority or power of
the court to deal with a matter and make an order carrying
binding force in the facts. In support of judicial opinion for
this view reference may be made to the Permanent Edition
of “Words und Phrases” Vol. 23-A at page 164. It would
be appropriate to refer to two small passages occurring at
pages 174 and 175 of the volume. At page 174, referring
to the decision in Carlile v. National Oil & Development
Co. it has been stated.
Jurisdiction is the authority to hear and determine, and in
order that it may exist the following are essential: (1) A
court created by law, organized and sitting; (2) authority
given to it by law to hear and determine causes of the
kind in question; (3) power given to it by law to render a
[2025] 7 S.C.R. 749

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

judgment such as it assumes to render; (4) authority over
the parties to the case if the judgment is to bind them
personally as a judgment in personam, which is acquired
over the plaintiff by his appearance and submission of the
matter to the court, and is acquired over the defendant
by his voluntary appearance, or by service of process on
him; (5) authority over the thing adjudicated upon its being
located within the court’s territory, and by actually seizing
it if liable to be carried away; (6) authority to decide the
question involved, which is acquired by the question being
submitted to it by the parties for decision.”
(Emphasis supplied)

46. In Bhadreshwar Vidyut (P) Ltd. v. Maharashtra ERC, reported in
2024 SCC OnLine APTEL 47 in para 149, this Court observed thus:
“149. As noted hereinabove, the possibility of inconvenience
or hardship would not confer jurisdiction on the CERC, since
jurisdiction can be conferred only by a statutory enactment
and not by judicial pronouncement. In the present case, it
is evident that the jurisdiction, to adjudicate on whether or
not the Appellant is a Captive Generation Plant in terms
of Section 2(8) read with Section 9 of the Electricity Act
and Rule 3(1) of the Electricity Rules, 2005, lies with the
State Commission under Section 86(1)(f) of the Electricity
Act, and not with the CERC under Section 79(1)(f).”
47. With respect to the ERCs in particular, this Court in Gujarat Urja
Vikas Nigam Ltd. v. Solar Semiconductor Power Co. (India) (P)
Ltd., reported in (2017) 16 SCC 498, has held that such statutory
authorities cannot act beyond the powers vested in them by their
parent statute. The relevant paras are reproduced below:
“39. The Commission being a creature of statute cannot
assume to itself any powers which are not otherwise
conferred on it. In other words, under the guise of exercising
its inherent power, as we have already noticed above, the
Commission cannot take recourse to exercise of a power,
procedure for which is otherwise specifically provided
under the Act…
---xxx---
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59. The inherent power is not a provision of law to grant
any substantive relief. But it is only a procedural provision
to make orders to secure the ends of justice and to prevent
abuse of process of the Court. It cannot be used to create
or recognize substantive rights of the parties.”
(Emphasis supplied)

48. Under the scheme of the Act, 2003, the Central and State ERCs
are vested with regulatory functions, tariff determination functions,
and adjudicatory functions, in particular under Sections 79 and 86
respectively. Whilst in the exercise of regulatory functions, the ERCs
are also required to comply with the various Regulations made by
the respective Central and State Commissions under Sections 178
and 181 respectively of the Act, 2003. A close reading of most of the
Regulations framed by the ERCs i.e., Regulations pertaining to Open
Access, Connectivity Regulations, Regulations on Renewable Power
Purchase Obligations etc., indicate that regulatory powers and functions
of the ERCs must be exercised in public or consumer interest alongside
commercial principles. The function of tariff adoption or determination is
also mandated to be carried by ERCs in accordance with public interest
and to safeguard consumer needs. It is noteworthy that Section 61 of
the Act, 2003 also requires ERCs to consider commercial principles
in matters of tariff and therefore ERCs are expected to undertake a
balancing act between commercial prudence and consumer interest.
49. The adjudicatory functions of ERCs are specifically governed by
Sections 79 and 86 respectively of the Act, 2003. The ERCs also have
the discretion to refer disputes to arbitration. Adjudicatory jurisdiction
of the Central Commission is specified under Section 79(1)(f) and is
limited to adjudication of disputes involving generating companies or
transmission licensee, in regard to matters connected with clauses (a)
to (d), which are extracted below:
a) to regulate the tariff of generating companies owned or controlled
by the Central Government;
b) to regulate the tariff of generating companies other than those
owned or controlled by the Central Government specified in
clause (a), if such generating companies enter into or otherwise
have a composite scheme for generation and sale of electricity
in more than one State;
[2025] 7 S.C.R. 751

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

c) to regulate the inter-State transmission of electricity;
d) to determine tariff for inter-State transmission of electricity.
50. The State ERCs have a comparatively broader jurisdiction under
Section 86, to adjudicate upon all disputes between the licensees and
generating companies, without being limited to categories specified
in (a) to (d) of Section 79. However, even this enlarged jurisdiction
of the State ERCs, more particularly the UPERC, does not include
within its fold the power to adjudicate disputes involving consumers
and by extension their grievances, irrespective of whether such issue
is raised in furtherance of public interest. However, a perusal of the
petition filed by the respondent no. 4 shows that there is no occasion
for application of Section 86, as the said petition was filed praying
for an investigation under Section 128 of the Act, 2003 against the
respondent nos. 2 and 3 as well as the appellant. To this extent, we
agree with the impugned order of the APTEL.
51. To contest the jurisdiction of the UPERC to decide the petition of
the respondent no. 4, the appellant has relied on this Court’s dictum
in Maharashtra Electricity Regulatory Commission v. Reliance
Energy Ltd., reported in (2007) 8 SCC 381 wherein it was held that
in view of the mechanism for redressal of consumers’ grievance
provided under Section 42(5) of the Act, 2003, there is no occasion
for the State ERC to exercise jurisdiction over such matters in place
of the forum created under the Act, 2003 for this very purpose. It was
further held that the ERCs are empowered to adjudicate upon disputes
under Section 86(1)(f) but the said provision does not appertain to
the individual consumers’ disputes. The relevant observations from
the said decision are reproduced below:
“31. The basic question which arises for our consideration
in this appeal is whether the individual consumer can
approach the Commission under the Act or not.
32. For deciding this question, the relevant provision is
Section 42(5) of the Act, which reads as under:
“42. Duties of distribution licensee and open access.—
(1)-(4) * * *
(5) Every distribution licensee shall, within six months
from the appointed date or date of grant of licence,
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whichever is earlier, establish a forum for redressal
of grievances of the consumers in accordance with
the guidelines as may be specified by the State
Commission.”
33. As per the aforesaid provision, if any grievance is
made by a consumer, then they have a remedy under
Section 42(5) of the Act and according to sub-section
(5) every distribution licensee has to appoint a forum for
redressal of grievances of the consumers. In exercise of
this power the State has already framed the Maharashtra
Electricity Regulatory Commission (Consumer Grievance
Redressal Forum and Ombudsman) Regulations, 2003
(hereinafter referred to as “the 2003 Regulations”) and
created Consumer Grievance Redressal Forum and
Ombudsman. Under these 2003 Regulations a proper
forum for redressal of the grievances of individual
consumers has been created by the Commission.
Therefore, now by virtue of sub-section (5) of Section
42 of the Act, all the individual grievances of consumers
have to be raised before this forum only. In the face of
this statutory provision we fail to understand how could
the Commission acquire jurisdiction to decide the matter
when a forum has been created under the Act for this
purpose. The matter should have been left to the said
forum. This question has already been considered and
decided by a Division Bench of the Delhi High Court in
Suresh Jindal v. BSES Rajdhani Power Ltd. [(2006) 132
DLT 339 (DB)] and Dheeraj Singh v. BSES Yamuna Power
Ltd. [Ed. : (2006) 127 DLT 525 (DB)] and we approve of
these decisions. It has been held in these decisions that
the forum and ombudsman have power to grant interim
orders. Thus a complete machinery has been provided
in Sections 42(5) and 42(6) for redressal of grievances
of individual consumers. Hence wherever a forum/
ombudsman have been created the consumers can only
resort to these bodies for redressal of their grievances.
Therefore, not much is required to be discussed on this
issue. As the aforesaid two decisions correctly lay down
the law when an individual consumer has a grievance
[2025] 7 S.C.R. 753

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

he can approach the forum created under sub-section
(5) of Section 42 of the Act.
34. In this connection, we may also refer to Section 86
of the Act which lays down the functions of the State
Commission. Sub-section (1)(f) of the said section lays
down the adjudicatory function of the State Commission
which does not encompass within its domain complaints of
individual consumers. It only provides that the Commission
can adjudicate upon the disputes between the licensees
and generating companies and to refer any such dispute
for arbitration. This does not include in it an individual
consumer. The proper forum for that is Section 42(5) and
thereafter Section 42(6) read with the Regulations of 2003
as referred to hereinabove.
35. Therefore, in the facts and circumstances of the
present case, we are of the opinion that the views taken
by the Commission as well as the appellate authority
are unsustainable and they have erred in coming to
the conclusion that the Commission has jurisdiction.
Consequently, we set aside the order dated 18-10-2005
passed by the Commission and the orders dated 5-4-
2006 and 2-6-2006 passed by the appellate authority
and remit the matter to the proper forum created under
Section 42(5) of the Act to decide the grievance of the
respondent herein in accordance with law. We make it
clear that we have not made any observation with regard
to the merits of the demand raised by the appellant upon
the respondent Company and it will be open for the proper
forum to adjudicate the same. The payment, if any, made
by the Company will not operate as an estoppel against
the respondent Company. We hope that the forum will
decide the matter expeditiously.”
(Emphasis supplied)

52. Although we are in respectful agreement with the principles
enunciated in the decision in Reliance Energy (supra) to the extent
that it observes that a State ERC cannot usurp the jurisdiction of
the consumer grievance redressal forum established under Section
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42(5), yet we are of the view that in the specific case on hand, the
said judgment is not applicable. The present matter pertains to the
State of Uttar Pradesh where the UPERC had enacted the Uttar
Pradesh Electricity Regulatory Commission (Consumer Grievance
Redressal Forum & Electricity Ombudsman) Regulations, 2007
dated 04.10.2007 (hereinafter referred to as “UPERC Consumer
Grievance Regulations”) under Section 181 of the Act, 2003.
Regulation 5 thereof relates to the jurisdiction of the consumer
grievance redressal forum wherein it has been specified that the
forum is not empowered to entertain a complaint pertaining to matters
under Section 128 of the Act, 2003. The relevant regulations are
extracted below:
“5.0 Jurisdiction of the Forum-
5.1 The Forum shall not entertain a complaint, if it pertains
to matters mentioned in Section 126, 127, 128, 135 to 139,
143, 152 and 161 of the Electricity Act, 03.
5.2 The Forum shall have the jurisdiction to take up
complaints, except those under Regulation 5.1, on an
application before it or suo-moto if it considers appropriate
in the interest of justice.
5.3 The Forum shall not entertain a complaint if it pertains to
the same subject matter for which any proceedings before
any court, authority or any other Forum is pending or a
decree, award or a final order has already been passed
by any competent court, authority or Forum.”
(Emphasis supplied)

53. We now examine the provision of law under Section 128 of the Act,
2003. Sub-section (1) of the provision reads thus:
“(1) The Appropriate Commission may, on being satisfied
that a licensee has failed to comply with any of the
conditions of licence or a generating company or a
licensee has failed to comply with any of the provisions
of this Act or rules or regulations made thereunder,
at any time, by order in writing, direct any person
(hereafter in this section referred to as “Investigating
Authority”) specified in the order to investigate the affairs
[2025] 7 S.C.R. 755

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

of any generating company or licensee and to report to
that Commission on any investigation made by such
Investigating Authority”
54. The language of the Section is clear inasmuch as it places the onus
of initiating an investigation on the appropriate commission, which
is either the Central ERC or the State ERCs. Read with Regulation
5.1 of the UPERC Consumer Grievance Regulations, it is clear that
a request for investigation under Section 128 cannot be made by
an individual before the consumer forum for the simple reason that
directing such investigation is out of the scope of the said body as it
does not exercise regulatory powers under the Act, 2003. Therefore,
this Court’s observations in Reliance Energy (supra) are of no avail
to the appellant.
55. Having dealt with the said submission, we now proceed to ascertain
whether the ERCs have suo motu power to initiate a proceeding under
Section 128. For this purpose, we may refer to the Uttar Pradesh
Electricity Regulatory Commission (Conduct of Business) Rules,
2004 (the “Conduct of Business Rules, 2004”), more particularly,
Regulation 14 thereof, which deals with initiation of proceedings.
The Regulation is extracted below:
“14. Initiation of Proceedings:
a. The Commission may initiate any proceeding suo moto
or on a Petition filed by any affected person.
b. When the Commission initiates the Proceedings, it shall
be by a notice issued by the Office of the Commission
through Secretary and the Commission may give such
orders and directions as may be deemed necessary, for
service of notices to the affected parties, for the filing of
replies and rejoinder in opposition or in support of the
Petition in such form as the Commission may direct. The
Commission may, if it considers appropriate, issue orders
for advertisement of the Petition inviting comments on the
issue involved in the Proceedings in such form as the
Commission may direct.
c. While issuing the notice of inquiry the Commission
may, in appropriate cases, designate an Officer of the
Commission or any other person whom the Commission
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considers appropriate to present the matter in the
capacity of the Party, which cannot afford to engage its
representative”
(Emphasis supplied)

56. A perusal of the Regulation compels us to conclude that the UPERC
had jurisdiction to entertain a petition praying for investigation under
Section 128. Therefore, in our considered view, the first issue must be
answered against the appellant. In the same breath, we also clarify
that as a principle of law, the ERCs are not competent to entertain
a matter on the singular ground of public interest. Accordingly, we
answer this issue in negative.

(iii) Whether the petition filed by the respondent no. 4 under
Section 128 of the Act, 2003 was maintainable in law?
57. We may now look into the “satisfaction” required under Section 128.
Such satisfaction must be on either of the two grounds: (1) that a
licensee has contravened the conditions of its license; or (2) that a
licensee has failed to act in accordance with the provisions of the Act,
2003 and/or the regulations made thereunder. In the case at hand,
the respondent no. 4 had approached the UPERC under Section
128 to investigate the respondent no. 3 along with the appellant on
the following grounds:
(i) First, the entire assets of the respondent no. 3 (i.e., the
distribution licensee) deployed in the urban area of Agra were
transferred to the appellant without the prior approval of the
UPERC under Section 17.
(ii) Secondly, the grant of franchisee for an urban area by a
distribution licensee is not permissible under Section 13.
(iii) Lastly, the appellant and respondent no. 3 were in violation of
the tariff orders passed by the UPERC under Section 62, by
adopting their own fixed schedule of annualized input rates.
58. As regards the first objection, we are of the view that the same does
not afford any ground for investigation under Section 128 in the
present case. Section 17 places the requirement of a prior approval
on a licensee in respect of transactions with other licensees and
not with a franchisee. In terms of the seventh proviso to Section 14
[2025] 7 S.C.R. 757

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

read with Sections 2(27) and 2(49), a franchisee is not required to
obtain a separate license and therefore, is not considered to be a
licensee under Section 2(38) and Section 14. The Uttar Pradesh
Electricity Regulatory Commission (General Conditions of Distribution
License) Regulations, 2004 (the “Conditions of Distribution License
Regulations, 2004”) reiterate the aforesaid explanation of Section 17.
Regulation 5.8 of the said Regulations permits a distribution licensee
to undertake distribution in a particular area through a franchisee,
and Regulation 5.11 thereof clarifies that a distribution licensee is
not restricted from transferring or assigning its functions under its
license to a franchisee. As such, the facts of the case on hand fall
outside the scope of an enquiry under Section 17 and no request
for investigation under Section 128 can be made on this count. The
relevant Regulations are extracted hereinbelow:
“5. ACTIVITIES OF THE DISTRIBUTION LICENSEE
5.8 The Licensee may undertake distribution of electricity
for a specified area (franchise) within his Area of Supply
through another Person. Such Person shall not be required
to obtain any separate Licence from the Commission. The
Licensee shall continue to be responsible for distribution
of electricity in its Area of Supply and –
(a) Such Person shall operate under the overall supervision
and control of the Licensee and upon the terms and
conditions of the Licence and comply with all Regulations,
guidelines or orders of the Commission;
(b) Establishment of such arrangements shall not alter the
Licensee’s duties and obligations pursuant to general or
specific conditions of Licence;
(c) The cost of providing service shall not be higher than
if the Licensee performed such tasks itself; and
(d) For any act or omission of such Person, the Licensee
shall be responsible.
---xxx---
5.10 The Distribution Licensee may establish Subsidiaries
or associated companies or grant a Franchisee or enter
into management contracts including appointment of billing
758 [2025] 7 S.C.R.

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agent to conduct or carry out any of the functions, which
the Distribution Licensee is authorised to conduct or carry
under the Licence Provided that the Licensee shall be
responsible for all actions of the Subsidiaries or associated
companies or Franchisees or agents or contractors.
5.11 Except as provided in clause 5.8 above the Distribution
Licensee shall not transfer or assign the Licence or any
of the functions under the Licence to any other Person
without the prior approval of the Commission.”
59. The second objection, in our view, does not serve as a ground for
initiating an investigation under Section 128. The respondent no.
4 may argue that appointment of the appellant as a distribution
franchisee in the urban area is inconsistent with Section 5 of the
Act, 2003, however, in our considered opinion, the said argument
is devoid of substance. Section 5 lays down the “National policy on
electrification and local distribution in rural areas” wherein franchisees
have been identified as important stakeholders to achieve this policy
but such provision cannot be taken to mean that the Act, 2003 restricts
the role of franchisees to rural areas. A conjoint reading of Sections
2(27), 2(49), 13 and seventh proviso of Section 14 indicates that
distribution franchisees may be appointed for urban areas as well
and the Act, 2003 places no limitation on the area of operation of
such franchisees. [See: Citizen Forum, Maharashtra v. State of
Maharashtra, reported in 2008 SCC OnLine Bom 165]
60. As regards the last objection, we understand such objection to
be one that challenges the very concept of “input-rate model of
distribution of franchisee”. The crux of the objection raised by the
respondent no. 4 is that the appellant herein is benefiting from the
fixation of lower rates as annualized input rates in the DFA between
it and the respondent no. 3. According to the respondent no. 4, such
input rates are lower than the bulk supply rate of the respondent
no. 2 and therefore, the difference between such rates has to be
subsidized by public money, that is, by consumers who consume
electricity supplied by the respondent no. 2 in areas other than the
urban area of Agra.
61. For the purpose of discussing this objection, we find it apposite to
first explain the “input-rate model of distribution franchisee”. In this
model, a franchisee buys electricity from a distribution licensee at
[2025] 7 S.C.R. 759

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

defined input point(s) at a pre-determined rate which is annualized
for consistency on a yearly basis. This pre-determined rate that has
to be paid by the franchisee to the distribution licensee for purchase
of electricity, is usually fixed by way of bids received from private
players interested in assuming the role of a franchisee. The private
party that quotes the highest rate is awarded the bid subject to other
terms and conditions of the bidding process. It is for this reason that
quoting of such annualized rates is required even by the Ministry
of Power’s “Standard Bidding Document for Appointment of Input
based Distribution Franchisee, June 2012”
62. Once a franchisee signs an input-based franchisee agreement, it
has to pay the distribution licensee or any utility it is purchasing
electricity from, the agreed input rate for all the energy received
by it. However, it is pertinent to note that the franchisee collects
revenue from the consumers by raising bills at the tariff decided by
the appropriate ERC. Therefore, after collecting the revenue from
the consumers, the surplus left with it after paying the input rate to
the distribution licensee or utility is its profit. This profit margin can
be increased by the franchisee by reducing the aggregate technical
and commercial losses (“AT&C losses”) and increasing efficiency
in improving collection of revenue for the same specified quantity
of power or energy purchased by it from the distribution licensee or
utility. In the same breath, we must also clarify that generally, the
level of investments and expenses anticipated by the franchisee
for increasing efficiency is incorporated in the input rates quoted
by it in the bid. The higher the level of investment is required, the
lower the input rate is likely to be. In other words, the input price
that a private player proposes in its bid is inversely proportional to
the capital expenditure that a private player believes it will have to
make to ensure that the distribution exercise is profitable.
63. It is because there is no fixed incentive for the franchisee envisaged
in such a model that the franchisees are motivated to reduce all
kinds of losses to earn more revenue to increase their profit margin.
Even though the model is advantageous for the purpose of reducing
losses through theft and non-payment, yet it is also considered to be
prone to misuse and not without its demerits. A bidding franchisee
may over-project the investments and expenses required to distribute
electricity efficiently, which in turn would lead to a reduction in the
input rate fixed between the distribution licensee and the franchisee,
760 [2025] 7 S.C.R.

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as operation in the particular area that the franchisee is bidding for
will be considered to be a loss-making venture. Lack of data about
baseline loss levels puts the distribution licensee in a weaker position
vis-à-vis the distribution franchisee. One could argue that this is a
demerit of the input-rate model. However, it does not seem to be
a plausible criticism of the model considering that most distribution
licensees would ideally have the knowledge of AT&C loss levels
prevailing in an area that they used to service before the franchisee
came into picture.
64. The objection raised by the respondent no. 4 is two-pronged: (1)
that the Average Tariff Rate (ATR) for the base year 2008-09 derived
by the respondent nos. 2 and 3 is based on fabricated data without
any authentication thereof; and (2) that the input rate fixed between
the appellant and respondent no. 3 is undervalued with the ulterior
motive to enable the appellant to profit at the cost of public money.
The respondent no. 4 assailed such action on part of the respondent
no. 2 and the appellant to be a willful and deliberate violation of the
tariff order passed by the UPERC.
65. To get a better background of the operations of the appellant in the
urban city of Agra, we may refer to the APTEL’s decision in Amausi
Industries Association v. Uttar Pradesh Electricity Regulatory
Commission reported in 2013 SCC OnLine APTEL 138, with profit.
The APTEL was faced with inter alia, the question whether Torrent
Power (the appellant herein) could be supplied power at a price below
the bulk power purchase price. The appellants therein argued that
despite the bulk supply price fixed by the State ERC for purchase
of power by the distribution licensees being Rs. 2.64 per unit for
the FY 2011-12 and Rs. 3.75 per unit for FY 2012-13, such power
was supplied to Torrent Power at Rs. 1.54 per unit for FY 2010-11,
Rs. 1.55 per unit for FY 2011-12 and Rs. 1.71 per unit for FY 2012-
13. The supply of electricity to Torrent Power at rates lower than the
bulk supply price fixed by the UPERC meant that the consumers of
other areas were cross subsidizing the supply of power by DVVNL
to Torrent Power. The appellants therein took strong exception to
the consumers of other areas bearing the tariff burden on account
of cheaper supply of power in Agra by DVVNL to Torrent Power. The
APTEL succinctly pointed out that due to high AT&C losses in the
urban area of Agra, the distribution licensee, DVVNL was unable
to recover the bulk supply rate of Rs. 2.64 per unit and was able
[2025] 7 S.C.R. 761

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

to collect revenue to the extent of Rs. 1.27 per unit by bearing a
loss of Rs. 1.37 per unit. Such loss of Rs. 1.37 per unit was being
subsidized by consumers of other areas. Therefore, to alleviate the
situation, DVVNL called for bids on the basis of input-rate model of
distribution franchisee in which the highest bidder was the appellant
herein, Torrent Power. Accordingly, an input rate of Rs. 1.54 per unit
was decided among the distribution licensee and franchise. DVVNL,
which was initially recovering Rs. 1.27 initially started recovering
Rs. 1.54. The APTEL observed that after the introduction of the
franchisee, the cross subsidization by consumers of other areas
was mitigated by 27 paise. The relevant portion of the judgment is
reproduced below:
“56. The fifth issue is regarding the Power Purchase
cost and other cost in excess of the legitimate claims
and allowing supply of bulk power to Torrent Power - a
franchisee at a price below the bulk power purchase price.
57. The learned Counsel for the Appellant has made the
following submissions on this issue:
(a) The State Commission has allowed exaggerated
power purchase costs to the Distribution Licensees.
The Distribution Licensees are purchasing high
cost power on short term basis without proper
planning and without entering into long term PPAs
at competitive rates. The State Commission ought to
have initiated an enquiry into such power purchase
by the Distribution Licensees and held against them
for excess power purchase cost.
(b) One of the Distribution Licensees - Dakshin anchal
Vidyut Vitran Nigam Limited has given a franchisee
in the Agra area which has been given to Torrent
Power Limited. The bulk supply price fixed by the
State Commission for purchase of power by the
distribution licensees is Rs. 2.64 per unit for FY
2011–12 and Rs. 3.75 per unit of FY 2012–13 and
the same is being supplied to Torrent Power Limited
at Rs. 1.54 per unit for FY 2010–11, Rs. 1.55 per
unit for FY 2011–12 and Rs. 1.71 per unit 2012–13,
Therefore, the consumers in all other areas are cross
762 [2025] 7 S.C.R.

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subsidizing the supply of power by Dakshinanchal
Vidyut Vitran Nigam Limited to Torrent Power Limited.
(c) The issue is not with regard to the power of the
Distribution Licensee to appoint a franchisee but that
if a franchisee is given by a Distribution Licensee in
its area of operation, why should the consumers of
the other Distribution Licensees bear the tariff burden
on account of supply of cheaper power by one of the
Distribution Licensees to the franchisee.
(d) The Rosa Power Plant was commissioned on
12/13.3.2010. However, the necessary transmission
evacuation facility (220 KV line) was not available
due to the mistakes of the distribution licensee/
transmission licensee/Rosa Power Supply Co. Ltd
and the power could not be evacuated from the COD
of Rosa Power Plant on 13.3.2010 for a period of 6
months till the transmission facility came. The power
generated by Rosa in these 6 months was supplied to
nearby rural areas. The licensees received fix amount
per month from such consumers. The balance amount
(i.e. the difference between the tariff paid to Rosa and
fix charges recovered from rural consumers) cannot
be passed on to the consumers.
(e) Rosa Power is one of the generating companies
having entered into a PPA with the Holding Company
for supply of power to the consumers in the State of
Uttar Pradesh. Any money excess paid to or recovered
from Rosa Power will necessarily be a pass through
in tariff and therefore, becomes a tariff issue.
58. In reply to above submissions, the learned counsel for
the State Commission has made the following submission:
a) The aforesaid argument is irrelevant and immaterial
since in determining the ARR of the distribution
licensee the cost of power purchased by the licensee
is the same. The revenue realized by the licensee is
calculated at the rate at which energy is sold to the
consumer, whether by the licensee directly or through
[2025] 7 S.C.R. 763

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

its franchisee. Hence, the rate at which the franchisee
draws power from the licensee is immaterial for the
purpose of ARR determination of the licensee.
b) In calculating the revenue of the licensee it is only
the rate which the consumer ultimately pays which
would be taken into account for determining the
revenue in the ARR. Hence, whatever may be the
transaction between the distribution licensee and the
franchisee will not alter in any way the ARR of the
licensee as a whole.
c) The Appellant has also been unable to establish as
to how the ARR has in any way been impacted by
the so called difference in rates as mentioned above.
59. The learned Counsel for the Distribution Licensees
has made the following submissions:
a) The bulk supply price of Rs. 2.64 per unit has been
fixed for the distribution licensee. The Discoms are
unable to recover the bulk supply price of Rs. 2.64 per
unit and are incurring heavy losses. The distribution
in Agra was recovering only Rs. 1.27 per unit.
b) In order to mitigate the situation, DVVNL initiated
bidding process for identifying the Franchisee on
the Input based Model, i.e., the franchisee will
buy the electricity from the utility and shall pay the
energy charges to the utility at a pre-determined
rate. The franchisee will have to collect revenues
from the consumers through raising bills so as to
have sustainable commercial operation. The Torrent
Power among all the bidders quoted the highest rate
of Rs. 1.54 per unit for the first year and consequent
increase every year. Accordingly, DVVNL entered into
agreement with Torrent to operate as their franchisee.
c) The payment made by Torrent Power Ltd a franchise
of DVVNL is based on Input unit on the basis of
agreement entered into between Torrent Power Ltd
and DVVNL.
764 [2025] 7 S.C.R.

Supreme Court Reports

d) The Hon’ble High Court of Bombay, Nagpur Bench
in its judgment dated 12.02.2008 in W.P. No. 3701
of 2007; Citizen Forum Maharashtra v. state of
Maharashtra (Paras 45-51) has upheld the power of
distribution licensee to appoint distribution franchisee
for the benefit of consumers.
e) The delay in commissioning of Transmission lines
relates FY 2009–10 and UP Transmission Licensee
and the said issue cannot be raised in the present
Appeal relating to Discoms.
60. We have carefully considered the submissions made
by both the parities. The crux of the submissions made by
the Appellant is that the Franchisee is being supplied power
at rate lower than the bulk supply rate of the Distribution
Licensee itself. The shortfall in the revenue of the licensee
is to be recovered from the consumers of the Licensee in
the remaining area to meet its ARR.
61. According to the Appellant, the State Commission has
allowed higher power purchase cost to the Distribution
Licensees. It is further stated that the distribution licensees
are purchasing high cost power on short term basis without
proper planning and without entering into long term PPAs
at competitive rates. But the State Commission has failed
to initiate an enquiry into such power purchase by the
distribution licensees.
62. According to the State Commission the ground urged
by the Appellant is irrelevant and immaterial since in
determining the ARR of the distribution licensee, the cost of
power purchased by the licensee is the same and hence,
the rate at which franchise draws power from the licensee
is immaterial for the purpose of ARR determination of the
licensee.
63. The reply statements of the Respondent including the
State Commission are not only evasive but also not to the
core of the issue raised by the Appellant.
64. On going through the impugned order it is clear that the
State Commission has allowed the power purchase cost
[2025] 7 S.C.R. 765

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

as claimed by the distribution licensee without considering
the following salient aspects.
“i) One of the Distribution Licensees - Dakshin anchal
Vidyut Vitran Nigam Limited has given a franchisee in the
Agra area which has been given to Torrent Power Limited.
The bulk supply price fixed by the State Commission for
purchase of power by the distribution licensees is Rs.
2.64 per unit for FY 2011–12 and Rs. 3.75 per unit of
FY 2012–13 and Rs. and the same is being supplied to
Torrent Power Limited at Rs. 1.54 per unit for FY 2010–11,
Rs. 1.55 per unit for FY 2011–12 and Rs. 1.71 per unit
2012–13, Therefore, the consumers in all other areas are
subsidizing the supply of power by Dakshin anchal Vidyut
Vitran Nigam Limited to Torrent Power Limited.
ii) The Rosa Power Plant was commissioned on
12/13.3.2010. However, the necessary transmission
evacuation facility (220KV line) was not available due
to the mistakes of the distribution licensee/transmission
licensee/Rosa Power Supply Co. Ltd and the power
could not be evacuated from the COD of Rosa Power
Plant on 12/13.3.2010 for a period of 6 months, when the
transmission facility came and maximum power generated
by Rosa supply to nearby rural area in 6 months were
licensees received fix amount per month from such
consumers. This amount can not be passed on to the
consumers. This aspect was raised by the Appellants
but no finding has been given by the State Commission.
65. The finding of the State Commission is only this:— “C)
The Commission’s view:— 3.8.6 The Commission notes
that M/s Torrent Power Ltd has been appointed input based
franchisee by the licensee.”
66. According to the distribution licensee, since the Torrent
Power was chose as a input based franchisee which was
improving recovery of the prices in a particular franchisee
area and the franchise arrangement has been approved by
the High Court of Bombay in W.P. No. 3701 of 2007 and
therefore there is nothing wrong in appoint Torrent Power as
a franchisee. This contention by the Distribution Licensee
766 [2025] 7 S.C.R.

Supreme Court Reports

is not relevant. The issue raised by the Appellants is not
with reference to the power of the distribution licensee
to appoint a franchisee. The real question arises is this -
“When a franchisee has been given by the distribution
license in its area of operation, who should the consumers
of the other distribution licensees bear the tariff burden
on account of supply of cheaper power by one of the
Distribution Licensees to the franchisee?”
67. The contention of the Appellant appears to be attractive
at first rush of blood. But there is something deeper. The
issue in the present case can be addressed simply by
saying that the Commission did not allow the Licensee
to recover its full ARR. The approved average revenue
recovery rate through tariff is only 77% of the average cost
of supply. Thus, the Commission has left huge gap including
the loss suffered due to lesser tariff to the franchisee.
68. Let us tackle the issue from the root to settle it for
once and all.
69. The Licensee gathers power to distribute electricity
in its area of supply through another person (Franchisee)
from 7th Proviso to section 14 of the Act reproduced below:
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:
70. The question arises as to why a licensee should
appoint a franchise for a particular area. The licensee
control large area of supply. Some areas within its area
of supply have higher losses than the average loss. The
licensee may deem it fit to hand over such an area, where
system losses are higher than the average losses in his
area of supply to some franchise. It is to be noted that
when losses are higher, the average revenue recovery rate
would have to be lesser than average revenue recovery
[2025] 7 S.C.R. 767

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

rate of the licensee. The franchise is expected to purchase
power from the licensee and supply to the consumers at
the same tariff fixed for other areas of the licensee. The
franchise has to incur capital expenditure to reduce the
losses to make the franchise business workable. If the
franchise purchase power at average power purchase
cost of the licensee and supply at tariff applicable to other
areas, the franchise business will never become viable.
71. There are many models of appointing the Franchisee
and one of such model is ‘on the basis of Input costs’.
Under this model the Franchisee is sold electricity by the
licensee at certain predetermined rate and the franchisee
distributes the electricity in its area and recovers the
costs at price not more than retail tariff of the Licensee.
The Franchisee is responsible for the reduction of losses.
The areas given to it for distribution is high loss area. The
franchisee would earn profit only if he is able to reduce
the losses to a certain level else he would suffer loss.
72. The average revenue recovery rate of Agra was only
Rs. 1.27 per unit. The bulk supply rate for the licensee
was Rs. 2.64 per unit. Thus, the licensee was suffering
a loss of Rs. 1.37 per unit to supply power in this area.
Accordingly, the consumers of other areas would have
been subsidizing this amount. With the appointment of a
Franchisee at Bulk supply rate of Rs. 1.54 per unit, the
cross subsidisation by the consumers of other areas gets
mitigated by 27 paise per unit.
73. Accordingly, the issue is decided against the Appellants.”
(Emphasis supplied)

66. What is worth noting is that the concept of cross subsidization is
not alien to the electricity distribution sector. It aims to balance
social objectives with the financial health of the electricity sector
and is done on the basis of population mix of an area or in some
circumstances even when there are high losses in an area. It is a
well settled position of law that the courts refrain from encroaching
into the powers of the Government or the legislature. Therefore,
the courts cannot question the rationale and wisdom behind cross
768 [2025] 7 S.C.R.

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subsidies. However, there is not an iota of doubt in our minds that
cross subsidization as a standalone cause for challenging the
fixation of an annualized input rate lower than the bulk supply rate
of the distribution licensee, cannot be accepted. What can also be
discerned from the aforesaid exposition is that the input-rate model
of distribution franchisee may not always be successful in attracting
bids that will entirely mitigate the cost of cross subsidization. Bids
for input rates lower than bulk supply rate may be received for areas
experiencing very high AT&C losses as the investment required
would be manifold. This is because, the higher the anticipation of
capital expenditure will be, the lower will be the input rate quoted
by a franchisee. Such low input rates cannot be taken to mean that
they are deliberately or mischievously undervalued, without any
substantial evidence that there has been misrepresentation of the
required investment and expenses.
67. We are dismayed to find that the respondent no. 4, though, has
levelled serious allegations against the respondent no. 2 and the
appellant, yet has not provided any reasons or documentation in
respect of how the appellant and respondent no. 2 are in violation
of tariff orders. Further, even the Expert Committee Report dated
09.01.2017 does not shed any light on how tariff orders are being
contravened by the appellant. The remit of the said Committee was to
study the levels of loss reductions, collection efficiency and extension
of benefit to the consumers. Even though the Expert Committee
made some suggestions in respect of all the points of study, yet it
did not make an adverse remark against the appellant that would
translate to blatant illegality.
68. What is discernible from the aforesaid is that unless some satisfactory
grounds are given for initiating an investigation, a petition or an
application under Section 128 cannot be held to be maintainable.
The ERCs are required to consider matters in public interest
wherever mandated by the Act, 2003, i.e., in matters relating to
tariff determination, procurement of power processes, and utility/
licensee management which requires safeguarding of consumer
interest alongside the commercial principles. We are, therefore,
of the considered view that in the present case, the petition of the
respondent no. 4 filed under Section 128 does not fulfill the parameters
of satisfaction required under the said Section.
[2025] 7 S.C.R. 769

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

(iv) Whether the ERCs have the jurisdiction to review the
functioning of a distribution licensee to supply electricity
through a franchisee?
69. Though we have held the petition under Section 128 to be not
maintainable in the case on hand, yet in our opinion, such observation
cannot have blanket application over distribution licensees and
franchisees.
70. Under the Act, 2003, the business of distribution/supply of electricity
can be undertaken by a Distribution Licensee licensed by the ERCs
under Section 12. However, according to the seventh proviso to
Section 14, the supply of electricity can be undertaken either by
the distribution licensee or through another person authorised by
the distribution licensee. It is pertinent to note herein that ERCs
under Section 181 of the Act, 2003 frame regulations to carry out
the provisions of the Act including the conditions of license as
mandated in Section 16. Under the Conditions of Distribution License
Regulations, 2004, the following are forthcoming:
“4. COMPLIANCE OF LAWS, RULES AND REGULATIONS
4.1 The Distribution Licensee shall comply with the
provisions of the Applicable Legal Framework, Rules,
Regulations, Orders, and Directions issued by the
Commission from time to time and the provisions of all
other applicable laws.
4.2 The Distribution Licensee shall act in accordance with
these General Conditions except where the Distribution
Licensee is exempted from any provisions of these General
Conditions at the time of the grant of Licence or otherwise
specifically by an approval of the Commission to any
deviation there from.
4.3 The Distribution Licensee shall duly comply with the
order and directions of the National Load Despatch Centre,
Regional Load Despatch Centre and the State Load
Despatch Centre and other statutory authorities issued
in the discharge of their functions under the Applicable
Legal Framework.
4.4 The Licensee shall comply with the Orders or Directions
issued by the Forum and Electricity Ombudsman.
770 [2025] 7 S.C.R.

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4.5 Licensee shall give consultancies / assignment to its
group companies /sister concerns/ subsidiary companies
only after prior approval of Commission

5. ACTIVITIES OF THE DISTRIBUTION LICENSEE
5.8 The Licensee may undertake distribution of electricity
for a specified area (franchise) within his Area of Supply
through another Person. Such Person shall not be required
to obtain any separate Licence from the Commission. The
Licensee shall continue to be responsible for distribution
of electricity in its Area of Supply and –
(a) Such Person shall operate under the overall supervision
and control of the Licensee and upon the terms and
conditions of the Licence and comply with all Regulations,
guidelines or orders of the Commission;
(b) Establishment of such arrangements shall not alter the
Licensee’s duties and obligations pursuant to general or
specific conditions of Licence;
(c) The cost of providing service shall not be higher than
if the Licensee performed such tasks itself; and
(d) For any act or omission of such Person, the Licensee
shall be responsible.
5.10 The Distribution Licensee may establish Subsidiaries
or associated companies or grant a Franchisee or enter
into management contracts including appointment of
billing agent to conduct or carry out any of the functions,
which the Distribution Licensee is authorised to conduct
or carry under the Licence Provided that the Licensee
shall be responsible for all actions of the Subsidiaries
or associated companies or Franchisees or agents or
contractors.
5.11 Except as provided in clause 5.8 above the
Distribution Licensee shall not transfer or assign the
Licence or any of the functions under the Licence to
any other Person without the prior approval of the
Commission.
[2025] 7 S.C.R. 771

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

7. PROVISION OF INFORMATION TO THE COMMISSION
7.1 The Distribution Licensee shall furnish to the
Commission without delay such information, documents
and details related to the Licensed Business or any Other
Business of the Distribution Licensee, as the Commission
may require from time to time for its own purposes or for the
purposes of the Government of India, State Government,
the Central Commission, the Central Electricity Authority,
the State Transmission Utility and State Load Dispatch
Centre.
7.2 The Distribution Licensee shall duly maintain the
information as the Commission may directed under Section
128 of the Act.”
71. Therefore, whilst an ERC may not directly regulate a franchisee,
it exercises regulatory oversight over the distribution licensee’s
functions and duties, including the process of a distribution licensee
delegating some of its functions and activities to a franchisee. Further,
Sections 16, 18, 19 and 20 of the Act, 2003 respectively, prescribe
that the ERC can stipulate/review the terms and conditions under
which a distribution licensee may delegate its electricity distribution
responsibilities to a franchisee. Such stipulation/review occurs as a
part of ERC’s regulatory functions.
72. It is apposite to observe that the Act, 2003 does not provide for a
direct regulatory oversight by the ERCs in respect of the distribution
franchisees. Part IV of the Act, 2003, from Sections 12 to 24 deals
with licensing which inter-alia includes the procedure for grant
of licence, conditions of licence, actions that a licensee may not
undertake, amendment of licence, revocation of licence, sale of utilities
of licensees, directions to licensees, and suspension of distribution
licence and sale of utility. All these stipulations are to regulate the
distribution licensee. There is no such stipulation provided to control
or regulate the relationship between a licensee and franchisee.
Thus, the contractual terms and conditions of the authorization by
the distribution licensee provided to the franchisee are privy to the
said parties. [See: Global Feeds Feedback Energy Distribution
Company Private Ltd. v. Govt. of Odisha, reported in 2019 SCC
OnLine Ori 205]
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73. It is well settled that the relationship between the distribution licensee
and franchisee is one of agency. As a natural corollary, the franchisee
is accountable only to the distribution licensee, who in turn is
accountable to the consumers. We refer to the APTEL’s decision in
City Corporation Limited v. Maharashtra Electricity Regulatory
Commission and Anr. reported in 2024 SCC OnLine APTEL 103
to fortify this point. The relevant observations therein read thus:
“40. Consequently, since Section 86(1)(f) of the Electricity
Act does not specifically provide for the franchisee to
file a petition questioning prescription of a very low
percentage towards distribution losses or reimbursement
charges, the MERC must be held to lack jurisdiction, to
entertain and adjudicate a petition filed by them, under
the said provision. The MERC can exercise jurisdiction
to determine tariff of a distribution licensee under Section
62(1)(d) of the Electricity Act in the exercise of its
regulatory functions under Section 86(1)(b) on a petition
filed by a Distribution licensee. It lacks jurisdiction to
entertain and adjudicate a petition filed by anyone else,
such as a franchisee, nor can a tariff order, passed with
respect to a distribution licensee, be held to apply to a
franchisee.
41. In considering the question whether MERC has
jurisdiction to adjudicate a dispute between a distribution
licensee and its franchisee, it is useful to examine the
provisions of the Electricity Act relating to a franchisee.
Section 2(27) of the Electricity Act, 2003 stipulates
that in the Electricity Act, unless the context otherwise
requires, “franchisee” shall mean a person authorised by
a distribution licensee to distribute electricity on its behalf
in a particular area within his area of supply. Section 14
relates to grant of license and, under Section 14(b), the
Appropriate Commission may, on an application made
to it under Section 15, grant a licence to any person to
distribute electricity as a distribution licensee. Under the
seventh proviso to Section 14, in 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
[2025] 7 S.C.R. 773

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

a separate licence from the concerned State Commission,
and such distribution licensee shall be responsible for
distribution of electricity in his area of supply.
42. The person, referred to in the seventh proviso to
Section 14, is the franchisee as defined in Section 2(27)
of the Electricity Act. It is clear, from a conjoint reading
of Section 2(27) and the seventh proviso to Section 14
of the Electricity Act, that (i) the franchisee is a person
authorised by a distribution licensee to distribute electricity
on its behalf, and (ii) such distribution of electricity by a
franchisee is confined to a particular area within the area
of supply of the distribution licensee. In other words, a
distribution licensee can authorise another person as its
franchisee to distribution electricity on its behalf within an
area as may be specified by it, provided such a specified
area forms part of the area of supply of the distribution
licensee. Such a franchisee, in view of the seventh proviso
to Section 14, does not require a separate licence since
the responsibility to ensure distribution of electricity in its
area of supply (including the specified area in which the
franchisee supplies electricity on behalf of the distribution
licensee) is that of the distribution licensee. In short, a
distribution licensee is the principal and the franchisee is
its agent. While the franchisee is, no doubt, accountable to
the distribution licensee in the discharge of its obligations
under the distribution franchisee agreement (entered into
between the distribution licensee and the franchisee),
it is the distribution licensee which is accountable to its
consumers including those consumers to whom electricity
is supplied, on its’ behalf, by the franchisee. Except
Section 2(27) and the Seventh Proviso to Section 14,
which make it clear that the franchisee is merely the
agent of the distribution licensee, and it is the distribution
licensee which is eventually responsible, for distribution of
electricity, to the consumers in its area of supply, there is
no other provision in the Electricity Act which specifically
relates to a franchisee.
---xxx---
774 [2025] 7 S.C.R.

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90. Unlike the tariff of a distribution licensee (including the
distribution losses it is permitted to incur) which is statutorily
required to be determined by the Regulatory Commission
under Section 62(1)(d) of the Electricity Act, the distribution
losses which a franchisee is entitled to incur, and the
reimbursement compensation it is entitled to receive, are
not governed by any provision of the Electricity Act, but
are those stipulated in the contractual provisions of the
Distribution Franchisee Agreement which it enters into as
an agent with the Distribution licensee, its principal. It is
clear, therefore, that the tariff orders passed by MERC, for
retail sale of electricity by the second Respondent-MSEDCL
to the consumers in its area of supply, cannot be said to
be an order passed by the Commission with respect to the
Appellant franchisee, violation of which would require the
MERC to adjudicate the dispute on its jurisdiction being
invoked under Section 86(1)(k) read with Section 142 of
the Electricity Act.
---xxx---
95. The challenge to the other conditions stipulated in the
DFA are also matters which fall outside the jurisdiction
of the MERC. Since an appeal under Section 111 of the
Electricity Act lies only against orders passed by Regulatory
Commissions, the Appellant cannot agitate its grievance,
relating to the validity of, or the terms and conditions
imposed under, the DFA in appellate proceedings before
this Tribunal, as the State Commission lacked jurisdiction
to examine these aspects. The issue of open access has
been dealt with earlier in this order, and is therefore not
being dealt with under this head.”
(Emphasis supplied)

74. Further, the Conditions of Distribution License Regulations, 2004,
more particularly Regulation 7.2 thereof, unequivocally places an
obligation on the distribution licensee to furnish any information that
the UPERC may ask for. Following the approach of decentralization of
electricity distribution adopted by the Act, 2003, the said Regulations
do not require furnishing of any information from the franchisee
directly.
[2025] 7 S.C.R. 775

Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors.

75. The aforesaid exposition of law leaves no manner of doubt in our
minds that the Act, 2003 does not envisage direct regulatory oversight
as regards distribution franchisees and by virtue of their relationship of
agency, such franchisees can only be indirectly regulated through the
distribution licensee. Therefore, even an investigation under Section
128 can only happen in respect of a distribution licensee and not its
franchisee. This is in consonance with the principle of agency. Any
action of the franchisee is equivalent to such action having been
committed by a distribution licensee. Therefore, only the distribution
licensee can be questioned for any action that its agent commits.
76. Although the Tribunal, in para 11.7 of its impugned order, upholds
the right of DVVNL as a distribution licensee, to appoint the appellant
as a franchisee for Agra, yet it seeks to review the progress of the
appellant without there being any specific provision in the Act, 2003
allowing for such review. The UPERC as well as the APTEL should
have been mindful of the fact that it cannot micromanage a distribution
franchisee transaction obliquely and question various aspects of the
functioning of such franchisee including its collection, efficiency and
the manner or quantum of reduction of distribution losses.
77. Even otherwise, if we were to limit our observations on the issue
whether an investigation under Section 128 could be ordered against
DVVNL or respondent no. 2, we will be compelled to answer in
the negative. It goes without saying that the investigation to be
conducted by an authority under Section 128 is to be limited to only
two eventualities: (i) if the licensee fails to abide by the terms of its
license, and (ii) if the licensee acts in contravention to the provisions
of the Act, 2003 and the regulations thereunder. The exposition in the
aforesaid clarifies that the threshold of “satisfaction” required to order
an investigation under Section 128 was not met by the respondent
no. 4 and even the Expert Committee did not present any findings
as regards these two considerations.

E. CONCLUSION
78. In the overall view of the matter, we have reached the conclusion
that the UPERC fell in serious error in entertaining the petition filed
by the respondent no. 4 and passing the order constituting an expert
committee. The APTEL also failed to look into the error committed by
the UPERC and dismissed the appeal filed by the appellant-herein.
776 [2025] 7 S.C.R.

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79. In the result, the appeal succeeds and is hereby allowed. The
impugned order passed by the APTEL is hereby set aside. As a
consequence, the report of the Expert Committee also pales into
insignificance.
80. Pending application(s), if any, are disposed of.
81. No orders as to cost.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan