Case: Monnet Ispat &amp; Energy Ltd. &amp; Others Vs. Union of India &amp; Others

a variation not exceeding ten percent;" Reading of the aforesaid Rule makes it clear that to be classified as `captive generating plant under Section 9 read with Section 2(8) of the Act of 2003, a power plant has to fulfil certain conditions; firstly, 26% of the ownership of the plant must be held by the captive user(s); and secondly, 51% of the electricity generated in such plant, on annual basis, is to be consumed for captive use. We find that the provision of the rule making power in Section 176 of the Act of 2003, deals with the power of Central Government to make the rules for carrying out the provisions of the Act and, Section 178 of the Act of 2003, deals with the powers of the Commission to make regulations. The Rules of 2005 have been framed by the Central Government under the power conferred upon it under Section 176 of the Act of 2003.11. The vires of Rule 3(1)(a)(ii) have been put into question in the instant cases. The High Court has rightly upheld its validity. We find that the definition of generating plant, as provided under Section 2(8) of the Act of 2003, emphasizes that the generation of electricity should be primarily "for his own use". Similar is the expression used in fourth proviso to Sub-Section 2 of Section 38, and the fourth proviso to Sub-Section (2) of Section 42 of the Act of 2003 contains provision of no surcharge on "his own use" as contemplated therein. Thus, while exercising the power under Section 176 of the Act of 2003, it was open to specify how much minimum use should be made in order to classify a captive power plant, primarily for "his own use". Thus, the Rule cannot be said to be repugnant to, rather it carries the very intendment of, the Act and is quite reasonable.12. The prescription that at least 51% electricity generation should be used for the purpose of "his own use", as has been provided in Rule 3 (1)(a)(ii) of the Rules of 2005, cannot be said to be arbitrary in any manner. In case, for certain months generating plant has to be closed for any reason or for non-compliance of the provisions or for any deficiency, the prescription of consumption of 51% on yearly basis takes care of such closure as well. The calculation is provided to be on an annual basis. Thus, provision is quite reasonable, and it cannot be said to be ultravires to the Act and fulfills purpose of the provisions of the Act, and no reading down of provision is called for as prayed. In case, due to force-measure any generating plant has been closed for a certain period, provision of consumption to be seen in annual perspective takes care of such exigency also. 13. Reliance has been placed on behalf of the appellants on Global Energy Ltd. & Anr. v. Central Electricity Regulatory Commission (2009) 15 SCC 570. Relied upon portions are extracted hereunder : "44. A disqualifying statute, in our opinion, must be definite and not uncertain; it should not be ambiguous or vague. Requisite guidelines in respect thereof should be laid down under the statute itself. It is well settled that essential legislative function cannot be delegated.""57. We may now consider the provisions of Section 178 of the Act. Although various clauses contained therein are merely illustrative in nature and not exhaustive, we will assume that although the matter relating to grant of licence is covered by Sections 12 and 14 of the Act, the regulation-making power may also be available for the said purpose. We have noticed hereinbefore the effect of subsection (1) of Section 178. We may only notice that clauses (a), (b), (c) and (o) which are referable to the provisions of Sections 14 and 15 as such do not provide for any power to deal with disqualification authorizing the respondent to frame regulation." This Court considered vires of Regulation 6- A of the Regulations framed by the CERC in 2006. It was held to be ultra vires of Act and the Constitution of India. Regulation 6-A provided for disqualification. This Court held subordinate legislation should be read in the context of the Act, in terms of requirement of section 52 of the Electricity Act, 2003. This Court observed that when statute is sought to be enforced power of authority to impose restrictions and conditions must be construed having regard to purpose and object it seeks to achieve. The conditions regarding generation of power must be reasonable. There cannot be excessive delegation. The power of Central Electricity Regulatory Commission to impose qualifications/restrictions should be read in line with larger object of the Act. The delegated legislation should promote rational and accountable policy implementation. This Court also observed that for disqualification guidelines should be laid down in the statute itself. Essential legislative functions cannot be delegated. 14. In the light of what has been discussed by this Court in Global Energy Ltd. (supra) when we examine definition of Generating Plant in section 2(8) of the Act it emphasizes setting up primarily for his own use or in case of cooperative society for use by its members. When we consider Rule 3()(a)(ii) of the Rules of 2005, it is clear that it provides not less than 51% of aggregate electricity generated in such plant determined on annual basis is consumed for captive use. The rule conforms to the requirement of section 2(8) that primarily electricity should be generated by captive generating plant for his own use/members as the case may be. The provisions of Rule 3(1)(a)(ii) of the Rules of 2005 cannot be said to be against purposes of the Act. Rather it promotes rationale of the provision and essential qualifications laid down in the Act itself. It cannot be said essential legislative function has been delegated in the case. The prescription in Rule 3(1)(a)(ii) is not thus ultra vires to the Act. It makes intendment of statutory provision clear and explicit.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. It is apparent from the provisions that generating plants are to be regulated as per the provisions of the Act, Rules andof the aforesaid Rule makes it clear that to be classified as `captive generating plant under Section 9 read with Section 2(8) of the Act of 2003, a power plant has to fulfil certain conditions; firstly, 26% of the ownership of the plant must be held by the captive user(s); and secondly, 51% of the electricity generated in such plant, on annual basis, is to be consumed for captive use. We find that the provision of the rule making power in Section 176 of the Act of 2003, deals with the power of Central Government to make the rules for carrying out the provisions of the Act and, Section 178 of the Act of 2003, deals with the powers of the Commission to make regulations. The Rules of 2005 have been framed by the Central Government under the power conferred upon it under Section 176 of the Act of 2003.11.The vires of Rule 3(1)(a)(ii) have been put into question in the instant cases.The High Court has rightly upheld its validity. We find that the definition of generating plant, as provided under Section 2(8) of the Act of 2003, emphasizes that the generation of electricity should be primarily "for his own use". Similar is the expression used in fourth proviso to2 of Section 38, and the fourth proviso to(2) of Section 42 of the Act of 2003 contains provision of no surcharge on "his own use" as contemplated therein. Thus, while exercising the power under Section 176 of the Act of 2003, it was open to specify how much minimum use should be made in order to classify a captive power plant, primarily for "his own use". Thus, the Rule cannot be said to be repugnant to, rather it carries the very intendment of, the Act and is quite reasonable.12. The prescription that at least 51% electricity generation should be used for the purpose of "his own use", as has been provided in Rule 3 (1)(a)(ii) of the Rules of 2005, cannot be said to be arbitrary in any manner. In case, for certain months generating plant has to be closed for any reason or forof the provisions or for any deficiency, the prescription of consumption of 51% on yearly basis takes care of such closure as well. The calculation is provided to be on an annual basis. Thus, provision is quite reasonable, and it cannot be said to be ultravires to the Act and fulfills purpose of the provisions of the Act, and no reading down of provision is called for as prayed. In case, due toany generating plant has been closed for a certain period, provision of consumption to be seen in annual perspective takes care of such exigency also.In the light of what has been discussed by this Court in Global Energy Ltd. (supra) when we examine definition of Generating Plant in section 2(8) of the Act it emphasizes setting up primarily for his own use or in case of cooperative society for use by its members. When we consider Rule 3()(a)(ii) of the Rules of 2005, it is clear that it provides not less than 51% of aggregate electricity generated in such plant determined on annual basis is consumed for captive use. The rule conforms to the requirement of section 2(8) that primarily electricity should be generated by captive generating plant for his own use/members as the case may be. The provisions of Rule 3(1)(a)(ii) of the Rules of 2005 cannot be said to be against purposes of the Act. Rather it promotes rationale of the provision and essential qualifications laid down in the Act itself. It cannot be said essential legislative function has been delegated in the case. The prescription in Rule 3(1)(a)(ii) is not thus ultra vires to the Act. It makes intendment of statutory provision clear and explicit.