Electricity Commissions cannot act on petitions solely on public interest grounds: Supreme Court rules in favour of Torrent Power

The Supreme Court recently set aside orders passed by electricity regulatory authorities that had permitted investigation of power company, Torrent Power's distribution franchisee agreement on a plea by a private individual [Torrent Power Ltd. v. UP Electricity Regulatory Commission].

A Bench of Justices JB Pardiwala and R Mahadevan said that although State Electricity Regulatory Commissions (ERC) can entertain petitions praying for investigation under Section 128 of the Electricity Act, 2003 into certain disputes, they cannot entertain such petitions filed by private persons solely on public interest grounds.

"A perusal of (Regulation 14 of 2004 Regulations) compels us to conclude that the UPERC had jurisdiction to entertain a petition praying for investigation under Section 128 ... In the same breath, we also clarify that as a principle of law, the ERCs are not competent to entertain a matter on the singular ground of public interest. Accordingly, we answer this issue in negative," the Court ruled.

The dispute arose in 2012 when a private individual, one Rama Shanker Awasthi, filed a petition before the Uttar Pradesh Electricity Regulatory Commission (UPERC) challenging the Distribution Franchisee Agreement between Torrent Power and Dakshinanchal Vidyut Vitran Nigam Ltd. (DVVNL). The agreement appointed Torrent Power as the distribution franchisee for electricity supply in Agra's urban area.

Awasthi sought an investigation into the conduct of DVVNL and the State Electricity Board for allegedly appointing Torrent Power without seeking prior UPERC approval for the transfer of utility.

Awasthi claimed violations of Section 17 of the Electricity Act, 2003. He also challenged the input-rate pricing model used in the franchisee agreement.

Torrent Power filed preliminary objections arguing that the petition was not maintainable as the petitioner was not a consumer and that regulatory commissions lack jurisdiction over contractual matters concerning distribution franchisees.

However, both UPERC and the Appellate Tribunal for Electricity (APTEL) rejected these objections and allowed the investigation to proceed, prompting Torrent Power's appeal to the Supreme Court.

The apex court categorically rejected the notion that electricity regulatory commissions can entertain matters solely on public interest grounds.

"The ERCs, being creatures of a statute, derive their jurisdiction and powers from the provisions of that statute," the Court observed.

It emphasised that statutory authorities cannot exercise powers which are not expressly conferred upon them.

The judgment established clear boundaries for regulatory oversight of distribution franchisees.

"The Act, 2003 does not envisage direct regulatory oversight as regards distribution franchisees and by virtue of their relationship of agency, such franchisees can only be indirectly regulated through the distribution licensee," the Court ruled.

The Bench clarified that the relationship between distribution licensees and franchisees is one of agency.

"Any action of the franchisee is equivalent to such action having been committed by a distribution licensee. Therefore, only the distribution licensee can be questioned for any action that its agent commits," the Court said.

On the maintainability of the petition under Section 128 (investigation of certain matters) of the Electricity Act, the Court found that the required threshold for ordering an investigation was not met.

"Unless some satisfactory grounds are given for initiating an investigation, a petition or an application under Section 128 cannot be held to be maintainable," the judgment stated.

In the present case, the petition filed under Section 128 did not fulfill the parameters of satisfaction required under the said provision, the Court concluded.

The Supreme Court was also critical of both lower authorities' handling of the matter.

"We have reached the conclusion that the UPERC fell in serious error in entertaining the petition filed by the respondent no. 4 and passing the order constituting an expert committee. The APTEL also failed to look into the error committed by the UPERC," the Court held.

Therefore, the Court allowed Torrent Power's appeal and set aside APTEL's order dated July 28, 2016.

"In the result, the appeal succeeds and is hereby allowed. The impugned order passed by the APTEL is hereby set aside. As a consequence, the report of the Expert Committee also pales into insignificance," the judgment concluded.

Torrent Power was represented by Senior Advocate Deepa P Chawan with advocates Reshma Roy, Sudhir Naagar, Arun Kumar Nagar and Manohar Naagar.

The respondents were represented by advocate Pradeep Misra, Daleep Dhyani, Anupam Misra, Suraj Singh, Anand K Ganesan and Nikunj Dayal.

Note: An earlier version of the story incorrectly said that the Supreme Court ruled in UPERC's favour and dismissed the appeal filed by Torrent. That story has been taken down. The error is regretted.

[Read Judgment]