GRID CORPORATION OF ORISSA LTD. versus GAJENDRA HALDEA AND ORS.

[2008] 12 S.C.R. 79

GRID CORPORATION OF ORISSA L TO.

GAJENDRA HALDEA AND ORS. (Civil Appeal No. 5722 of 2006 etc.)

AUGUST 13, 2008

[DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.]

Electricity Act, 2003- ss. 52 rlw s. 79(1)(g), 111, 121 and 142- Sale of surplus power by Grid Corporation of Orissa (GRIDCO)- To other trader- Petition before Central Electric- ity Regulatory Commission (CERC) seeking direction to GRIDCO to adhere to trading margin as specified. by CERC in its Notification- CERC holding that the petitioner had no Lpcus Standi and that the Notification was not applicable to -GRIDCO being intra-State trader Appellat.e Tribunal held 0 that sale to Power Trading Corporation(PTC) was an inter-State trade attracting. Regulation 2 of Fixation of Trading Margins Reg·ulations, 2006 and as such PTC could not sell the pur-chased power within the State - On appeal, held: The petition before CERC was not entertainable, the petitioner lacking Locus Standi - The transaction was intra-State - In view of r. 9 of Electricity Rules, PTC was not barred from selling the pur-chased power within the State- PTC is bound by the Regula-tions - Central Electricity Rules, 2005 - r. 9 - Central Elec-tricity Regulatory Commission (Fixation of Trading Margin) Regulations, 2006 - Regulation 2 - Central Electricity Regu-F latory Commission (Procedure, Terms and Conditions for Grant of Licence and other Related Matters) Regulations, 2004.

Respondent No. 1 filed petition before Central Elec-. tricity Regulatory Commission (CERC) u/s 52 r/w s. 79 (1) ~ (g) of Electricity Act, 2003. He sought direction to the ap-pellant-GRIDCO to adhere to maximum trading margin, as specified by the Commission by its Notification dated

[2008J 12 S.C.R

GRID CORPORATION OF ORISSA LTD. v. GAJENDRA 81 HALDEA & ORS.

In fact, there was no agreement to take out the electricity, as was inferred by the Appellate Tribunal. PTC is bound by the Regulations. Whenever there is sal~ for inter-state trade, the margin is maintained. Additionally, PTC was not party before CERC. Originally also, it was not party · before the Appellate Tribunal. [Para 20] [93,8-C]

Ben Gorm Nilgiri Plantations Company, Coonoor and Ors. v. Sales Tax Officer, Special Circle, Ernaku/am and Ors. 1964 (7) SCR 706- relied on. ·

Case Law Reference

1964 (7) SCR 706 Relied on Para 18

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 5722 of 2006

From the final Judgment and Order dated 16/11/20.06 of the Appellate Tribunal for Electricity, New Delhi in Appeal No. 81 of 2006

WITH

C.A. Nos. 185, 399 of 2007 and SLP (C) No. 11629 of 2007

Vikas Singh, A.S.G. Aruneshwar Gupta, A.A. G. Dushyant Dave, Arun Jaitely, Dr. A.M. Singhvi, K.K. Venugopal, Shyam Diwan, Kukrety, Raj Kumar Mehta, Mriganka, Amit Kapur, Mansoor Ali, Aribam Guneshwar Sharma, K.K. Lahiri, Ejaj Maqbool, Abhijeet Sinha, Keshav Mohan, Pratik Dhar, C.K. Rai, D. Julius Riamei, Sridhar Potaraju, Satesh Mukherjee, Vishal Anand Jagjit Singh Chhabra, Ajay Saroya, Sapan Kumar Mishra, Swati Sinha ·(for M/s. Fox Mandai & Co.), M.G. Ramachandran, Sanjeev Kumar, Avinash Menon, Kumar Mihir (for M/s. Khaitan & Co.), Aproova Misra, Pradeep Misra, Daieep Kr. Dhayani, D.J. Kakalia, Syed Naqvi, Smieetaa lnna and Rajesh Kumar; Paras Kuhad, Biju Mattam, Richa Srivastava. S.K. Puri, V.M. Chauhan, Priya Puri, H.K. Puri, Arun Pendnekar. S.S. Shind~. Hemantika Wahi, Pinky, Sangeeta Singh, Neeraj

per unit and to modify any contract that allows it to retain higher margin.

(d) Direct GRIDCO not to invite bids with the intent of selling electricity in the course. of inter-state trade with margin exceeding 4 paisa per unit.

(e) Exempt petitioner from the requirement of payment of the prescribed fee . .

(f) Pass such other and further orders and/or directions as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."

As is evident from paras 9 and 11 of the petition, the same was purportedly in public interest and was intended to save in-terests of consumers of electricity in the country. The appellant-Grid Corporation of India filed objections inter-alia taking the stand that petition filed by respondent No.1-Gejendra Haldea was misconceived and not maintainable in law and was liable to be rejected. By order dated 1.5.2006 CERC dismissed the petition and following findings were recorded:

"In our considered view, GRIDCO though de~med to be an Electricity trader is an intra-state trader and is amenable to the jurisdiction of the Orissa Commission. Therefore, the Trading margin of 4 paise/KW specified by the Commission in its Notification dated 23.1.2006 published in the Official Gazette on 27.1.2006 does not apply to GRIDCO."

Challenging the order of CERC , respondent No.1-Gajendra Haldea carried the matter before the Appellate Tribu-nal in appeal purportedly filed under Section 111 of the Act. By the impugned order, the Appellate Tribunal allowed the appeal and granted reliefs as prayed for by respondent No.1.

3. The basic challenge in these appeals is that the peti-tion filed by respondent No.1-Gajendra Haldia was thoroughly mis-conceived because the appeal in terms of sub-section (1) of Section 111 has to fulfill the following requirements.

[2008] 12 S.C.R.

"111. Appe.al to Appellate Tribunal.-(1) Any person aggrieved by an order made by an adjudicating officer ·under this Act (except under section 127) or an order made by the Ap-propriate Commission under this Act may prefer an appeal to the Appellate Tribunal for Electricity: ·

Provided that any person appealing against the order of the adjudicating officer ievying any penalty shall, w!lile filing the appeal, deposit the amotJnt of such penalty:

Provided further that where in any particular case, ·the Appellate· Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, it may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard • the realisation of penalty.

(2) Ever)i appeal under sub-section (1) shall be filed within period· of forty five days from the date on which copy of the order made by the adjudicating officer or the Appropriate Commission is received by the aggrieved person .and it shall be in such form, verified in such manner and be accompanied by such fee as may be pfescribed:

Provided ·that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five day~ ~fit _is s~tisfied _that there was sufficient cause for not filing it within that period.

(3) On receipt of an appeal under sub-section (1 ), the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon . . as it thinks fit, confi~ming , modifying or setting aside the order appealed against.

(4) The Appellate Tribuna(shall send copy of every order made by it to_ ttl~· parties to the appeal and to the concemed . adjudicating officer ·or the Appropriate Commission,· a~ · the case may· be.

·- ~ .... . .

(5) The appeal filed before the Appellate Tribunal under . sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within one hundred and eighty days from the date of receipt of the appeal:

Provided that where any appeal could not be disposed of [B ]within the said period of one hundred and eighty days, the -Appellate Tribunal shall record its reasons in writing for

not disposing of the appeal within the said period. .

(6) The Appellate TribLJnal may, for the purpose <?f examining the legality, propriety or correctness of Appropriate Commission under this Act, as the case may be, in relation to any proceeding, on its own motion or oth.erwise, call for the records of such proceedings and make such order in the case as it thinks fit."

. )r 4. It was, therefore, submitted that respondent No.1 was neither entitled to file petition before the CERC under Sec-tion 52 read with Section 79 (1 )(g) of the Act nor is entitled to file an appeal before the Appellate Tribunal.

5. It is pointed out that the ·expression 'any person ag-grieved' must be person who suffered legal grievance or le- · gal injury or o:ne who has been unjustly deprived and denied of something which he wpuld have entitled to obtain in usual course.

6. On merits it is submitted that the transaction between · .4_ the appellant-Grid Corporation of Orissa Ltd . . and PTC India Ltd. was intra-state within the meaning of Central Electricity . Regulatory· Commission (Procedure, Terms & conditions for Grant of Trading Licence and Other Related Matters) Regula-tions, 2004 (in short the 'Regulations'). It is submitted that even on cursory reading of the Regulations, it would be apparent that .~ the appellant's sale to Power Trading Corporation of India Ltd. (in short 'PTC') cannot be construed as inter-state trading within the meaning of said ~xpression.

7. Civil Appeal No.185/2007 has been filed by PTC l~dia

) whom to sell and at what price passed to PTC within Orissa."

10. It is pointed out that the finding recorded to the effect that the sale took place only after electricity was exported out-side Orissa and sale took place only by consumption are con-8 trary to the scheme of the Electricity Act. It is also submitted that the finding regarding protection of consumers' interest and the question qua exporting of unregulated rates at which the elec-tricity is sold by trader of electricity will promote competition a'nd protect consumers and the finding that the appropriate Commissions must utilize the mechanism of fixing trading mar-[c ]gins under Section 79(1 )0) and 86(1)U) to protect consumers' interests is neither based on any pleadings nor arises for adju-dication in Appeal No.81 of 2006.

11. It is pointed out that the Appellate Tribunal itself under-0 stood that there is no power vested in any ERC to determine tariff for trading. It has noted as follows: "Section 66 requires development of market (price determination by forces of demand by supply); and

(b) Section 60 empowers the ERCs to adjudicate upon a~y instance of and issue directions considered appropriate to prevent an adverse effect on competition in electricity industry by-

(i) Entering into an agreement

(ii) Abusing its dominant position; or

(iii) Entering into combination.

12. The appellant-GRIDCO has also submitted that the definition of inter-state trading in terms of Section 2(g) of the . Regulations has not been kept in view. Reference is made to )., Clauses 2, 3, 4, 18 and 23 to contend that the Appellate Tribunal's conclusions are erroneous. It is also submitted that scope and ambit of Clause 26 has been mis-construed by the Appellate Tribunal.

{2008] 12-S.C.R.

13. Additionally, learneq counsel for GRIDCO has submit-tee·that in reply to the pe-tition filed GRIDCO ha9 categorically ·. submitted that respondent Gajendra.had no locus standi to. file the petition· and the petition filed was not maintainable. CERC held that trading margins are not applicable to GRIDCO since 8. · it is carried out the functions of bulk supply of electricity within· ·the State of Orissa under Bulk Supply Licence issued by the CERe· and the transactions were completed in the State of Orissa. The entire benefit from the sale of such ~urplus power was passed .on to the consumers of_ the State thro'ugh the Bulk Supply Tariff Orders. CERC, it is pointed out, had dismissed the petition by respondent No.1-Gajendra ·Haldea by holding that GRIDCO is an intra state trader. GRIDCO's transactions - under the said contract with PTC was completed within the State • of Orissa. Accordingly, it was held that the RegtJiations w~re . not applicable to GRIDCO. CERC in view of the above did not 0 deal with the question of locus standi. Appellate Tribunal held that Gajendra Haldea had locus standi to file the petition. Though it did not disturb the findings of CERC that GRIDCO is an intra-state trader, it held that the transactions _of sale Qf surplus power by GRIDCO.to the inter-state traders are in the nature of inter-E state trading. Accordingly, it held that the transactions of GRIDCO are governed by the Trading Regulations and directed CERC to find out methodology for refund of the excess amount.

14. On behalf of respondent No.1-Gajendra· Haldea the order of Appellate Tribunal is supported.

15. It is unnecessary to go into the -question as to the na-ture of the transaction, bec;ause respondent No.1-Gajendra · Haldea in order to prove that he had locus standi relied on Sec-tions 121 and 142 of the Act. It was also stated that it is not in .the nature of PIL. 1.t was stated that the prayer for refund was not being pressed.

16. bare reading of Sections 121 and 142 of the Act which read as follows st)ows that those provisions are not applicable.

"121. Power of Appellate Tribunal:- The Appellate Tribunal

GRID CORPORATION OF ORISSA l TO. v. GAJENDRA 89 HALDEA & ORS. [DR. ARIJIT PASAYAT, J.] .

may, after hearing the Appropriate Commission or other interested party, if any, from time·to time, issue such orders, instructions or directions as it may deem fit, to any Appropriate Commiss.ion for the performance of its statutory function u·nder this Act.

.j ' / •·

"142. Punishment for non-compliance of directions by [B ]•· Appropriate Commission. -In case any complaint is filed t '' '' before the Appropriate Commiss.ion by any person or if that Commission is satisfied that any person has · cqntravened any of the proyisions of this Act 9r the rules or regulations made thereunder, or any direction issued by the Commission, the Appropriate Commission may after giving such person an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any. other penalty to whic~ he may be liable under this Act, such person shall pay, by way of penalty, which shall not exceed one lakh rupees for each contravention and in • case of continuing failure with an additional penalty which may extend to six thousand rupees for every day during · which the failure continues after contravention of the first such direction."

t '' ''

17. Therefore, the Appellate Tribunal was wrong in inter-ferin.g with the conclusions of CERC that respondent No.1's petition was not entertainable and/or maintainable.

18. In Ben Gorm Nilgiri Plantations Company, Cbonoor · and ors . . v.· Sales Tax Officer, Special Circle, Ernakulam and Ors. (1964 (7) SCR 706), it w_as inter alia observed as follows:

"To constitute sale in the course of export of goods out of the territory of India, comm0n intention of the parties to the transaction to export the goods .followed by actual export of the goods, to foreign destination is necessary. But intention to export and actual exportation are not sufficient to constitute sale in the course of export, for sale by export "involves series of integrated activities commencing fr9m the agreement of sale with foreign

buyer ~nd ending with the delivery of the goods to common carrier or transport out" of the country by land or sea. Such sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and . resultant export form parts of single transaction": State of Travnncore Cochin and others v. The Bombay Company Ltd. sale in the course of export predicates connection between the s~le and export, the two activities being so integrated that the c_onnection between the two cannot be voluntarily interrupted, without breach of the contract or the· compulsion arising from the nature of the transaction. In this sense to constitute sale in the course of export it may be said that there must be an intention on the part of both the buyer and the .seller to export, there must be obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of · the transaction which links the sale to export. transaction ·of sale which is preliminary to expor.t of the commodity sold may be regarded as sale for export but is no~ necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such bond between the co.ntract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such bond, transaction of sale cannot be called sale in the course of export of goods out of the territory of India. There are variety of transactions in which the sale of commodity is followed by .export thereof. At one end are transactions in which there is sale of goods in India and the purchaser1mmediate or remote exports the goods out of lndf~ for foreign consumption . For instance, the foreign purchaser ei~her by himself or through his agent purchases goods within the territory of India and exports th~ goods and even if the seller has the knowledge that the goods are intended· by the purchasers to be exported, such

~ t --. ~-. \ .. ... ,. f....

transaction is not in the course· of export, for the seller does not export the goods, and it is not his concern as to how the purchaser deals with the goods. Such transaction without more cannot be regarded as one in the course of export because etymologically, "in the course of export", . contemplates an integral relation or bond between the sale and the export. At the other end is transaction under contract of sale with foreign buyer under which the goods may under the contract be delivered by the seller to common carrier for transporting them to the purchaser. Such sale would indisputably be one. for export, whether the contract and delivery to the common carrier are effected [c ]directly or through agents. But in between lie variety of transactions in which the question whether the sale is one for export or is one in the course of export i.e., it is transaction which has occasioned the export, may have to be determined on correct appraisal of all the facts. No single test can be laid a·s decisive for determining that question. Each case must depend upon its facts: But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real. In general where the sale is effected by the seller, and he is not connected with the export which actually takes place, it is ~ale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without breach of the obligation arising by statute, contract or [F ]mutual understanding between the_parties arising from the nature of the transaction, the sale is in the course of export.

It may be conceded that when chests of tea out of the export quota are sold together with the export rights, the goods are earmarked for export, and knowledge that the goods were purchased by the bidders for exporting them to the foreign principals of the bidders must clearly be attributable to them. Does the co-existence of these circumstances, impress upon the transactions of sale with

and not in the course of export."

19.· The Appellate Tribunal's conclusions regarding nature of transactions are not supportable when various clauses of the agreement are considered. They clearly establish intra-state nature of the transactions.

20. It is to be noted that under Rule 9 of the Central Elec-tricity Rules, 2005 (in short the 'Central Rules') there is no re-striction on the licensee effecting sale or re-sale in the same State and no separate licence is needed. In fact, there was no agreement to take out the electricity, as was inferred by the Appellate Tribunal. PTC is bound by the Regulations. It is pointed out that whenever there is sale for inter state trade, the margin is maintained. Additionally, PTC was not party before CERC. Originally also it was not party before the Appellate Tribunal. In another c·ase relating to trade margin PTC was party. The 0 issues were different and PTC was discharged from the pro-ceedings. It is stated that PTC is affected by para 56 of the Appellate Tribunal's order. The observation of the Appellate Tri-bunal that PTC could not have sold electricity and it could not have effected sale inside the State is wrong because of Rule 9 of the Central Rules. It is also to be noted that the contract was concluded in the State of Orissa and the transmission loss was to be borne by PTC who was not agent of GRIDCO.

21 . In that view of the matter, looked at from any angle the order passed by the Appellate Tribunal cannot be maintained \ and is set aside. 22. In view of the order passed in Civil Appeal No.5722 of 2006, other Civil Appeals are allowed, and in view of the said ·order passed, no separate orders are necessary to be passed . in lAs and they are rejected, and SLP (C) No.11629 of 2007 /..._ filed by Haryana Power Generation Corporation Ltd. is dis-missed. Costs made easy.

Special Leave Petition and Civil Appeals disposed of.