Eastern Coalfields Ltd. vs Eastern Regional Power Committee

I.P. Mukerji, J.—DEVELOPMENTS

On 30th March, 1985, a meeting was held under the Chairmanship of Mr. Vasant Sathe, the then Minister of Steel, Mines and Coal. The Secretary, Department of Coal emphasised the need for an uninterrupted supply of power by NTPC, the respondent no. 3, from Farakka through an independent transmission line, to the Raj Mahal mine owned and operated by Eastern Coalfields Limited, (ECL), the writ petitioner, in Bihar, now in Jharkhand. The cost of laying this line would have to be borne by ECL. The Minister agreed. The Chairman of NTPC agreed to look into the matter.

The proposals made on 30th March, 1985 were put into effect.

The transmission line was erected and, paid for by ECL. The cost was Rs. 17.86 crores. It was called the Farakka, Lalmatia Transmission System. It commenced supply of power to the Lalmatia (Raj Mahal) project of ECL from 14th June, 1990. It was a 220 KV 82.11 km. long line running from Farakka, for 9.5 km through West Bengal and 72.61 km. through Jharkhand to the Dhankunda substation of the distribution licensee, JUSNL, the respondent no. 9 and onward to the establishment of ECL, also the consumer through a distribution system also built by them.

In the minutes of another meeting held under the Chairmanship of the Additional Secretary (Coal), Government of India, on 23rd October, 1991, a concrete decision was taken that the ownership of the transmission line would remain with ECL. The system would be continued to be operated by NTPC.

In or about October, 1992 the Bihar State Electricity Board expressed an intention to take over this transmission system. They wrote to the Additional Secretary, Ministry of Coal on 7th October, 1992, to this effect. On 2nd November, 1992 the Additional Secretary replied that it would not be possible for ECL to handover the system to the Board. It was clarified that power would continue to be supplied from Farakka to the Raj Mahal open cast mine of ECL. However, ECL would have to pay for it at the same rate as they would have paid as if they received it from the Board.

So, upto today the Raj Mahal area of Eastern Coalfields Limited receives power supply from the Farakka Super Thermal Power Station of NTPC through the 220 KV Farakka, Lalmatia Transmission System. It is routed through the Dhankunda substation, Lalmatia which is under the JUSNL, the successor of Bihar State Electricity Board. NTPC is operating and maintaining this transmission system and the associated switchyard equipment.

This transmission line, through the JUSNL is giving power not only to Eastern Coalfields Limited at Raj Mahal but also to the areas of Sahebgunj, Dumka, Pakur, Deoghar, Godda etc. in Jharkhand.

NTPC said that they were an expert in power generation but did not have the expertise in the field of transmission of power. Hence, they were having some difficulty in operating and maintaining the line. On 13th and 14th February, 2015 meetings were held in Ranchi, followed by another on 11th March, 2015 in Kolkata and the final one on 24th March, 2015 in Ranchi. It was well represented by the Jharkhand Electricity Authorities, the Eastern Regional Power Committee, the respondent no. 1 (ERPC), ECL and NTPC. Here it was suggested that the operation and management of this line would be looked after by JUSNL upon payment of charges to them by ECL. ECL said that JUSNL would be using this transmission line to supply electricity to other consumers. Hence, ECL should get a special rate. ECL would have to hand over the entire Farakka, Lalmatia Transmission System to JUSNL. It was also proposed that joint supervision of the transmission system would be made by JUSNL, NTPC, ECL and other interested parties. Till the asset was handed over its operation and maintenance would be carried out by NTPC. There was also some discussion regarding payment of electricity tariff, which is not very important for the purposes of this case.

In the meeting held by ERPC on 24th March, 2015, they decided that ECL should hand over the entire Farakka, Lalmatia Transmission System (FLTS) to JUSNL. Till this handing over was made by ECL to JUSNL operation and maintenance would be carried out by NTPC.

Being aggrieved by this decision, ECL is before this court by filing the instant writ application under Article 226 of the Constitution of India.

SUBMISSIONS

Mr. Sanyal appearing for ECL made some very broad submissions.

First of all, he argued that ERPC had no jurisdiction to make this kind of an order. Nobody had given them the power to direct that the transmission system set up and owned by ECL should be transferred and handed over to JUSNL. Section 29 (4) of the Electricity Act, 2003 did not vest this power on them. ECL was the owner of the transmission system. It was part of the assets of the company. This asset had been acquired by making very substantial expenditure from the funds of the company. The asset was shown in its balance sheet. Without an order from a proper authority or a decision by the Board of Directors of the company or the Ministry of Coal, ECL could not hand over this asset to JUSNL merely on a decision taken by the respondent nos. 1 and 2. Moreover, a valuable asset of a Corporation could not be parted with without any consideration, it was submitted.

ERPC did not have the power to make the decision. Similarly the Central Electricity Regulatory Commission (CERC) did not have the power to hear an appeal from this kind of a decision. Moreover, Section 79 (f) of the said Act did not empower CERC to decide the instant dispute. There was no dispute between ECL and the ERPC that was referable to CERC on appeal, Mr. Sanyal argued.

Mr. Sanyal also said that Regulation 3.2.4 of the JSERC (Electricity Code) Regulations, 2005 provided that the dedicated distribution system, belonged to a distribution licensee but on a close scrutiny of the Act and the Regulations, Farakka, Lalmatia (Raj Mahal) Transmission System could not be called a distribution line or system. Mr. Sanyal supplemented his argument by citing various provisions of the Act and Regulations to which I will refer later on in this judgement.

Mr. Shyamal Sarkar, senior Advocate appearing for the ERPC submitted that the Jharkhand Electricity Regulatory Commission fixed tariff for this consumption of electricity. He referred me to Section 2 (72) of the Indian Electricity Act, 2003 which defined a Transmission System and also to Section 2 (19) which defined to the distribution system. He said that ECL did not receive power directly from NTPC but it received it, as distributed by JUSNL.

The power to frame regulations was contained in Section 50 of the said Act. Under Regulation 3.2.4 the dedicated facility belonged to the distribution licensee.

Mr. Sarkar cited OTC India Ltd. v. Central Electricity Regulatory Commission, through secretariat reported in (2010) 4 SCC 603. In that case the court was inter alia dealing with the power of the Central Commission under Section 178 of the said Act to make regulations. A regulation under Section 178 could even override existing contracts between the ''regulated'' entities. Similar was a regulation by the State Commission under Section 181 of the said Act. He contended that Regulation 3.2.4 was made by the State Commission of Jharkhand in lawful exercise of power and was binding on the petitioner. He also cited Coastal Andhra Power Limited. v. Andhra Pradesh Central Power Distribution Company Limited reported in 2012 SCC OnLine Del 3352 and Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. reported in (2008) 4 SCC 755. He submitted that the present dispute could be resolved by the adjudicator under Section 79 (1) (f) and Section 86 (1) (f) of the said Act. According to Mr. Sarkar ERPC had correctly directed handing over of the system by ECL to JUSNL as NTPC had expressed its lack of expertise to operate and maintain the system.

The Farakka, Lalmatia transmission line had been identified as an alternative system to supply electricity to the Eastern part of India in case of a National Grid Failure. Thus, a black out could be avoided, he added.

Mr. Tridib Bose for JUSNL said that his client was agreeable to supply ECL power at the same rate as NTPC.

MY VIEWS

Now, let us consider certain key provisions of the Electricity Act, 2003.

First, Section 14. It provides that the appropriate Commission i.e. the Central Commission or the State Commission, may on an application made to it, under Section 15 inter alia grant a licence to transmit electricity. The licensee is described as a transmission licensee.

Section 2 (72) defines "transmission lines". Very importantly the sub-section states that these transmission lines are not part of the distribution system. Transmission lines denote high pressure cables and overhead wires transmitting electricity from a generating station to inter alia a sub-station. Transmission lines include the transformers, switchgears and other things including buildings that are needed to house these equipments.

Now, let us see how the distribution system is defined.

Section 2 (19) defines it as the connection network together with other facilities between delivery points on inter alia the transmission line and the point of connection to the "installation of the consumer".

It may also be necessary to notice the definition of "service line" in Section 2 (61) of the Act. It is a supply line through which electricity is supplied to a consumer or a group of consumers from a distributing main. Distributing main is defined in Section 2 (18) as any portion of any main line with which a service line is connected. Again "main" in Section 2 (42) means against any electricity supply line through which electricity is intended to be supplied.

Section 16 of the Electricity Act, 2003 provides that the Appropriate Commission may set down general or specific conditions under which the transmission or a distribution licensee would operate. Section 17 prohibits inter alia a transmission licensee to purchase or take over the utility of another licensee or to merge his utility with the utility of another, without the permission of the Appropriate Commission. Section 20 says that on revocation of a licence, under Section 19, the Appropriate Commission has the power to sell the utility of the licensee to the purchaser, without liabilities.

In my opinion, the provisions of Section 40 are most important. It casts a duty on the transmission licensee ''to build, maintain and operate an efficient coordinated and economical inter-state transmission system or intra state transmission system as the case may be".

In exercise of powers conferred by Clause -x of sub-Section (2) of Section 181 read with Section 50 of the said Act, the Jharkhand State Electricity Regulatory Commission made the (Electricity Supply Code) Regulations, 2005 published on 28th July, 2005. The regulations apply to the distribution licensees in their respective licensed areas. This Court''s attention was drawn by Mr. Sarkar to Regulation 2(5) which related to dedicated distribution facilities. They are described as a facility not including a service line, forming part of the distribution system of the licensee dedicated to the supply of electricity to a group of consumers.

I was also shown 3.2.4 of these regulations which say that the service line and the dedicated distribution facility would be the property of the licensee, notwithstanding that it was paid for by the consumer.

Now, for the purposes of this case the business of generation transmission and distribution of electricity has to be seen as simply as possible. We have to imagine a tree with a firm trunk and many branches. When the roots of the tree start accumulating the absorbed water from the soil, it is similar to the process of generation of electricity. As this water is driven up the trunk of the tree, the trunk can be appropriately viewed as the transmission line. Section 2 (72) defines transmission lines inter alia as overhead lines transmitting electricity from a generation station to inter alia a sub-station. The trunk of the tree branches out into main branches and subsidiary branches, forming a kind of a network. The water that is pumped up the trunk of the tree ultimately reaches the finest branches, then the leaves and the flowers. At the points where the main trunk branches out, we might visualise the location of the distribution system, as defined in Section 2(19). This subsection defines distribution system as a "system of wires and associated facilities between the delivery points on the transmission line.... "and the point of connection to the installation of the consumers." We might consider the leaves and flowers as the consumers.

Now, this 220 KV Farakka, Lalmatia transmission systems transmits electricity to the Dhankunda sub-station Lalmatia under JUSNL. It is not in dispute that from this substation, power is not only supplied to ECL but also to district Godda in Dumka and other places, as stated above. Therefore, the sub-station can be taken as the delivery point of the transmission system from which JUSNL is supplying electricity to ECL through a distribution system and "service line" as defined in Section 2(61). Therefore, from Farakka electricity is transmitted to the Dhankunda sub-station. From there it is inter alia distributed by JUSNL to ECL.

In my understanding of the subject it would not at all be proper to classify this entire network as a transmission system or a distribution system. It is partly transmission and partly distribution. It is a transmission system from Farakka upto Dhankunda substation. Thereafter, it is the distribution network which reaches electricity to ECL. I accept the submission of Mr. Sanyal of ECL that this entire transmission line, the part of the distribution system service line etc. through which this power generated at Farakka is transmitted to ECL has been built and paid for by ECL.

If one examines the above provisions of the said Act one will notice that electricity can be transmitted by a person upon grant of a licence by the appropriate commission. (see Section 12 and 14 of the said Act). Now there is no bar if this person is an individual or a body corporate, statutory body, government company and so on. Section 40 of the said Act says that it would be one of the duties of the transmission licensee to "build, maintain and operate" an interstate or intra state transmission system. In this case it is interstate because the transmission system runs partly through Bengal and partly through Jharkhand. Section 17 puts restrictions upon a licensee to acquire the utility of another licensee. Under Section 20 of the Act, the appropriate commission has the right to sell the utility of a licence, without liability.

If these provisions do not suggest anything else, they at least suggest that a transmission licensee has the right to build a system and the right to own it, till the licence is revoked.

Section 42 of the Act relating to distribution of electricity. It does not say that a distribution licensee has to build the distribution system including the service lines. The word "build" employed in Section 40 is omitted in Section 42. Hence, a distribution system could also be built and owned by a person other than the distributing licensee, even by a consumer. And the consumer could also own the service line taking the supply from the distribution main.

I am able to hold that the writ petitioner owns the transmission system from Farakka, Lalmatia and also owns a part of the distribution system from the Dhankunda substation to the points where it receives supply from JUSNL. ECL is also a consumer. It is also the owner of the service line from the distributing main to its establishment.

The (Electricity Supply Code) Regulations 2005 of the Jharkhand State Electricity Regulatory Commission, Ranchi is a piece of sub-ordinate legislation, subordinate to the Electricity Act, 2003. For the reasons above I am constrained to say that regulation 3.2.4 is incompatible with the said provisions of the Act. Since there is no prayer in the petition to declare the Regulations ultra vires the said Act, I simply disapply the same. Regulation 3.2.4 has no application as far as the Farakka, Lalmatia transmission system is concerned.

To appreciate the defence of the first and second respondents that the writ petitioner should be relegated to an alternative remedy, one has to understand the reliefs prayed for in the writ. The principal relief claimed is that the Eastern Regional Power Committee had no power to direct ECL to hand over the Farakka, Lalmatia Transmission System to JUSNL by their direction dated 24th March, 2015. As an alternative, it is prayed that in case ECL is compelled to hand over the system to any other body, it should be suitably compensated for the cost incurred by it in setting up the system.

The Regional Power Committee is described in Section 2 (55) of the said Act in the following manner:-

"2(55) ''Regional Power Committee'' means a committee established by resolution by the Central Government for a specified region for facilitating the integrated operation of the power systems in that region."

Section 29 (4) gives the following power to this committee.

"29(4) The Regional Power Committee in the region may, from time to time, agree on matters concerning the stability and smooth operation of the integrated grid and economy and efficiency in the operation of the power system in that region."

The Farakka, Lalmatia Transmission Line is undoubtedly an interstate transmission system. It has its own speciality. As I have said before, it is undisputedly set up and made operational by ECL and owned by it. ECL is also a consumer. There is also a distribution network through JUSNL, owned by ECL from Dhankunda sub-station to the establishment of the writ petitioner, as a consumer. It is a part of the distribution system of JUSNL. It is also admitted that JUSNL distributes this electricity to the district Godda in Dumka and other places. Therefore, ECL is the owner of the transmission line as well as a part of the distribution system of JUSNL. It is also a consumer.

In this special position I do not find any provisions in the Act, far less Section 79 (1) (f) or Section 86 (1) (f) of the Act providing a remedy to ECL for its present grievances. It has far larger ramifications at the national level. It is not a dispute "involving" a transmission or a distributions licensee.

Let us not forget the basic elements of private law. ECL is a public limited company. Its major shareholding is held by the Central government. Nevertheless, it is a body corporate in the eye of law. This entire electricity network, owned by the company is part of its assets. Mr. Sanyal submitted, on being asked by this court, that, this system was shown in ECL''s balance sheet as their asset. A company managed by prudent professionals is always conscious of its assets, and their value. The directors or managers as trustees of the company cannot allow its valuable assets to be taken over and that too without any consideration. There has to be a policy decision to do so and in case it is made, a proper procedure is to be adopted for transfer of the assets to another body. In my opinion, ECL has rightly resisted the move of the Regional Power Committee to compel them to handover the system to JUSNL. I do not find any power in the Regional Power Committee to direct ECL to do so.

In my opinion, the decision taken by them in the meeting dated 24th March, 2015 directing ECL to hand over the system to JUSNL is totally dehors the law. Therefore, the said decision dated 24th march, 2015 is quashed.

We should also remember that it is an accepted position that operation and maintenance of a transmission system can be contracted out. It is in these circumstances NTPC is operating and maintaining the system upto this day. Since NTPC does not want to continue, there is an option to contract out these functions to an organization. In this regard JUSNL may be considered.

In that event, ECL may expect a return for building this line. They are entitled to, in my opinion, a special regulated rate of tariff for electricity, to recompense them for the money spent in laying the line.

Since the transmission is inter-state and it also provides an alternative system to provide electricity to the entire region in case of National Grid failure, any dealing with the said transmission system should not be taken lightly by the authorities.

The entire modalities and paraphernalias of ensuring that there is a lawful transfer of this transmission line or the functions of maintenance and operation of it to an authority or body are to be carefully worked out by ECL, the various authorities under the Electricity Act, 2003, the Central and the respective State governments. In my opinion this impasse has to be resolved expeditiously. Till it is done, NTPC will continue to operate and manage the transmission system under the ownership of ECL. JUSNL will continue with the distribution of this electricity to the coal mines of ECL.

Therefore, this writ application is allowed only to the extent of the declarations claimed in prayers (a) and (b) of the writ petition. Other points not decided here are kept open.