Case: CHHATTISGARH STATE POWER DISTRIBUTION  COMPANY LTD Vs. CHHATTISGARH STATE ELECTRICITY REGULATORY COMMISSION AND ANOTHER

2. The facts in brief giving rise to the present appeals are as under:M/s Shri Bajrang Power and Ispat Ltd. (hereinafter referred to as SBPIL) has established a Captive Generation Plant. M/s Shri Bajrang Metallics and Power Ltd. (hereinafter referred to as SBMPL) is a sister concern of SBPIL. SBPIL submitted a petition to the Chhattisgarh State Electricity Regulatory Commission (hereinafter referred to as the Commission) for providing open access and wheeling of power through the transmission system of the appellant for captive use by SBMPL. The petition of the SBPIL was for permission to wheel 19 lakh units, corresponding to 13 MW, to SBMPL. It was stated in the said petition that SBMPL holds 27.6% of the equity shares of SBPIL and that more than 51% of the electricity generated by the captive power plant would be consumed by them. It was submitted that the generating capacity of the captive generation plant set up by SBPIL would be 103.68 MU per annum. It was further submitted that out of the said 103.68 MU per annum power generated, 13.22 MU per annum would be utilized in its sponge iron plant. It was further submitted that 54 MU per annum would be supplied to SBMPL through the appellant grid and the balance would be sold to the appellant.3. The said petition came to be resisted by the appellant. It was contended by the appellant that SBPIL holds more than 72% of the shares of the company. However, its consumption would be limited only to 14.16% (13.22 MU), whereas the consumption of SBMPL holding 26.67% shares, would be 57.87% (54 MU). It was submitted that this was not proportionate to the ownership of the power plant.4. The Commission, vide its order dated 14th October 2005, rejected the contention of the appellant and held that SBPIL was entitled to supply electricity to its sister concern SBMPL and the same would qualify to be treated as own consumption within the ambit of Section 9 read with Section 2(8) of the Electricity Act, 2003 (hereinafter referred to as the said Act) and Rule 3 of the Electricity Rules, 2005 (hereinafter referred to as the said Rules). While allowing the said petition, the Commission imposed the following conditions:(i) The consumption of electricity by the captive users shall not be less than 51% over a financial year, and in case it is not so it would be treated as supply of electricity by a generating company in terms of provision of rule 3(2) of the Rules.(ii) The CSEB is entitled to charge for wheeling of electricity and levy other charges as per their present rates which shall be subject to revision as per the provisions in regulations on the charges for open access to be notified by the Commission shortly.(iii) The company may enter into necessary agreement with the CSEB for the sale of balance power under the present terms and conditions of the CSEB, is subject to revision as per the directions of the Commission from time to time.5. Being aggrieved thereby, the appellant preferred appeals before the APTEL. The said appeals came to be dismissed by the APTEL vide impugned judgment dated 6th December 2007. Being aggrieved thereby, the present appeals.

Court's reasoning:
14. A combined reading of Section 9 and Clause (8) of Section 2 of the said Act would reveal that a person is entitled to construct, maintain or operate a captive generating plant. Such a plant should be primarily for his own use. Clause (8) of Section 2 of the said Act would further show that it includes a power plant set up by any cooperative society or association of persons for generating electricity. The requirement is that it should be primarily for the use of the members of such co-operative society or association.16. It is thus clear that a person, to get benefit under Section 9 of the said Act, could be an individual or a body corporate or association or body of individuals, whether incorporated or not. It could thus be seen that even an association of corporate bodies can establish a captive power plant. The only requirement would be that the said plant must be established primarily for their own use. The fourth proviso to sub-section (2) of Section 42 of the said Act would also reveal that surcharge would not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.19. The provisions made in Rule 3 of the said Rules are clear. Sub-rule (1) of Rule 3 of the said Rules provides that no power plant shall qualify as a Captive Generating Plant under Section 9 read with Clause (8) of Section 2 of the said Act unless the conditions stated therein are fulfilled. The first requirement is that not less than 26% of the ownership is held by the captive user(s). The second requirement is that not less than 51% of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for the captive use. The second proviso to Rule 3(1)(a)(ii) of the said Rules provides that in case of association of persons, the captive user(s) shall hold not less than 26% of the ownership of the plant in aggregate and such captive user(s) shall consume not less than 51% of the electricity generated, determined on an annual basis, in proportion to their shares in ownership of the power plant within a variation not exceeding 10%.20. Admittedly, SBMPL holds 27.6% equity shares in SBPIL. As such, the requirement of not less than 26% of shares is fulfilled by SBMPL. As already discussed hereinabove, even an association of corporate bodies can establish a power plant. Since SBMPL holds 27.6% of the ownership, the use of electricity by it would be for captive use under the provisions of the said Act. The other requirement would be that the consumption of SBIPL and SBMPL together should not be less than 51% of the power generated. Admittedly, the joint consumption by SBIPL and SBMPL is more than 51%. As such, both the conditions as provided under Rule 3 of the said Rules are satisfied.22. It could thus be seen that the provision with respect to establishing captive power plant has been made with a view to not only securing reliable, quality and cost-effective power but also to facilitate creation of employment opportunities through speedy and efficient growth of industry. The said Policy further states that the provision relating to captive power plants to be set up by a group of consumers has been made primarily for enabling small and medium industries or other consumers that may not individually be in a position to set up plant of optimal size, in a cost-effective manner. It also states that the efficient expansion of small and medium industries across the country would lead to creation of enormous employment opportunities. Clause 5.2.26 of the said Policy further states that the captive and standby generating stations in India have surplus capacity that could be supplied to the grid continuously or during certain time periods.23. The said Policy is issued under Section 3 of the said Act and as such, has a statutory flavour. In any case, the said Policy is in tune with the provisions as contained in Section 9 and Clause (8) of Section 2 of the said Act. A liberal provision has been made in Section 9 of the said Act so as to promote establishment of captive power plants.24. It is a settled position of law that the interpretation which advances the object and purpose of the Act, has to be preferred. A reliance in this respect can be placed on the judgments of this Court in the cases of Administrator, Municipal Corporation, Bilaspur v. Dattatraya Dahankar, Advocate and Another (1992) 1 SCC 361,  S. Gopal Reddy v. State of A.P. (1996) 4 SCC 596  and Ahmedabad Municipal Corporation and Another v. Nilaybhai R. Thakore and Another (1999) 8 SCC 139 .25. We are, therefore, of the considered view that no case is made out for interfering with the order dated 14th October 2005 passed by the Commission and the impugned judgment dated 6th December 2007 passed by the APTEL.