Chhattisgarh State Power Distribution Co. Limited vs Chhattisgarh State Electricity Regulatory Commission & Anr
- Court
- Appellate Tribunal For Electricity
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO.20 OF 2021
Dated: 20.04.2026
Present: Hon’ble Ms. Seema Gupta, Officiating Chairperson
Hon’ble Mr. Virender Bhat, Judicial Member
IN THE MATTER OF:
Chhattisgarh State Power Distribution Co. Limited
Vidyut Seva Bhavan,
Danganiya, Raipur – 492013, Chhattisgarh
Email: [email protected] … Appellant
Versus
1. Chhattisgarh State Electricity Regulatory Commission
Through its Secretary
Irrigation Colony, Shanti Nagar,
Raipur – 492001, Chhattisgarh
Email: [email protected]
2. M/s Sarda Energy & Minerals Limited
Through Shri P.S. Dutta Gupta
1st Floor, Vanijya Bhawan, Jail Road,
Devendra Nagar Square,
Raipur – 492001, Chhattisgarh
Email: [email protected] … Respondent (s)
Counsel on record for the Appellant(s) : Suparna Srivastava
Counsel on record for the Respondent(s) : Raunak Jain
for Res. 2
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Appeal No.20 of 2021 Page 1 of 28
J U D G M E N T
PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. The distribution company operating in the State of Chhattisgarh
namely Chhattisgarh State Power Distribution Company Limited (in short
CSPDCL) has come up in appeal against the order dated 28.01.2020
st
passed by 1 respondent Chhattisgarh State Electricity Regulatory
Commission (hereinafter referred to as the Commission) whereby the
nd
Commission has held that the 2 respondent M/s Sarda Energy & Minerals
Limited along with its subsidiary M/s Sharda Minerals and Alloys Limited
qualify as a captive user with regards to the captive power generating plant
setup by the subsidiary company Sharda Minerals and Alloys Limited in the
State of Andhra Pradesh and has directed the appellant to allow non-
nd
discriminatory open access to the 2 respondent under sub-sections (2) &
(3) of Section 42 of the Electricity Act, 2003 without imposition of cross
subsidy surcharge. A further direction has been issued to the appellant to
nd
return the cross subsidy surcharge recovered so far from the 2 respondent
within 60 days of the passing of the order.
2. The appellant is the successor of the erstwhile Chhattisgarh State
Electricity Board which had been constituted under Section 5 of the
Electricity (Supply) Act, 1948 read with Section 58 of the Madhya Pradesh
Reorganization Act, 2000. By virtue of the Chhattisgarh State Electricity
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Board Transfer Scheme Rules, 2008 and 2010 notified by the State
government under Section 131 of the Electricity Act, 2003 which unbundled
the Electricity Board into different companies with effect from 01.01.2009,
the appellant has been functioning as the distribution licensee in the State
and is performing all the functions as well as duties pertaining to distribution
of electricity in the State.
nd
3. The 2 respondent is located at Raipur in the State of Chhattisgarh
and is engaged, inter alia, in the business of iron and steel production. It has
a 100% wholly owned subsidiary i.e. M/s Sharda Matels and Alloys Limited
(in short SMAL) located in the State of Andhra Pradesh. This subsidiary
nd
company of 2 respondent has set up an 80MW captive generating plant in
the State of Andhra Pradesh from which it avails power for its own use. The
nd
2 respondent is also availing power from the said captive generating plant
of SMAL through interstate open access.
4. It appears that the appellant levied cross subsidy surcharge (in short
nd
“CSS”) upon 2 respondent for the power received by it from the captive
generating plant of its subsidiary SMAL in Andhra Pradesh through open
nd
access during the financial year 2017-18 and accordingly the 2 respondent
approached the Commission by way of a petition bearing no.42/2018 under
Sections 9(2) and 42 of the Electricity Act, 2003 against such recovery of
cross subsidy surcharge by the appellant and sought a direction to the
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appellant for refund of cross subsidy surcharge already recovered from the
nd
2 respondent.
5. The appellant contested the petition on the aspect of jurisdiction of the
Chhattisgarh Commission to deal with the issue raised in the petition as well
nd
as on merits defending the liability of 2 respondent to pay CSS. The
appellant had objected to the jurisdiction of the Commission on following two
counts: -
(a) The Chhattisgarh Commission lacked jurisdiction to declare the
captive status of a generating plant which is located in the State of
Andhra Pradesh i.e. beyond its territorial jurisdiction; and
(b) since the matter relates to inter-state distribution, jurisdiction to
adjudicate the same lies with the Central Electricity Regulatory
Commission.
6. The Commission held that it has the jurisdiction to adjudicate upon the
dispute between the parties and also came to the conclusion that the users
nd
of the power produced in the captive generating plant in question i.e. the 2
respondent as well as its subsidiary SMAL have more than 26% of
ownership in the plant and consumed more than 51% of the aggregate
electricity generated in the power plant and thus qualify as captive users
envisaged under Rule 3 of the Electricity Rules, 2005 notified by the Central
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Government. The relevant portion of the impugned order is extracted
hereinbelow: -
“ …
As regards the consumption of electricity
generated by the plant, the documents submitted by the
petitioner issued by DISCOM and TRANSCO of Andhra
Pradesh go on to prove that both the users i.e. M/s
SMAL and M/s SEML together consumed 74 per cent
(72 per cent and 2 per cent respectively) of the electricity
generated.
Thus, the users in questions i.e. M/s SMAL and
M/s SEML have more than 26 per cent of ownership of
the plant and consume more than 51 per cent of the
aggregate electricity generated by the power plant during
FY 2017-18. It is worth mentioning that the provisions in
Electricity Rules, 2005 do not contain any mandatory
requirement of the users being located in the same state.
The qualifying criteria mentioned in the Rules talks about
captive user/ users owning not less than twenty six per
cent of the ownership and consuming not less than fifty
one per cent of the aggregate electricity generated in
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Appeal No.20 of 2021 Page 5 of 28
such plant. Thus, in the present case, both the conditions
laid down in the Electricity Rules have been fulfilled for
attaining captive status by the plant.
6. As regards the objection of the respondent
regarding the jurisdiction of this Commission to declare
the captive status, it is pertinent to mention here that the
captive status of one of the users i.e. M/s SMAL has
already been certified by the Andhra Pradesh Utilities. As
far as the Chhattisgarh State DISCOM and M/s SEML
are concerned, DISCOM, being a state distribution
licensee, and M/s SEML, being a unit situated in the
state, they fall within the jurisdiction of this Commission.
7. As regards the contention of the respondent that
since the matter relates to inter-state dispute, the
jurisdiction for adjudication lies with CERC, it is relevant
to mention here that as per the Electricity Act, the
jurisdiction of CERC lies over disputes relating to
generation and sale of electricity in more than one State.
The instant case is regarding levy of CSS in respect of a
consumer, namely, M/s SEML which is located in
Chhattisgarh, by the CSPDCL which is, again, a State
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Distribution licensee. Since the issue in hand is not a
case of inter-state generation and sale of electricity and
both the parties to the case are within the jurisdiction of
this Commission i.e. the DISCOM being the State
distribution licensee and M/s SEML being situated in
Chhattisgarh, the respondent’s objection as to
jurisdiction of this Commission is not sustainable.”
7. Accordingly, the Commission finally held as under: -
“ 8. Coming to the issue of levy of cross subsidy
surcharge on the petitioner, the statutory provision,
contained in Section 42 of the Act, provides that such
surcharge shall 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.
9. In the light of the aforesaid, we are of the
considered view that the petitioner, together with SMAL,
is a captive user and direct the CSPDCL to allow the
petitioner non-discriminatory open access under sub-
section (2) and (3) of Section 42 of the Act and Rules
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without imposition of CSS. So far as the CSS recovered
from the petitioner, the respondent is directed to return
the same within 60 days from the date of order. Further,
looking into the circumstances of the case, the petitioner
is not entitled to any interest on this amount. ”
8. Feeling aggrieved by these findings arrived at by the Commission in
the impugned order, instant appeal has been filed by the appellant.
9. Following issues have been raised by the appellant for determination in
this appeal: -
(I) Whether a State Electricity Regulatory Commission performing
its functions under Section 86 of the Electricity Act, 2003 is
vested with the jurisdiction to determine the status of “captive
consumption” by an entity situated within the State with respect
to power drawn from a captive power plant situated outside the
State?
(II) Whether the State Electricity Regulatory Commission performing
its functions under Section 86 of the Electricity Act, 2003 has the
jurisdiction to determine disputes arising in relation to payment of
cross-subsidy surcharge by “captive users” situated in two
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different States and the captive generating plant also situated
outside the State or the said jurisdiction vests with the Central
Electricity Regulatory Commission performing its functions under
Section 79 of the Act?
(III) Whether consumption of power by an entity situated in a State
from the captive generating plant of 100% owned subsidiary
company in another State qualifies as “captive use” under Rule 3
of the Electricity Rules, 2005 and accordingly by granted the
benefit of exemption from payment of cross subsidy surcharge?
(IV) Whether supply of power by a 100% wholly owned subsidiary
from its captive generating plant situated in one State to its
holding company situated in another State is a supply through
inter-State open access to a consumer/non-captive user and
therefore subject to payment of all open access including cross
subsidy surcharge as laid down in the applicable Open Access
Regulations of the other State?
nd
10. We have heard learned counsels appearing for the appellant and 2
respondent. We have also perused the impugned order of the Commission
as also the written submissions filed by the learned counsels.
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11. We may note at the outset that during the hearing of the appeal, the
learned counsel for the appellant fairly conceded on the basis of judgment of
this Tribunal dated 31.05.2025 in appeal no.89 of 2019 M/s Bhadreshwar
Vidyut Private Limited v. Maharashtra Electricity Regulatory Commission &
Anr., that the challenge to the jurisdiction of the Commission in deciding the
nd
issues involved in the petition filed by the 2 respondent does not survive at
all, and therefore, the same is not being pressed.
12. Therefore, the only issue which arises for our consideration in the
appeal is :-
“Whether supply of power by SMAL, a 100% wholly owned subsidiary
nd
of 2 respondent from its captive generating plant situated in Andhra
nd
Pradesh to its holding company i.e. the 2 respondent situated in
another State i.e. Chhattisgarh can be considered as supply of power
by a captive generating plant to a captive user through inter state open
access and thus is exempt from payment of cross subsidy surcharge in
view of fourth proviso attached to sub-Section 2 of Section 42 of the
Electricity Act, 2003?”
13. Before adverting to and analysing the rival submissions of the learned
counsels, we think it apposite to refer to the relevant statutory/regulatory
provisions.
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14. Section 2(8) of the Electricity Act, 2003 defines “captive generating
plant” to mean a power plant set up by any person to generate electricity
primarily for his own use and includes a power plant set up by any co-
operative society or association of persons for generating electricity primarily
for use of members of such cooperative society or association.
15. Section 9(2) of the Act entitles a person, who has constructed a
captive generating plant and is maintaining as well as operating such plant,
to have open access for the purposes of carrying electricity from the plant to
the destination of use. The only restriction of such entitlement is put by the
proviso attached to this sub-section is with regards to the availability of
adequate transmission facility.
16. “Open access” is defined in Section 2(47) of the Act to mean the non-
discriminatory provision for the use of transmission lines or distribution
system or associated facilities with such lines or system by any licensee or
consumer or a person engaged in generation in accordance with the
regulations specified by the Appropriate Commission.
17. Section 42(2) of the Act makes it mandatory for the State Regulatory
Commissions to introduce open access subject to conditions including cross
subsidy and other operational constraints. The fourth proviso attached to
this sub-section is material and is extracted hereinbelow: -
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“Provided also that such surcharge shall 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: ”
18. Thus, as per the said fourth proviso attached to Section 42(2) of the
Electricity Act, 2003, no surcharge is 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. Rule 3 of the electricity Rules, 2005 notified by the Central
Government on 08.05.2005 provide the requirements of a captive generating
plant. The relevant portion of the said Rule is reproduced hereinbelow: -
“ 3. Requirements of Captive Generating Plant . - (1)
No power plant shall qualify as a ‘captive generating plant’
under section 9 read with clause (8) of section 2 of the Act
unless-
(a) in case of a power plant -
(i) not less than twenty six percent of the ownership
is held by the captive user(s), and
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(ii) not less than fifty one percent of the aggregate
electricity generated in such plant, determined on an
annual basis, is consumed for the captive use:
Provided that in case of power plant set up by registered
cooperative society, the conditions mentioned under
paragraphs at (i) and (ii) above shall be satisfied
collectively by the members of the cooperative society:
Provided further that in case of association of persons,
the captive user(s) shall hold not less than twenty six
percent of the ownership of the plant in aggregate and
such captive user(s) shall consume not less than fifty one
percent 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 ten
percent;
…………………………………………………………………
…………………………………………………………………
…………………………………………………………………
(2) It shall be the obligation of the captive users to
ensure that the consumption by the captive users at the
percentages mentioned in sub-clauses (a) and (b) of
sub-rule (1) above is maintained and in case the
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minimum percentage of captive use is not complied with
in any year, the entire electricity generated shall be
treated as if it is a supply of electricity by a generating
company.
Explanation.- (1) For the purpose of this rule.-
a. “Annual Basis” shall be determined based on a
financial year;
b. “Captive User” shall mean the end user of the
electricity generated in a Captive Generating Plant and
the term “Captive Use” shall be construed accordingly;
c. “Ownership” in relation to a generating station or
power plant set up by a company or any other body
corporate shall mean the equity share capital with voting
rights. In other cases ownership shall mean proprietary
interest and control over the generating station or power
plant;
d. “Special Purpose Vehicle” shall mean a legal entity
owning, operating and maintaining a generating station
and with no other business or activity to be engaged in by
the legal entity.”
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20. Thus, the requirements for qualifying as a captive generating plant laid
down in the said Rule 3 of the 2005 Rules are that not less than 26% of the
ownership of the plant is held by the captive user and not less than 51% of
the aggregate electricity generated in the plant determined on an annual
basis is consumed for the captive use. The term “captive user” has been
defined to mean the end user of the electricity generated in the captive
generating plant.
21. We may note that the definition of captive user has undergone
changes by way of amendments to Rule 3(2) by way of notifications dated
st nd
30.06.2023 (1 amendment) and 01.09.2023 (2 amendment), which would
be discussed in the latter part of this judgment.
22. It is argued by learned counsel for the appellant that in view of the
scheme of Electricity Act, cross subsidy surcharge is levied to meet the
current level of cross subsidy in the State and therefore, the captive
consumption of only those captive users who are situated within that State
must be taken into consideration for exemption from payment of cross
subsidy surcharge. She would submit that the consumption by users outside
the State who, otherwise qualify the shareholding requirement under Rule 3
of 2005 Rules qua captive generating plant in the State, ought to be
considered as consumption by non-captive user/consumer who are supplied
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Appeal No.20 of 2021 Page 15 of 28
power from captive generating plant through open access as they are the
consumers of the distribution licensees in that other States and thus liable to
pay cross subsidy surcharge to the distribution licensee operating in the
area where they are situated.
nd
23. On behalf of the 2 respondent, it is argued that no such restriction, as
sought to be placed by the appellant on the definition of captive user is found
in the language used in Rule 3 of 2005 Rules. It is further argued that if the
constricted interpretation propounded by the appellant is accepted it would
totally negate the disposition granted to the captive generating plant under
Section 9(2) and Section 42(2) of the Act thereby depriving them of the
benefits available to the captive users under fourth proviso to Section 42(2)
of the Act. It is argued that on a harmonious reading of Section 9 of the Act
and Rule 3 of the 2005 Rules, it is manifest that the term “captive user”
appearing in Rule 3(2)(b) ought to be read as “captive users” and it was only
in order to cure this defect in the Rule that the Central Government thought it
necessary to amend the same by way of two amendments in the year 2023.
Our Analysis: -
24. The conundrum of the appellant’s case can be resolved only by
meaningful interpretation of Sections 2(8) & 9(2) of the Electricity Act, 2003,
along with Rule 3 of the Electricity Rules, 2005.
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25. We may note that a statute is an authentic expression of the legislative
will, the function of the court being to interpret the same “according to the
intent of them who made it.” Interpretation of law is an intellectual activity, a
form of activity which aims at explaining, expounding and ascertaining the
meaning and scope of the statute. Thus, it is a well settled principle that a
statute must be constituted to find out the intention of the legislature. The
intention of the legislature can be gathered from the language used in the
statute. Attention should be paid to what has been said as also to what has
not been said. Any construction which requires, for its support, addition or
substitution of words or which results in rejection of words as meaningless
has to be avoided.
26. Where, by the use of clear and unequivocal language capable of only
one meaning, anything is enacted by the legislature, it must be enforced,
however harsh, absurd or contrary to common sense the result may be.
Words in a statute must not be construed contrary to their ordinary meaning
or to embrace/exclude certain situations or cases merely because no good
reason appears for not doing so. The interpretation of statute is not to be
done on the basis of any notions which may be entertained by the court as to
what is just and expedient. The duty of the court is to expound the law as it
stands and leave the remedy, if any required, to the legislature.
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27. Where the question arises as to the meaning of certain provision in a
statute, it is not only legitimate but also proper to read the provision in the
context of statute as a whole, the previous state of law, other statutes in pari
materia and the mischief it was intended to remedy. In National Insurance
Company v. Anjana Shyam (2007) 7 SCC 628 the Supreme Court held that
in order to ascertain the meaning of a clause in a statute, the court must look
at whole statute, at what precedes as well as what succeeds that clause and
not merely the clause itself.
28. The principle that statute must be read as a whole is equally applicable
to different parts of the same section also. The section must be construed
as a whole whether or not one of the parts is a saving clause or a proviso.
29. The duty of the judicature is to act upon the true intention of the
legislature. It is contrary to all the rules of construction to read words into an
Act unless it is absolutely necessary to do so. The language of the statue
must be read as it is. It is wrong and dangerous to proceed by substituting
some other words for the words of the statute. To be precise, the court can
not reframe the drafting of the legislation for the very good reason that it has
no power to legislate. The interpreter is not entitled to read words into an
Act of Parliament. The court cannot add or amend or make up deficiencies
which are left there.
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30. As on one hand, it is not permissible to add words or to fill in a gap or
lacuna, on the other hand efforts should be made to give meaning to each
and every word or expression used by the legislature. The courts always
presume that the legislature inserted every part of the statute thereof for a
purpose and the legislative intention is that every part of statute should have
effect. The legislature is deemed not to waste its words or to say anything in
vain. A construction that attributes redundancy to the legislation is not
acceptable. In Aswini Kumar Ghosh v Arabinda Bose AIR 1952 Supreme
Court 369, the Supreme Court said that it is not a sound principle of
construction to brush aside words in a statute as being inappropriate
surplusage, if they can have appropriate application in circumstances
conceivably within the contemplation of the statute.
31. In this backdrop, let us now proceed to examine and analyse the
relevant provisions of the Electricity Act, 2003 and the Electricity Rules, 2005
framed thereunder.
32. A look at the Statement of Objects and Reasons for enactment of the
Electricity Act, 2003 reveals that apart from finding it necessary to harmonize
and rationalize the provisions of the Indian Electricity Act, 1910, the
Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions
Act, 1998 by enacting a new legislation for regulating the electricity supply
industry in the country to replace the existing laws, need was also felt to
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introduce newer concepts like “power trading” and “open access”. The main
features of the 2003 Act include delicencing of the electricity generation and
allowing “captive generation”.
33. Thus, the concepts of “open access” and “captive generation” were
introduced in the Act of 2003 with a view to encourage private sector
participation in generation, transmission and distribution of electricity.
34. “Captive generating plant” is defined in section 2(8) of the Act to mean
a power plant set up by any person to generate electricity primarily for his
own use. It would include within its ambit a power plant set up by any co-
operative society or association of persons for generating electricity primarily
for use of members of such co-operative society or association.
35. The manner in which the captive generating plant has been defined in
section 2(8) is indicative of the fact that the Parliament was aware of the
financial as well as other aspects involved in setting up of a captive
generating plant and thought that it might not be possible for a single private
individual to do so. Having it in mind, cooperative societies and association
of persons were permitted to set up such power plants so that the policy of
encouraging private sector participation in electricity generation gets
impetus.
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36. Rule 3 of the Electricity Rules, 2005 prescribes requirements for a
power plant to qualify as a “captive generating plant”. The rule laws down
that at least 26% of the ownership of the plant must be held by the captive
user and at least 51% of the aggregate electricity produced in such plant,
determined on annual basis, must be consumed for the captive use.
Therefore, in case these twin requirements are fulfilled, the power plant
would attain the status of a captive generating plant.
37. Rule 3(2)(b) defines “captive user” to mean the end user of the
electricity generated in a captive generating plant.
38. There is nothing in the language used in Section 2(8) of the Electricity
Act, 2003 and entire Rule 3 of Electricity Rules, 2005 to suggest that the
captive generating plant and the captive user ought to be situated in the
same State. No such implied restriction can be read into these two legal
provisions when language/words used therein are clear, unambiguous and
brook no anomaly. According to Rule 3(2)(b), the end user of the electricity
generated in a captive generating plant would be captive user. It nowhere
says that such end user of the electricity must be located in the same State
in which the captive generating plant is situated.
39. Thus, plain and unambiguous language used in these two statutory
provisions clearly indicates that it is not necessary that a captive generating
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plant and a captive user must be located in the same State. A captive
generating plant may have been set up in one State and the captive user
may be located in some other State. In case the intention of the legislature
would have been that the captive generating plant and the captive user
ought to be in the same State, it would have provided so specifically in Rule
3 while prescribing the requirements of a captive generating plant. Any
contrary interpretation of these legal provisions would be adding words to the
statute/rule which are not present there and thus, not permissible. It would
also run contrary to the intention of the legislature.
40. Even Section 9 of the Electricity Act, 2003 also does not prescribe any
such stipulation. Section 9(2) entitles a person, who has constructed a
captive generating plant and is maintaining as well as operating such plant,
to have open access for the purposes of carrying electricity from the plant to
the destination of use. It nowhere says that the “destination of use” or the
“end ser” must be located in the same State in which the captive generating
plant has been set up.
nd
41. Hence, in the instant case, the 2 respondent does not lose the status
of “captive user” merely for the reason that it is located in State of
Chhattisgarh whereas the captive generating plant of its subsidiary SMAL is
situated in the State of Andhra Pradesh.
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42. Now coming to another limb of the arguments of the learned counsel
nd
for the appellant that consumption of electricity by 2 respondent, a holding
company, cannot be added to the consumption of electricity by SMAL itself
from its captive generating plant to say that requirements under Rule 3(1)(a)
are fulfilled. We do not find any merit in the said argument. As we have
already noted that the Parliament being aware about the financial and other
constraints that may be experienced by private individuals in setting up
captive generating plant, permitted the co-operative societies and
associations of persons to set up such plants. First proviso to Rule 3(1)(a)
provides that in case such a power plant is set up by a registered
cooperative society, the requirement as to minimum 26% ownership of the
plant and minimum 51% consumption of electricity generated from the plant
for captive use on annual basis, shall be satisfied collectively by all the
members of the society. Meaning thereby that the percentage of ownership
of the plant and the percentage of consumption of the electricity generated
from it by each member of the society has to be added up in order to arrive
at the total collective figure to ascertain whether these twin requirements are
fulfilled.
43. Similarly, in case of Association of Persons, as per the second proviso
attached to Rule 3(1)(a), the aggregate percentage of ownership in the plant
of all the persons comprising the association and their respective
consumption of power in proportion to their shares in ownership in the power
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plant is to be considered for ascertaining the status of such power plant as a
captive generating plant.
44. Therefore, we do not see any reason as to why the ownership
percentage in a power plant and consumption percentage of electricity
generated therein of a holding company and subsidiary company can not be
added up to arrive at the figures of 26% and 51% respectively specified in
Rule 3(1)(a).
45. Further, we also find Rule 3(2)(c) very material on this aspect. It
defines “ownership” in relation to a generating station or power plant set up
by a company or any other body corporate to mean the equity share capital
with voting rights.
46. In the instant case, it is not disputed that SMAL is the 100% wholly
nd
owned subsidiary of the 2 respondent which means that all the equity
nd
shares of SMAL are held by 2 respondent in its name. Therefore, by virtue
of definition of “ownership” of a generating station or a power plant in Rule
nd
3(2)(c), it is the 2 respondent which owns the captive generating plant set
up by SMAL as it has 100% equity shareholding in SMAL. Therefore, both
nd
the 2 respondent and SMAL being the owners of the captive generating
plant in question, the Commission has not committed any error by holding in
the impugned order that both these entities have more than 26% of
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ownership in the power plant and consume more than 51% of the aggregate
electricity generated by the power plant thereby fulfilling the criterion
envisaged in Rule 3(1)(a).
47. Let us now turn to the amendments to Rule 3 notified in the year 2023.
By way of first amendment notified on 30.06.2023, clause (b) appearing after
the explanation in Rule 3(2) was substituted by following clause: -
“(b) “captive user” shall mean the end user of the electricity
generated in a Captive Generating Plant and the term “captive
use” shall be construed accordingly:
Provided that the consumption of electricity by the captive user
may be either directly or through Energy Storage System:
Provided further that the consumption by a subsidiary company,
as defined in clause (87) of section 2 of the Companies Act,
2013 (18 of 2013), of a company which is an existing captive
user shall also be admissible as captive consumption by the
captive user.”
48. Thus, by inserting second proviso to clause (b) of explanation,
consumption by a subsidiary company was made admissible as captive
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consumption by the captive user to arrive at figure of minimum 51% laid
down in Rule 3(1)(a)(ii).
49. The said clause (b) was again amended by way of notification dated
01/09/2023 by substituting the second proviso by following:-
“Provided further that the consumption by a subsidiary company
as defined in clause (87) of section 2 of the Companies Act,
2013 (18 of 2013) or the holding company as defined in clause
(46) of section 2 of the Companies Act, 2013 (18 of 2013), of a
company which is a captive user, shall be admissible as captive
consumption by the captive user.”
50. The newly substituted second proviso, thus, provided that consumption
of both, a holding company as well as a subsidiary company of a company
which is captive user, shall be admissible as captive consumption by the
captive user to arrive at the figure of minimum 51% as stipulated in Rule
3(1)(a)(ii).
51. Referring to these amendments to Rule 3, it was argued by learned
counsel for the appellant that the Commission has applied in the year 2020
what was not there in the statute at that time and what was engrafted in the
said Rule 3 in the year 2023 by virtue of these amendments and thus, the
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Appeal No.20 of 2021 Page 26 of 28
impugned order is patently erroneous which can not be sustained. The
argument though appears to be attractive in first blush but evaporates in thin
air upon closer scrutiny.
52. It is manifest from our discussion in the foregoing paragraphs that even
unamended Rule 3 envisaged combining of the consumption of electricity by
a holding company and its subsidiary company, generated by a captive
generating plant set up by either of the two, to arrive at the figure of
minimum 51% consumption stipulated under Rule 3(1)(a)(ii) where the equity
shareholding of the holding company in the subsidiary is more than 26%.
What the amendments have done is to clear this position. The amendments
are, thus, only clarificatory in nature and do not introduce any new thing in
Rule 3 which was not envisaged thereunder before the amendments.
53. It was also argued on behalf of the appellant that Chhattisgarh
Regulatory Commission had no power or jurisdiction to declare the captive
status of a generating station situated in Andhra Pradesh and therefore, the
impugned order suffers from infirmity on this count also. In this regard we
may note that status of the generating plant in question as ‘captive’ and that
of SMAL as ‘captive user’ was already certified by the Andhra Pradesh
utilities. What the Chhattisgarh Commission has done in the impugned order
nd
is to declare 2 respondent as “captive user” in relation to the captive
generating plant of SMAL. The Commission was competent to do so as
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Appeal No.20 of 2021 Page 27 of 28
nd
there was dispute in this regard between the appellant and 2 respondent
and both were within the jurisdictional area of the Commission.
54. The issue formulated in paragraph no. 12 hereinabove stands
answered accordingly.
Conclusion: -
55. Having regard to the above discussion we do not find that the
Commission has committed any error either on facts or on law. The appeal is
sans any merit and is dismissed as such.
th
Pronounced in the open court on this the 20 day of April, 2026.
(Virender Bhat)
Judicial Member
(Seema Gupta)
Officiating Chairperson
✓
REPORTABLE / NON-REPORATBLE
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