Case: Global Energy Ltd.  Vs. Central Electricity Regulatory Com

3. It arises in the following factual matrix.The Parliament enacted Electricity Act, 2003 (hereinafter referred to as, "the said Act"). In exercise of its jurisdiction conferred by Section 178 of the said Act, the Central Electricity Regulatory Commission (for short, "CERC") made Central Electricity Regulatory Commission (Procedure, Terms and Conditions for Grant of Trading License and other related matters), Regulation 2004 (for short, "the Regulation")Indisputably, in terms of the provisions of the said Act as also the Regulations, inter alia, license is required to be taken by a person who is desirous of dealing in inter-state trading, which in terms of Regulation 2(g) means "transfer of electricity from the territory of one State to the territory of another State by an electricity dealer".4. Appellant No. 1 is a Public Limited Company incorporated and registered under the Indian Companies Act.5. Pursuant to or in furtherance of the said Act and the Regulations, the appellant No. 1 herein filed an application for grant of inter-State Trading License under Category `A before CERC on 23.3.2004. CERC published a notice as regards the said application filed by the appellant No. 1 for grant of inter-state Trading License in all editions of `Indian Express, Financial Express and a vernacular daily `Jansatta. Appellant No. 1 also filed an interlocutory application seeking permission to trade in the electricity pending final disposal of its petition for grant of inter-state trading license as it had been engaged in inter-state trading of electricity prior to the commencement of the said Act. By reason of an order dated 31.3.2004, the said application was allowed. Objections filed to the appellant No.1s application for grant of license pursuant to the aforementioned notice were also rejected by an order dated 30.6.2004.6. On or about 6.9.2004, CERC directed asThe petitioner No. 1 was qualified for the grant of Category `A license for inter-state trading in electricity for trading up to 100 million units in a year.(ii) The CERC proposed to issue the license for inter-state trading to the petitioner No. 1 as category `A trader.(iii) The petitioner No. 1 was directed to publish a notice under Section 15(5) of the Act. Section 15(5) of the Act reads as follows:15. Procedure for grant of licence............(5) Before granting a licence under section 14, the Appropriate Commission shall-(a) publish a notice in two such daily newspapers, as that Commission may consider necessary, stating the name and address of the person to whom it proposes to issue the licence;(b) consider all suggestions or objections and the recommendations, if any, of the Central Transmission Utility or the State Transmission Utility, as the case may be.After the publication of notices, objections were also received as regards appellant No. 1s trading in inter-state supply of electrical energy pursuant to the aforementioned interim order. The matter was taken to High Court and interim license granted to appellant No. 1 was extended by the High Court from time toRegulations were published to which appellant No. 1 filed objection. The Amended Regulations were notified on 3.4.2006. By an order dated 20.8.2006, CERC rejected the application filed by the appellant No. 1 for grant of inter-state trading license opining that Regulation 6A brought in through the amended Regulation will have a retrospective effect. An appeal preferred thereagainst is pending before the Appellate Tribunal for Electricity.8. Appellants filed Writ Petitions before the High Court questioning the validity of the said Regulation. By reason of the impugned judgment the said Writ Petitions have been dismissed.

Reasoning: 29. Our attention has been drawn to some other legislations wherein the concept of `fit and proper person had been applied, namely, Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004.30. We have not been shown as to how the purpose and object of the said Regulations can be said to be in pari materia with the Regulations in question. It must also be borne in mind that an elaborate public hearing process is provided for grant of licence in terms of Section 15 of the Act. Such an independent inquiry cannot be carried out de hors the statute. But the Parliament thought it fit to confer a hearing as regards public objection only.Regulation 6A in effect confers powers/discretion on matters of licensing even in public hearing. Such relevant factors which provide for the criteria laid down in Regulation 6A could be brought on record. Section 15, however, empowers the Commission to specify the form and manner of the application and the fees that is required to be attached. The parliamentary object must be read in the context of the preamble.The reform legislation sought to bring in transparency in the work of the public sector. It postulates competition from the private sector. Only such a competition now would give rise to a development of a proper market in the long run. The power of the Regulatory Commission to impose qualification/restrictions should be read in line with the larger object of the Act. The Consumer tariff is to be laid down by the Commission. How licensees would operate their business to the extent permissible under law should be subject to Regulation, which ordinarily should not be resorted to discourage private participation in the power sector. A trader of electricity does not deal with consumers; he is merely an intermediary between a generating company and a distribution licensee. The tariff that a distribution licensee will charge from its consumers is regulated. Even the margin that a trader can make is regulated. It is, therefore, not correct to contend that Regulation 6A is in consumer interest as it has not been shown how it will protect the consumer interest.ULTRA VIRES ISSUE31. Section 52 of the Act is without prejudice to the provisions contained in(c) of Section 12. By reason of the said provision the appropriate Government is vested with the power to specify:(1) Technical requirement; (2) Capital adequacy requirement and; (3) Creditworthiness in relation to an electricity trader.Regulation 6 deals with capital adequacy requirement and creditworthiness. Regulation 6A (b), therefore, cannot have anything to do with capital adequacy requirement and creditworthiness. The finding of the High Court to that effect cannot be upheld as Regulation 6A is a stand alone provision providing for a set of disqualifications. Although by the said provisions, it cannot be said that the legislature has exhausted itself but the same should also be taken into consideration for the purpose of determining the effect of the Regulations. As Section 52 does not empower the Regulation making authority to provide for qualification or disqualification, the delegated legislation or a subordinate legislation as is well known must conform exactly to the power granted.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 Section 12 and 14 of the Act, the Regulation making power may also be available for the said purpose.33. We have noticed hereinbefore the effect of(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.