Electricity Regulatory Commissions Not Competent To Entertain Matters On Singular Ground Of Public Interest: Supreme Court
The Supreme Court said that the language of Section 128 of the Electricity Act 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.
Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
The Supreme Court held that the Electricity Regulatory Commissions (ERCs) are not competent to entertain cases on a singular ground of public interest.
The Court held thus in a Civil Appeal filed by a company under Section 125 of the Electricity Act, 2003 against the Judgment of the Appellate Tribunal for Electricity (APTEL), which affirmed the Order of the Uttar Pradesh Electricity Regulatory Commission (UPERC).
The two-Judge Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan observed, “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.”
The Bench said that the language of Section 128 of the Electricity Act 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.
AOR Sudhir Naagar represented the Appellant while AOR Pradeep Misra represented the Respondents.
Factual Background
The Respondent No. 4 filed a Petition before the UPERC, questioning the legality, validity, and propriety of the Distribution Franchise Agreement (DFA) and Supplementary Agreement respectively. The said DFA was entered and executed between the Appellant (distribution franchisee) and the Respondent No. 3 (distribution licensee). The said Petition prayed for investigation of the conduct of the Respondent Nos. 2 and 3 respectively in appointing the Appellant as a franchisee for distribution of electricity in the urban area of Agra without purportedly seeking prior approval of UPERC for transfer of its utility to the Appellant, being violative of Section 17 of the Electricity Act.
The Appellant filed the preliminary objections, raising the grounds of jurisdiction and maintainability of the Petition before the UPERC. The said objections were disposed of by the UPERC on the grounds of public interest. The Appellant filed an Appeal under Section 111 of the Act before the APTEL, which took a diverging opinion on the aspect of maintainability and held that the Act does not have any provision for entertaining of a Public Interest Litigation by the ERCs. This was under challenge before the Apex Court.
Issues for Consideration
The following two questions arose before the Court for consideration –
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?
Reasoning
The Supreme Court after hearing the contentions of the counsel, noted, “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 Court added that 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.
“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”, it further elucidated.
The Court said 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”, it also noted.
Whether ERCs have jurisdiction to review the functioning of a distribution licensee to supply electricity through a franchisee?
The Court in view of the above question observed 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”, it said.
Furthermore, the Court remarked that 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.
Conclusion
The Court, therefore, observed, “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.”
The Court concluded 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. It added that the APTEL also failed to look into the error committed by the UPERC and dismissed the Appeal filed by the Appellant.
Accordingly, the Apex Court allowed the Appeal and set aside the APTEL’s Order.
Cause Title- Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors. (Neutral Citation: 2025 INSC 838)
Appearance:
Appellant: AOR Sudhir Naagar, Advocates Hardik Luthra, Reshma Ray, and Arun Kumar Nagar.
Respondents: AORs Pradeep Misra, Nikunj Dayal, Advocates Daleep Dhyani, Suraj Singh, Manoj Kumar Sharma, and Pramod Dayal.
