V.GOPALA GOWDA, CJ & B.N.MAHAPATRA, J. W.P. (C ) NO.17178 OF 2011 (Decided on 13.7.2011) NORTH EASTERN ELECTRICITY SUPPLY COMPANY OF ORISSA LTD.(NESCO). ……. Petitioner. .Vrs. STATE OF ORISSA & ANR. ……..Opp.Parties. PREVENTION OF CORRUPTION ACT,1988 (ACT NO. 49 OF1988) – S.2 (b), 2(c). For Petitioner - M/s. Rajjeet Roy, S.K.Singh & N.Hota. For Opp.Parties - Government Advocate V.GOPALA GOWDA, C.J. The petitioner is a company incorporated under the Companies Act, 1956 on 19.11.1997. Its main object is to acquire, establish, construct, erect, lay, operate, run, manage, repair, maintain, alter, renovate, modernize, work and use electrical lines for the purposes of distribution of power etc. in the State of Orissa and elsewhere,.The petitioner-company is challenging the order dated 26th May, 2011 (Annexure-1) passed by the Commissioner-cum-Secretary, Department of Energy-Opposite Party no.1 holding the employees of the petitioner-company are, public servants, for the purpose of bringing them under the purview of the provisions of the Prevention of Corruption Act, 1988 (for short ‘the PC Act’), urging various facts and legal contentions. 2. The brief facts are stated herein : The PC Act, 1947 was amended in 1964 on the recommendations made by the Santhanam Committee. The statement of objects and reasons of the said Act is to make the anticorruption laws more effectively “widening the scope of definition of the expression “public servant”, incorporation of offences under Sections 161 to 165A of the Indian Penal Code. The terms of reference of the Committee were to “suggest measures calculated to provide a social climate both amongst public servants and in the general public in which bribery and corruption may not flourish.” The relevant passage from the recommendations made by the Santhanam Committee, placed by the petitioner is extracted hereunder : “The advance of technological and scientific development is contributing to the emergence of a “mass society” with a large rank and file and small controlling elite, encouraging the growth of monopolies rise of a managerial class and intricate Institutional mechanisms. The inability of the society to appreciate an honest functioning social, political and economic process resulting in the emergence and growth of white collar and economic crimes. Corruption is a white collar crime defying any permanent solution.” 3. The relevant features of the PC Act is reproduced as under : “Section 2(b) defines “public duty” to mean a duty in the discharge of which the State, the public or the community at large has an interest.” Section 2(c) defines “public servant” which means : (i) any person in the service or pay of the Government or remunerated by the Government by fees or commission for the performance of any public duty; (ii) any person in the service or pay of a local authority; (iii) any person in the service or pay of a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Comopanies Act, 1956; (iv) any Judge, including any person empowered by law to discharge, whether by himself or as a member of any body of persons, any adjudicatory functions; (v) any person authorised by a court of justice to perform any duty, in connection with the administration of justice, including a liquidatory, receiver or commissioner appointed by such court; (vi) any arbitrator or other person to whom any cause or matter has been referred for decision or report by a court of justice or by a competent public authority; (vii) any person who holds an office by virtue of which he is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election or part of an election; (viii) any person who holds an office by virtue of which he is authorised or required to perform any public duty; 2 (ix) any person who is the president, secretary or other office-bearer of a registered co-operative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid from the Central Government or a State Government or from any corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956; (x) any person who is a Chairman, member or employee of any Service Commission or Board, by whatever name called, or a member of any selection committee appointed by such Commission or Board for the conduct of any examination or making any selection on behalf of such Commission or Board; (xi) any person who is a Vice-Chancellor or member of any government body, professor, reader, lecturer or any other teacher or employee, by whatever designation called, of any University and any person whose services have been availed of by a University or any other public authority in connection with holding or conducting examinations; (xii) any person who is an office-bearer or an employee of an educational, scientific, social, cultural or other institution, in whatever manner established, receiving or having received any financial assistance from the Central Government or any State Government or local or other public authority. 19. Previous sanction necessary for prosecution : 1) No court shall take cognizance of an offence punishable under Sections 7, 10, 13 and 15 alleged to have been committed by a public servant, except with the previous sanction,- xx xx xx xx (b) in the case of a person who is employed in connection with the affairs of the Union and is not removable from his office sae by or with the sanction of the Central Government, of that Government; (c) in the case of any other person, of the authority competent to remove him from his office.” 3 4. The Company has got its memorandum of Articles of Association (for short ‘memorandum of Association’). (i) In terms of Article 29A of the memorandum of Association, the directors appointed by BSES (Bombay Sub-urban Electricity Supply) including any Managing director if considered necessary by BSES shall be responsible for the day to day management of the Business. (ii) Article 29A(2) of the memorandum of Association, states that No director (including the Chairman) appointed by GRIDCO (Grid Corporation of Orissa Limited) shall have any executive responsibility or power relating to the Company unless specifically agreed otherwise by BSES. No director appointed by the Trustees shall have any executive responsibility. (iii) Article 44 of the memorandum of Association, provides that the business of the Company shall be managed by the Board who may exercise all such powers of the Company and do all such acts and things as are not, by the Act, or any other Act or by the Memorandum or by the Articles of the Company required to be exercised by the Company in general. (iv) Article 45(p) of the memorandum of Association, provides that the Director shall have the power to appoint, and at their discretion remove or suspend such general managers, managers, secretaries, assistants, supervisors, scientists, technicians, engineers, consultants, legal, medical or economic advisers, research workers, labourers, clerks, agents and servants for permanent, temporary or special services as the Board may from time to time think fit, and to determine their powers and duties and fix their salaries, or emoluments or remunerations, and to require and/or security in such instances and to such amounts as the Board may think fit and also from time to time provide for the management and transaction of the affairs of the Company in any specified locality in India or elsewhere in such manner as the Board may think fit;” 5. The case of the petitioner is that in terms of the Orissa Electricity Reforms Act, 1995 (in short ‘the OERC Act’), the electricity industry of Orissa was restructured whereby the generation, transmission and distribution of electricity was made open to private sector. Accordingly a Commission known as Orissa Electricity Regulatory Commission was established in terms of Section 3 thereof and as per section 12(1), the State Government shall have the powers to issue policy directives on matters concerning electricity in the State including the overall planning and coordination and all such policy directives shall be consistent with the objects sought to be achieved by this Act. Section 14(1) thereof provides for licensing and it says, No person, other than those authorised to do so by licence or by virtue of exemption under this Act or authorised or exempted by any other authority under the Electricity (Supply) Act, 1948 shall engage in the State in the business of – (a) Transmitting; or 4 (b) Supplying electricity 6. The license is granted by the Commission as per Section 14 thereof and the licence is revoked as per Section 18. 7. Under the provisions of the said OERC Act, a transfer scheme called “Orissa Electricity Reforms (Transfer of Assets, Liabilities, Proceedings and Personnel of Gridco to Distribution Companies Rules, 1998 (for short ‘the Rules, 1998) was framed on 25.11.1998 whereby assets and personnel as they existed prior to the transfer got transferred to the distribution companies. (i) Sub-rule (3) of Rule 3 of the Rules, 1998 provides, that With effect from the appointed date the Distribution Undertakings of Gridco classified under Sub-rule (1) and comprising the Specified Assets, Specified Liabilities, Specified Proceedings and Specified Personnel as agreed to between Gridco and each of the Distcos (Distribution Companies) and set out in the Schedules A, B, C and D shall stand transferred to and vest in Cesco, Nesco, Wesco and Southco respectively without any further act or things to be done by the State Government, Gridco, any Distco, the Personnel, debtors or creditors or any other person, subject, however, to the terms and conditions contained in these rules. Sub-rule (5) of Rule 3 of the Rules, 1998 provides, that On the transfer and vesting of the Distribution Undertakings and except as otherwise provided in these rules the relevant Distco (Distribution Companies) shall be responsible for all, or the relevant part of any, contracts, tenders, rights, deeds, schemes, bonds, agreements and other instruments of whatever nature relating to the Distribution Undertakings, which are subsisting or having effect on the Appointed Date, in the same manner as Gridco was liable immediately before the Appointed Date and the same shall be in full force and effect against or in favour of the relevant Distco and may be enforced as fully and effectively as if instead of Gridco, the relevant Distco had been a party thereto : Provided however, if any of the Specified Assets transferred to a Distco (Distribution Company) are subject to any security document or arrangement in favour of any third party such assets shall stand transferred to the relevant Distcos subject to such security but Gridco shall enter into an agreement with the concerned Distcos for payment and discharge of such liability by Gridco to the third parties. (ii) Sub-rule (2) of Rule 4 of the Rules, 1998 provides that The Specified Personnel on the Appointed Date shall cease to be in the service of Gridco and they shall not assert or claim any benefit of service in Gridco from the Appointed Date except as provided in these rules. 5 (iii) Sub-rule (7) of Rule 4 of the Rules, 1998 provides that The existing conditions of the service and the service regulations of Gridco shall apply mutatis mutandis to the Specified Personnel trasnferred to the Distcos, till the Distcos (Distribution Companies) frame the service regulation subject however to the conditions specified in Sub-rule (1). 8. It is contended by the learned counsel for the petitioner-company that the electricity distribution business in the State was thus transferred to the petitioner in the area of license granted to it by the Commission. It is further contended that pursuant to the letter dated 6.11.2010 addressed to the DSP, Vigilance, Bhubaneswar Division, Bhubaneswar (Annexure-3), petitioner raised objecton to the decision of bringing the petitioner under the provisions of the PC Act. It is contended that the petitioner- company is a licensee and does not discharge the public duty in terms of section 2(b) of the PC Act or its employees are not the public servant in terms of section 2(c) of the PC Act. Therefore, the impugned order passed by the opposite party no.1 holding that the employees of the petitioner-company are discharging public duties in terms of section 2(b) of the PC Act and are falling within the definition of “Public Servants” under Section 2(c) of the PC Act is not correct since the definition “Public Servants” does not include the employees of private entity. Further under Section 2(c)(viii) of the PC Act public servants, inter alia, means ‘any person’ ‘any person’ who holds an office by vitrue of which is authorised and required to perform any public duty. The petitioner is not a person who holds an office. To come to a conclusion that a person “holds an office”, there must be a duty so assigned to such person either by statute or by an executive order. Petitioner who is a licensee can not be said to be a holder of office as there is no duty cast upon it in either of the form. Further it is urged that the petitioner-company cannot be said to have been authorised or required to perform public duties. Therefore, passing the impugned order applying the provisions of PC Act to the employees is wholly improper in law and further as per section 14 of the OERC Act corresponding the provisions of the Electricity Act, 2003, the license granted in favour of the company is to engage itself in the distribution of electricity in its assigned area. If the petitioner is “authorised or required” to “perform a pubic duty”, then it is so authorised by Commission and not by the Government. A plain look at the sub-section suggets that words “by the Government” are what the sub-section seeks to convey. There is no express or implied authorisation or requirement by the Government for the petitioner to perform a public duty so as to bring it under the definition of sub-section (c) of Section 2 of the PC Act. Further it is contended that the statement of objects and reasons of the PC Act clearly envisage that the same is intended to cover the employees who have nexus with the Government which may be estalished either by way of master servant relationship or by way of command-obedience relationship. The relationship between the Governemnt and the petitioner is not that of master-servant and, therefore, the petitioner cannot be brought under the purview of the PC Act. From the terms of reference and the recommendation made by Santhanam Committee, it is manifestly clear that the Committee was required to suggest measures for curbing corruption in the Government and amongst its servants. The recommendation of the Committee, that was responsible for the enactment of the PC Act, did not intend to cover the employees of the private sector. It is further contended that if parameters like management, control and funding are looked at, then also petitioner does not come under the purview of the PC Act. The management of the petitioner-company, as per its Articles of Association, 6 is done by a Board comprising persons of the BSES and Government has no role in it. Control of the Government over the petioner is completely absent. There is no funding by the Government in so far as the business of petioner is concerned. It is, therefore, evident that petioner has no nexus with the Government so as to bring it under the definition of ‘public servant” to apply the provision of PC Act. In the petitioner-company BSES has 51%, the Employees Trust has 10% and the Gridco has 9% equity. However, this equity is not same as that of funding and in any case, Gridco is not same as that of Government. 9. The petitioner-company has got its own vigilance and is well-equipped to meet any challenge that might come. In cases involving corruption of its employees, petitioner-company is armed with its service regulations to deal with contingencies arising out of such cases. Measures such as disciplinary proceedings and even, instances where corruption assumes contributory factor for acts of omission and commission, petitioner-company does not lack competence to deal with such situations. Proposed attempt of the State Vigilance to inquire into the cases of corruption involving the employees of the petitioner is unauthorised and, therefore, unsustainable in law. 10. It is further contended that in the enactment of Electricity Act, 2003 in which the OERC Act stands saved, the Distribution Companies in essence can be viewed as a creature of the statute. The Electricity Act, 2003 clearly outlines the power of the State Government. Reference to the statements of objects and reasons clearly highlight the policy of encouraging private sector participation in Generation, Tansmission and Distribution and the objective of distancing the Regulatory Responsibilities from the Government to the Regulatory Commission. The aim of the new legislation is to regulate the electricity supply industry in the country which would replace the existing laws, preserve its core freature other than those relating to the mandatory existence of the State Electricity Boards and the responsibilities of the State Government and State Electricity Boards with respect to regulating licenses. Therefore, it can clearly be inferred from the aforeasid Act that it is the object of the Parliament to distance the Electricity Industry from over arching Government control and finance control. The impugned order is in contravention of the provision of the said Act. Therefore, the same is liable to be quashed. 11. The OERC Act was enacted by the State legislature which received assent of the President on 3rd January, 1996 with a view to achieve the following objects : “An act to provide for Restructuring of the Electricity Industry for the Rationalisation of the Generation, Transmission, Distribution and Supply of Electricity for Avenues for Particiption of Private Sector Interprenures in the Electricity Industry and Generally for taking Measures conducive to the Development and Management, of the Electricity Industry in the State in an Efficient Economic and Competitive manner including the Constitution of an 7 Electricity Regulatory Commission for the State and for matters connected therewith or incidental thereto.” 12. The OERC Act must be read along with the Electricity Act, 2003 for the same purpose for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto. 13. Though there are two enactments in the same field, exercising respective legisltive power by the parliament and State Legislature under Articles 246(1) & 246(2) of the Constitution of India from the same entry of the concurent list, the object and intentment of both the enactments are same and the OERC Act received the assent of the President in view of Article 254(1) of the Constitution, the said State Act has application to the case at hand. Hence it would be necessary for us to refer to certain provisions of the said enactment. In view of the above, whether the grant of license by the Commission which is established and constituted under section 3 of the OERC Act and granting license by it in favour of the eligible licensees for the purpose of discharging the functions of Gridco (Grid Corporation of Orissa Limited) as referred in section 13 of the OERC Act which is a statutory Corporation incorporated under the Companies Act, 1956 with the main object of engaging in the business of procurement, transmission and bulk supply of electric energy, shall subject to the powers of the State Government under section 12, be the principal company to undertake planning and coordination in regard to transmission and to determine the electricity requirements in the State in coordination with the Generating Companies, State-Government, contiguous States, the Commission, the Regional Electricity Board and the Central Electricity Authority and granting licence in favour of licensee by transmission and supply of electricity. The said licence has been obtained by the petitioner-company by filing an application before the Commission in such form and payment of such fee as prescribed by the regulations, authorising it to transmit electricity in a specified area of transmission; and/or supply electricity in a specified area of supply as described under sub-section (1) after fulfilling the conditions (a) to (g) of sub-section (4), provisions (a) to (d) of sub-section (2), sub-sections (3), (5), (8), (9). 14. By careful reading of the provision of under sections 14 & 15 in (Chapter-VI of the OERC Act) regarding grant of license or licence particularly, sub-sections (a) to (g) of sub-section (4) of section 15 without prejudice to the generality of Sub-section (3), conditions included in a licence may require the licencee to enter into agreements on specified terms with other persons for the use of any electric lines, electrical plant and associated equipment operated by the licensee; comply with any direction given by the Commision; refer all disputes arising under the licence for determination by the Commission; furnish information, documents and details which the Commission may 8 require for its own purposes or for the purposes of the Central Government or the State Government or the Central Electricity Authority; comply with the requirements of the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 and rules framed thereunder in so far as they are applicable; undertake such functions and obligations of the Board under the Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948; obtain the approval of the Commission of such things that are required under the licence conditions or for deviation from the same; rectify the Commission of any scheme that it is proposing to undertake including the schemes in terms of the provisions of the Electricity (Supply) Act, 1948; purchase power in an economical manner and under a transparent power purchase procurement process; supply in bulk to other licensees or to customers; and fix a tariff or to calculate its charges from time to time; in accordance with the requirements prescribed by the Commission and the provisions under sub- sections (5), (8) and (9) would clearly go to show that for the licensee registered under the Companies Act, it is required to discharge its functions and duties of the State Government. The OERC Act is to provide for Restructuring of the Electricity Industry for the Rationalisation of the Generation, Transmission, Distribution And Supply of Electricity for Avenues for Particiption of Private Sector Interprenures in the Electricity Industry and Generally for taking Measures conducive to the Develooment and Management, of the Electricity Industry in the State in an Efficient Economic and Competitive manner including the Constitution of an Electricity Regulatory Commission for the State and for matters connected therewith or incidental thereto. Therefore, the terms and conditions by virtue of which are incorporated in the lcense issued in favour of the licensee, the licensee performs the public functions and duties which are required to be performed by the Electricity Board under the provisions of Electricity (Supply) Act, 1948 and the Indian Electricity Act, 1910 and the Rules and Regulations made thereunder and, the prtitioner herein, thereby discharging the public functions and duties of the earstwhile Electricity Board with the avowed object of achieving the objects and intent of the OERC Act which are extracted above, therefore, we have to hold that though the petitioner is a private sector company on account of the State Government enacting the law (supra) the petitioner-licensee is discharging the functions of earstwhile Electricity Board or Gridco for the purpose of generation, transmission, distribution and supply of electricity in the assigned area of the State to supply power to the consumers after satisfying certain terms and conditions (supra). Therefore, the contention raised by the petitioner that