Electricity Act - An Association Of Corporate Bodies Can Establish A Captive Power Plant Primarily For Their Own Use: Supreme Court

The Supreme Court observed that an association of corporate bodies can establish a captive power plant primarily for their own use.

Shri Bajrang Power and Ispat Ltd. ("SBPIL") established a Captive Generation Plant. Shri Bajrang Metallics and Power Ltd. ("SBMPL") is a sister concern of SBPIL. SBPIL submitted a petition to the Chhattisgarh State Electricity Regulatory Commission ("Commission") for providing open access and wheeling of power through the transmission system of the Chhattisgarh State Power Distribution Company Ltd (Company) for captive use by SBMPL. The Commission 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 and Rule 3 of the Electricity Rules, 2005. The Appellate Tribunal for Electricity dismissed the appeal filed by the Company.

In appeal filed before the Apex Court, the appellant Company contended that unless SBPIL consumes 51% of the aggregate electricity generated by it, it will not be entitled to get the benefit under Section 9 of the said Act. On the other hand, SBPIL (respondent) supported the impugned judgment and contended that no permission is required from the Commission for supply of electricity for its own use.

Referring to relevant provisions of the Electricity Act, the bench observed thus:

"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 10 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 co­operative society or association. 15. The definition of "person" is wide enough to include any company or body corporate or association or body of individuals, whether incorporated or not, or artificial juridical person. 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 sub­section (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"

While dismissing the appeal, the court noted that both the conditions as provided under Rule 3 of the Rules are satisfied in this case. The court observed:

"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%. "

Case details

Chhattisgarh State Power Distribution Company Ltd. vs Chhattisgarh State Electricity Regulatory Commission | 2022 LiveLaw (SC) 478 | CA 2578­-2579 OF 2008 | 12 May 2022

Coram: Justice L Nageswara Rao and B R Gavai

Counsel: Sr. Adv Nikhil Nayyar for appellant, Sr. Adv Naveen R. Nath and Adv Swapna Seshadari for respondents

Headnotes

Electricity Act, 2003 ; Section 2(8), 2(49), 9, 42 - 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. (Para 16) 

Interpretation of Statutes - The interpretation which advances the object and purpose of the Act, has to be preferred. (Para 24)

Electricity Act, 2003 ; Section 9 - National Electricity Policy, 2005 - 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 - A liberal provision has been made in Section 9 of the said Act so as to promote establishment of captive power plants. (Para 21-23)