IN THE APPELLATE TRIBUNAL FOR ELECTRICITY

AT NEW DELHI
APPELLATE JURISDICTION

APPEAL NO. 276 OF 2015,

APPEAL NO.320 OF 2018,
APPEAL NO.114 OF 2020 & IA NOS. 635 OF 2020& 654 OF 2023,
APPEAL NO. 73 OF 2021 & IA NO. 969 OF 2020,
APPEAL NO. 213 OF 2021 & IA NO. 915 OF 2021,
APPEAL NO. 170 OF 2019 & IA NO. 709 OF 2019 & IA NO. 809 OF 2021,
APPEAL NO. 343 OF 2019 & IA NO. 1787 OF 2019 &
APPEAL NO.133 OF 2020 & IA NOS. 934 OF 2020, 873 OF 2021& 709
OF 2023

Dated: 12th February, 2024

Present: Hon`ble Mr. Justice Ramesh Ranganathan, Chairperson

Hon`ble Mr. Sandesh Kumar Sharma, Technical Member

APPEAL NO. 276 OF 2015

In the matter of:

West Bengal State Electricity

Distribution Company Limited
Through its Chairman and Managing
Director
Vidyut Bhavan, Bidhannagar
Block DJ, Sector – II,
Kolkata – 700 091 … Appellant(s)

Versus

1. Central Electricity Regulatory

Commission
Through its Secretary
3rd& 4th Floor, Chanderlok Building,
36, Janpath New Delhi - 110001 … Respondent No.1

2. Indian Railways

Page 1 of 387
 Government of India
Through Deputy Chief Electrical
Engineer (TRD)
Railway Bhawan, Raisina Road
New Delhi – 110 001 … Respondent No.2

3. Power Grid Corporation of India

Limited
Through its Chairman and Managing
Director
Saudamini, Plot No.2, Sector 29,
Near IFFCO Chowk,
Gurgaon – 122 001 … Respondent No.3

4. Power System Operation Corporation

Limited
Chairman and Managing Director
B-9, Qutub Institutional Area
Katwaria Sarai, New Delhi – 110 066 … Respondent No.4

5. Central Electricity Authority

Through its Chairperson
R.K. Puram, New Delhi – 110 066 … Respondent No.5

6. Gujarat Electricity Transmission Co.

Ltd.
Through its Chairperson
Sardar Patel Vidyut Bhavan
Race Course Circle
Vadodara, Gujarat – 390 007 … Respondent No.6

7. Maharashtra State Electricity

Transmission Co. Ltd.
Through its Chairman and Managing
Director
Prakash Gad, Bandra East
Mumbai, Maharashstra – 400 051 … Respondent No.7

8. West Bengal State Electricity

Transmission Co. Ltd.

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 Vidyut Bhavan, Bidhannagar
Block DJ, Sector –II,
Kolkata – 700 091 … Respondent No.8

9. Jharkhand Urja Sancharan Nigam

Limited
Through its Managing Director
Sardar Patel, Vidyut Bhawan
Race Course Circle
Vadodara, Gujarat – 390 007 … Respondent No.9

10. Ratnagiri Gas and Power Private

Limited
Through its General Manager
5th Floor, GAIL, Jubliee Tower, B-35-
36 Sector – 1, NOIDA
(U.P.) – 201 301 … Respondent No.10

11 Uttar Pradesh Power Corporation

Limited
Through its Managing Director
Shakti Bhawan,14, Ashok Marg,
Lucknow, UP, India, U.P. 226001 … Respondent No.11

12 Tamil Nadu Generation and

Distribution Corporation Limited
(TANGEDCO)
Through its Chairman cum Managing
Director
10th Floor, NPKRR Maaligai, 144,
Anna Salai , Chennai,-600002 … Respondent No.12

13 Grid Corporation of Odisha Limited

(GRIDCO)
The Managing Director
Janpath, Bhubaneshwar, Bhoi Nagar
Odisha-751022 … Respondent No.13

14 Madhya Pradesh Power Management

Company Limited

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 The Managing Director
Shakti Bhawan Road, MPSEB
Colony, Rampur, Jabalpur, MADHYA … Respondent No.14
PRADESH, -482008

Counsel on record for the Appellant(s) : Aniket Prasoon

Abhishek Kumar
Srishti Rai

Counsel on record for the Respondent(s): Dhananjay Baijal For Res1

Pulkit Agarwal For Res2
Suparna Srivastava For Res3
M.Y. Deshmukh For Res7
Rajiv Srivastava For Res11
S.Vallinayagam For Res12
Arijit Maitra For Res13
Aditya Singh For Res14

APPEAL NO.320 OF 2018

In the matter of:

Punjab State Power Corporation Ltd.

Through Chief Engineer
ARR &TR, Patiala 147 001 … Appellant(s)

Versus

1. Punjab State Electricity Regulatory

Commission
Through its Secretary
SCO 220-221, Sector 34-A,
Chandigarh – 160 022 … Respondent No.1

2. The Northern Railways, (Ambala

Division)
Through its Chief Electrical Distribution
Engineer, Baroda House,
New Delhi – 110 001 … Respondent No.2

3. Punjab State Transmission Corp. Ltd.

Through its Managing Director
The Mall Patiala – 147 001 … Respondent No.3
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Counsel on record for the Appellant(s) : Suparna Srivastava For App1

Counsel on record for the Respondent(s) : Sakesh Kuma For Res1

Pulkit Agarwal For Res2

Anand K. Ganesan
Swapna Seshadri
Neha Garg
Parichita Chowdhury For
Res3

APPEAL NO.114 OF 2020 & IA NOS. 635 OF 2020 &

654 OF 2023
In the matter of:

Indian Railways
Represented by East Coast Railway,
Through the Chief Electrical
Distribution Engineer, Rail Sadan, 3rd
Floor, South Block,
Chandrasekharpur,
Bhubaneswar – 751 017 … Appellant(s)

Versus

1. Odisha Power Transmission

Corporation Limited,
Through its Chairman and Managing
Director Janpath,
Bhubaneswar – 751 022 … Respondent No.1

2. State Load Despatch Centre,

Through its Chief Load Despatcher
Odisha Power Transmission
Corporation Limited,
Mancheswar GRIDCO Colony,
Bhubaneswar – 751 017 … Respondent No.2

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3. Grid Corporation of Orissa Limited
(GRIDCO),
Through its Chairman and Managing
Director
Janpath, Bhubaneswar – 751 022 … Respondent No.3

4. TP Central Odisha Distribution Limited

(Erstwhile known as Central Electricity
Supply Utility of Orissa)
Through its Head (Legal Services)
2nd Floor, IDCO TOWER,
Janpath, Bhubaneswar -751022 … Respondent No.4

5. Western Electricity Supply Company

of Orissa Ltd. (WESCO Utility)
Through its Authorised Officer
Dist - Sambalpur , Burla- 768017 … Respondent No.5

6. North Eastern Electricity Supply

Company of Odisha Limited (NESCO
Utility)
Through its Authorised Officer
Januganj, Balasore -756019 … Respondent No.6

7. SOUTHCO Utility
Through its Authorised Officer
Courtpeta, Berhampur,
Ganjam, Orissa - 760 004 … Respondent No.7

8. Government of Odisha,
Through Department of Energy,
Secretariat Building,
Bhubaneswar … Respondent No.8

9. Eastern Region Load Despatch

Centre (ERLDC)
Through its General Manager,
14, Golf Club Road, Tollygunje,
Kolkata – 700 033 … Respondent No.9

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 10. Shri. Akshya Kumar Sahani,
Retd. Electrical Inspector,
Government of Odisha,
B/L-108, VSS Nagar,
Bhubaneswar – 751 007 … Respondent No.10

11. Odisha Electricity Regulatory

Commission
Through its Secretary
Bidyut Niyamak Bhawan,
Plot No.4, Chunukoli, Shailashree
Vihar, Bhubaneswar – 751 021 … Respondent No.11

Counsel on record for the Appellant(s) : Pulkit Agarwal For App1

Counsel on record for the Respondent(s) : Sakesh Kumar

Gitanjali N Sharma For Res1

Rutwik Panda For Res11

Arijit Maitra For Res3

Anand Kumar Shrivastava

Shruti Kanodia
Shivam Sinha
Anubhuti Sinha
Chandrika Bhadu
Nilesh Panda
Anandini Sood
Rahul Jajoo For Res4

Anand Kumar Shrivastava

Shruti Kanodia
Prabhat Kr. Shrivastava
Shivam Sinha
Ishita Jain
Priya Goyal
Nilesh Panda
Amrita Bakhshi
Rishika Garg
Ankit Bhandari
Akash Dash
Anuja Jain For Res5

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 Anand Kumar Shrivastava
Shruti Kanodia
Prabhat Kr. Shrivastava
Anuja Jain
Ishita Jain
Sam C. Mathew
Priya Goyal
Nilesh Panda
Amrita Bakhshi
Rishika Garg
Ankit Bhandari

Akash Dash For Res6

Arunav Patnaik For Res8

APPEAL NO. 73 OF 2021 & IA NO. 969 OF 2020

In the matter of:

Indian Railways
Represented by Southern Railway,
Through the Chief Electrical
Distribution Engineer,
Office of the Principal Chief Electrical
Engineer, Southern Railway, 7th Floor,
NGO Annex, Park Town,
Chennai 600 003 … Appellant(s)

Versus

1. Kerala State Electricity Board Limited

Through its Chairman and Managing
Director,
Vydyuthi Bhavanam, Pattom,
Thiruvananthapuram – 695004
(Kerala) … Respondent No.1

2. State Load Despatch Centre (Kerala)

Through its Chief Engineer
(Transmission & System Operation)

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 Kerala State Electricity Board Limited
Kalamassery, Ernakulam– 683503 … Respondent No.2

3. Kerala State Electricity Regulatory

Commission
Through its Secretary
KPFC Bhavanam, C.V. Raman Pillai
Road, Vellayambalam
Thiruvananthapuram – 695010
(Kerala) … Respondent No.3

Counsel on record for the Appellant(s) : Pulkit Agarwal For App1

Counsel on record for the Respondent(s) : P.V. Dinesh

Mukund .P. Unny
Sindhu T.P
Ashwini Kumar Singh For Res1

M. T. George For Res3

APPEAL NO. 213 OF 2021 & IA NO. 915 OF 2021

In the matter of:

Indian Railways
Represented by West Central
Railways,
Through the Deputy Chief Electrical
Engineer,
GM Office, 3rd Floor,
Annex Building, Indira Market,
Jabalpur,Madhya Pradesh – 482 068 … Appellant(s)

Versus

1. M. P. Poorv Kshetra Vidyut Vitaran

Company Limited,
Through its Managing Director,
Block No. 7, Shakti Bhawan,
Rampur, Jabalpur – 482008 … Respondent No.1

2. M. P. Paschim Kshetra Vidyut Vitaran

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 Company Limited,
Through its Managing Director,
GPH Compound, Pologround,
Indore – 452001 … Respondent No.2

3. M. P. Madhya Kshetra Vidyut Vitaran

Company Limited,
Through its Managing Director,
Nishtha Parisar, Govindpura,
Bhopal – 462023 … Respondent No.3

4. M.P. Power Transmission Company

Limited,
Through its Managing Director,
Block No. 2, Shakti Bhawan,
Rampur, Jabalpur – 482008 … Respondent No.4

5. State Load Despatch Centre (SLDC)

M.P. Power Transmission Company
Limited,
Through its Chief Engineer ,
Block No. 2, Shakti Bhawan,
Rampur, Jabalpur – 482008 … Respondent No.5

6. Madhya Pradesh Electricity Regulatory

Commission
Through its Secretary
5th Floor, Metro Plaza, Arera Colony,
Bittan Market, Bhopal 462 016 … Respondent No.6

Counsel on record for the Appellant(s) : Pulkit Agarwal For App1

Counsel on record for the Respondent(s) : Alok Shankar For Res1

Alok Shankar
Divya Anand For Res2

Alok Shankar For Res3

Aashish Anand Bernard

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 Paramhans Sahani For Res5

Shlok Chandra For Res6

APPEAL NO. 170 OF 2019 & IA NO. 709 OF 2019 &

IA NO. 809 OF 2021,
In the matter of:
Indian Railways
Represented by West Central Railways,
Through the Principal Chief Electrical
Engineer,
GM Office, 3rd Floor,
Annex Building, Indira Market, Jabalpur,
Madhya Pradesh – 482 068 … Appellant(s)

Versus

1. Jaipur Vidyut Vitaran Nigam Limited,

Through its Managing Director,
Vidyut Bhawan, Jyoti Nagar, Jaipur –
302005 Rajasthan … Respondent No.1

2. Rajasthan Electricity Regulatory

Commission
Through its Secretary
Vidyut Viniyamak Bhawan
(Near State Motor Garage),
Sahakar Marg, Jaipur – 302005,
Rajasthan … Respondent No.2

3. Punjab State Power Corporation Ltd.

Through its Dy. CE/Power Regulations
Shed No. T-1, Thermal Design
Complex,
Shakti Vihar, Patiala – 147 001, Punjab … Respondent No.3

Counsel on record for the Appellant(s) : Ranjitha Ramachandran

Pulkit Agarwal
Poorva Saigal
Shubham Arya

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 Anushree Bardhan For App1

Counsel on record for the Respondent(s) : Sandeep Pathak For Res1

C.K. Rai For Res2

Suparna Srivastava For Res3

APPEAL NO. 343 OF 2019 & IA NO. 1787 OF 2019

In the matter of:

Indian Railways
Represented through Dy. CEE/TRD/HQ
Central Railways, Electrical Branch
Second Floor, Parcel Office Building
Mumbai – 400 001 … Appellant(s)

Versus

1. Maharashtra Electricity Regulatory

Commission
Through its Secretary
World Trade Centre, Centre No.1,
13th Floor, Cuffe Parade,
Mumbai-400005 … Respondent No.1

2. Tata Power Company Limited

(Distribution)
Through its Managing Director
Mumbai House, 21, Homi Modi Street
Mumbai – 400 001 … Respondent No.2

Counsel on record for the Appellant(s) : Pulkit Agarwal For App1

Counsel on record for the Respondent(s) : Pratiti Rungta For Res1

Shri Venkatesh
Nishtha Kumar
Somesh Srivastava
Vikas Maini
Suhael Buttan

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 Lasya Pamidi
Revanta Solanki For Res2

APPEAL NO.133 OF 2020 & IA NOS. 934 OF 2020,

873 OF 2021 & 709 OF 2023

In the matter of:

Indian Railways
Represented by Northern Railway,
Through the Deputy Chief Electrical
Engineer/TRD/HQ,
Headquarters Office, Northern
Railway,
Baroda House, New Delhi – 110 001 … Appellant(s)

Versus

1. Dakshin Haryana Bijli Vitran Nigam

Limited,
Through its Chairman and Managing
Director,
Vidyut Sadan, Vidyut Nagar,
Hisar -125 005 (Haryana) … Respondent No.1

2. Haryana Vidyut Prasaran Nigam

Limited,
Through its Managing Director,
Shakti Bhawan, Sector – 6,
Panchkula – 134 109 (Haryana) … Respondent No.2

3. Haryana Electricity Regulatory

Commission
Through its Secretary
Bays No. 33-36, Sector – 4
Panchkula, Haryana – 134 112 … Respondent No.3

Counsel on record for the Appellant(s) : Pulkit Agarwal For App1

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 Counsel on record for the Respondent(s) : Samir Malik
Divya Anand
Rimali Batra
Nikita Choukse For Res1

Rimali Batra
Nikita Choukse
Samir Malik
Divya Anand For Res2

Sandeep Kumar Mahapatra For

Res3

JUDGMENT

PER HON’BLE MR. JUSTICE RAMESH RANGANATHAN, CHAIRPERSON

I.INTRODUCTION:
Indian Railways, a part of the Central Government, operates India’s
national railway system - the fourth largest national railway system in the
world. The railway operations are integrated across the country with
1,28,305 Kms of running track, of which more than 67,452 kms was
electrified as on 31.03.2022. The Railways Act, 1989 was enacted by
Parliament under Entries 22 and 30 of List I of the Seventh Schedule to the
Constitution of India. While Entry 22 of List I of the Seventh Schedule
relates to “Railway”, Entry 30 thereof relates, among others, to “carriage of
passengers and goods by Railway”. Prior thereto, the Indian Railways Act,
1890 governed the field. The Electricity Act, 2003 was enacted by
Parliament under Entry 38 of List III of the Seventh Schedule to the
Constitution of India, which entry relates to “Electricity”.
The crux of the dispute, in this batch of appeals, is whether Indian
Railways is a deemed distribution licensee under the third proviso to
Section 14 of the Electricity Act and, if so, whether it is still required to pay

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additional/cross-subsidy surcharge to different distribution licensees under
Section 42 of the Electricity Act, if it chooses to procure electricity from
sources other than the concerned distribution licensees within whose area
of supply it is situated. Railways claim the status of a deemed distribution
licensee as that would result in their not being mulcted with additional/cross
subsidy surcharge under Section 42 of the Electricity Act. Their case, in
short, is that, if they are held entitled to procure electricity directly from
generators as deemed distribution licensees, they would be able to reduce
their financial burden to the extent they are otherwise required to pay
additional/cross-subsidy surcharge to different distribution licensees in
different States in the country; and this would, in turn, enable them to
reduce the rates being charged on railway passengers and for
transportation of goods by the Railways.
While Indian Railways claims to be a deemed distribution licensee
and to distribute electricity to itself as a consumer, besides distributing it to
others carrying on business associated with the Railways, the submission,
urged on behalf of the Respondents (mainly distribution licensees in
different States), are two-fold. Firstly, that Indian Railways is merely a
consumer of electricity, and not a deemed distribution licensee; and
secondly, even if it is presumed to be so, it is nonetheless required to pay
additional/cross-subsidy surcharge, under Section 42 of the Electricity Act,
to the concerned distribution licensees on availing open access and
procuring electricity directly from generators and others.
It is pointed out by them that, in the State of Odisha, the total financial
losses to distribution licensees and to GRIDCO would be approximately
Rs.393 crores per annum in the event Railways is granted open access as
a deemed distribution licensee; the approximate losses include Rs.193

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crores per annum loss to GRIDCO alone towards fixed charges payable for
the stranded capacity under long term PPAs with ISGS sources; the losses
suffered by distribution licensees all over India would translate into a higher
retail cost of electricity, the burden of which would fall on individual
consumers which is totally against public interest; and Railways have been
a consumer of GRIDCO for decades.
The financial burden to be borne by parties on either side, depending
on- the outcome of this batch of appeals, has little bearing on the
adjudication of the present lis, and the rival contentions shall be considered
on its merits, and in the light of the relevant legislations, both plenary and
subordinate, as is in force as on date.
While several ancilliary questions have been raised in this batch of
appeals, which shall be dealt with issue-wise later in this Order, the main
questions which arise for consideration is whether Railways are, in fact,
distributing electricity which is a pre-requisite for it to be held to be a
deemed distribution licensee under the third proviso to Section 14 of the
Electricity Act, 2003 (the “2003 Act” for short); and whether it can, even if it
is held to be a deemed distribution licensee, avoid payment of cross-
subsidy surcharge and additional surcharge, under Section 42(2) & (4) of
the 2003 Act, while availing open access.

II.BRIEF DETAILS OF THE ORDERS IMPUGNED IN THIS BATCH OF

APPEALS:

Appeal No. 276 of 2015 is filed by the West Bengal State Electricity
Distribution Company Ltd (“WBSEDCL” for short) against the Order passed
by the Central Electricity Regulatory Commission (“the CERC” for short) in
Petition No. 197/MP/2015 dated 05.11.2015. Respondent No.2-Indian

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Railways had filed Petition No. 197/MP/2015 before the CERC requesting
them to hold that they were entitled for grant of open access for
procurement of power from Respondent Nos.8 and 9 and other generating
stations, or source power through the Inter-State Transmission Network of
the Central Transmission Utility and the Transmission Network of the
Respondent States including Respondent Nos. 4 to 7, till the facilities and
network of the Indian Railways is ready; to direct that they, in their capacity
as an authorized entity, were entitled to distribute and supply electricity in
connection with its working as railways and across a number of states; to
be a separate participating entity, like any other state entity, in the DSM
mechanism notified by the CERC for the purpose of scheduling and
dispatch of electricity; direct all the STUs and SLDCs to give connectivity,
and to process the application for open access (Long Term, Medium Term,
Short Term), treating Indian Railways as an entity akin to a person who has
been granted a distribution license in their State, and to allow use of the
Intra- State Transmission facilities of such respondents as incidental to
Inter State Transmission of electricity from the place of generation.

In the Order now under appeal before us, i.e. in Petition No.
197/MP/2015 dated 05.11.2015, the CERC held that, in the light of the
judgement of the Supreme Court in UOI vs. UPSEB :(2012) 3 SCC 329,
the Indian Railways was an authorized entity under the Railways Act to
undertake transmission and distribution activities in connection with the
working of the Railways, independent of its status under the Electricity Act;
therefore the information sought by MSETCL, vide letter dated 06.07.2015,
was not relevant for the grant of connectivity and concurrence to the Indian
Railways for scheduling of power from RGPPL and GUVNL, through the

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ISTS and State network by availing long term access or medium term open
access in terms of the Connectivity Regulations; Indian Railways was a
deemed license under the third proviso to Section 14 of the Act, and no
separate declaration to that effect was required from the Commission;
Indian Railways was a deemed licensee, and shall be bound by the terms
and conditions of the license under the proviso to Section 16 of the Act;
drawal points from ISTS, located within the State, shall be treated as a
single entity for the purpose of scheduling; the group TSS, situated in a
State and connected directly with ISTS, may be treated as fragmented
control areas, and the responsibility for scheduling, metering , balancing
applicability of ISTS charges and loss shall vest in the concerned RLDC;
and for the TSS situated in the State, and connected to the State network,
these function shall vest in the concerned SLDC. All concerned RLDCs,
STUs and SLDCs were directed to facilitate LTA and MTA, in terms of the
Connectivity Regulations, from the generating stations or other sources to
the facilities and network of Indian Railways.

Appeal No. 114 OF 2020 is filed by Indian Railways against the Order
passed by the Odisha Electricity Regulatory Commission (“OERC” for
short) in Petition No. 55 of 2016 dated 25.02.2020. Respondent No.1-
Odisha Power Transmission Corporation Limited had filed the said petition
before the OERC to acknowledge Indian Railway as a Deemed Distribution
Licensee, and declare them as the fifth discom to be operative in the State
of Odisha, apart from the existing four DISCOMS (CESU,WESCO,NESCO
and SOUTHCO); to specify the general or specific conditions to be
applicable upon Indian Railways in accordance with Section 16 of the
Electricity Act, 2003, and the CERC order dated 05.11.2015; to decide the

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operation and commercial modalities to be followed, by the Indian Railways
and the other Railway utilities, like OPTCL, SLDC, GRIDCO and DISCOMS
in line with the minutes of various meetings; and to approve the proposal of
OPTCL to collect charges from the Indian Railways for the proposed open
access transaction, besides intra-state transmission charges and losses
approved by the State Commission.

In the Order, now under appeal before us, the OERC held that they
were not agreeable to declare Railway a “deemed distribution licensee”
either under the provisions of the Railways Act, 1989 or under the
Electricity Act, 2003; the Ministry of Power had declared Railways a
‘Deemed Licensee’, not a ‘Deemed Distribution Licensee’; they were a
‘deemed licensee’ for the purpose of a transmission license, and not for
distribution license; they could carry on transmission activity without
obtaining a transmission license, in addition to consuming power like a
normal consumer due to their special and superior status under the
Railways Act, 1989, in contrast to the provisions of the Electricity Act, 2003;
and, as a consumer under the Electricity Act, 2003, they had the full right to
avail open access under the relevant Regulations made under the
Electricity Act, 2003.

Appeal No. 73 of 2021 is filed by the Indian Railways against the

Order passed by the Kerela State Electricity Regulatory Commission
(“KSERC” for short) in OP.No. 31/19 dated 12.12.2019. Indian Railways
had filed the said petition before the KSERC to Issue a directive to the
respondents herein to issue a “No Objection Certificate”, and convey their
concurrence to the Indian Railways for non-discriminatory open access to
avail power supply from M/s. Bharatiya Rail Bijlee Company Limited

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(BRBCL) 2 Power plant at Nabinagar, Bihar or any other source to the
Railway Traction Sub-Stations as a deemed licensee.

In the Order, now under appeal before us, KSERC held that Southern
Railway was an existing consumer of KSEB Ltd, with a total contract
demand of 91 MVA, for ‘railway traction; at present they were availing
supply at 12 drawal points across the State; and Indian Railways was also
a deemed licensee as per the provisions of the Electricity Act, 2003. After
referring to Section 39(2)(d) and Section 42(2) of the Electricity Act, and
Regulation 11 of the Kerala State Electricity Regulatory Commission
(Connectivity and Intra-State Open Access) Regulation, 2013, the KSERC
held that it had, vide order dated 08.07.2019 in OA No. 15/2018, approved
the charges applicable to open access consumers within the State of
Kerala; and the same was applicable to Southern Railways also if they
availed the open access facility. KSERC directed KSEB Ltd to issue a ‘No
objection Certificate’ to Southern Railway for open access for availing
power from any source, on payment of the charges applicable for open
access consumers in the State, and subject to assessment of appropriate
compensation, if any, after its approval by the Commission.

As, despite their being considered a Deemed Licensee, they were

called upon to pay certain charges, Indian Railways filed a petition seeking
review of the Impugned Order which was rejected by the KSERC vide order
dated 26.06.2020. KSERC held that, as per the judgment of the Supreme
Court dated 25th April 2014 in Civil Appeal No. 5479 of 2013 (ie Sesa
Strerlite), even a licensee, purchasing power through open access for their
own consumption, was liable to pay cross subsidy surcharge under the
Electricity Act, 2003; since Southern Railways, as a deemed licensee,

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proposed to avail power through open access for their own consumption,
they were also bound to pay cross subsidy surcharge as per the provisions
of the Electricity Act. 2003; and they were of the considered view that
Railways was liable to bear cross subsidy surcharge while availing power
through open access for their own consumption. The KSERC rejected the
review petition as not maintainable.

Appeal No. 213 of 2021 is filed by Indian Railways against the order
passed by the Madhya Pradesh Electricity Regulatory Commission
(“MPERC” for short) in Petition No. 11 of 2020 dated 05.05.2021.
Respondent No. 1-3, ie the Madhya Pradesh Discoms, had filed the said
petition before the MPERC seeking levy of open access charges, such as
cross subsidy surcharge and additional surcharge, on the electricity being
drawn by the Western Central Railway through open access.
In the said Order, now under appeal before us, the MPERC held that
the Supreme Court, in Sesa Sterlite, had observed that, being authorized
to operate and maintain a distribution system as a deemed licensee, would
not confer the status of a distribution licensee to any person; power must
be supplied to consumers; since the Western Central Railway was
consuming the power purchased by it for its own use, and was not
distributing and supplying it to consumers, it was not a distribution licensee;
the Appellant, in Sesa Sterlite, had the status of a deemed distribution
licensee through the Special Economic Zones Act, 2005, whereas the
Western Central Railway was conferred power, through the Railways Act,
1989 to distribute electricity for its own establishment/use; it also had the
status of a deemed licensee through the Electricity Act, 2003; both were

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drawing electricity through open access in the area of the distribution
licensee, and both were not consumers of the distribution licensee of their
areas; admittedly, the Western Central Railway was not supplying
electricity to consumers, and it did not maintain a distribution system for
this purpose; the Western Central Railway had no universal supply
obligation under Section 43 of the Electricity Act 2003; it had no consumer
network, hence no distribution system for supply to the consumers; the
status of the Appellant in Sesa Sterlite case, and the Western Central
Railway in the present case, was similar; the Judgment passed by the
Supreme Court, in the Sesa Sterlite case, was squarely applicable; a
similar view was taken by the Rajasthan Electricity Regulatory Commission
in a petition filed on the same issue; and they were of the view that the
Western Central Railway was liable to pay open access charges i.e., cross
subsidy surcharge and additional surcharge. The Western Central Railway
was directed to pay the aforesaid open access charges without any further
delay.

Appeal No. 170 of 2019 is filed by the Indian Railways against the
order passed by the Rajasthan Electricity Regulatory Commission (“RERC”
for short) in Petition No. RERC-1452/19 dated 23.04.2019. Jaipur Vidyut
Vitaran Nigam Limited-Respondent No.1 had filed the said petition before
the RERC seeking levy of open access charges, such as cross subsidy
surcharge and additional surcharge on the electricity being drawn by Indian
Railways through open access.

In the Order, now under appeal before us, the RERC held that merely
being authorized to operate and maintain a distribution system as a
deemed licensee, would not confer the status of a distribution licensee on

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any person; Section 2(17) of the Electricity Act, 2003 emphasized upon the
distribution licensee to operate and maintain a distribution system and
supply power to the consumers; in the present case, Railways did not
supply to any consumer, but used power for its own use; and in view of
judgment of the Supreme Court in Sesa Sterlite case, being similar to the
facts of the present case, it was of the view that the Respondent was liable
to pay open access charges i.e. cross subsidy surcharge and additional
surcharge.
Appeal No. 343 of 2019 is filed by Indian Railways against the order
passed by the Maharashtra Electricity Regulatory Commission (“MERC” for
short) in Petition No. 154 of 2019 dated 05.04.2019. MERC had earlier
initiated a suo-moto petition to take on record the Deemed Distribution
Licensee status of Indian Railways, and for issuing specific conditions of
Distribution License for Indian Railways. In the order under appeal, the
MERC observed that CERC had held that Indian Railways, as a Deemed
Licensee, shall be bound by the terms and conditions of the License
specified or to be specified by the Appropriate Commission under the
proviso to Section 16 of the Electricity Act; APTEL had also upheld the
above CERC Order; and, in view of the Orders of the CERC and APTEL,
they considered it appropriate to specify certain specific conditions of the
Distribution License for Indian Railways as a Deemed Distribution Licensee
under Section 16 of the Electricity Act.

MERC directed Indian Railways to adhere and comply with following

Regulations with immediate effect on a provisional basis, which could also
form part of their Specific Conditions to be specified by the Commission
after following due process: (i) MERC (State Grid Code Regulations)

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2006; (ii) MERC (Transmission Open Access) Regulations, 2016; (iii)
MERC (Renewable Purchase Obligation, its Compliance and
Implementation of Renewable Energy Certificate Framework) Regulations,
2016; (iv) MERC (Fees and Charges) Regulations, 2017; (v) Order issued
by the Commission in Case No. 42 of 2007 (ABT) Order and FBSM
mechanism; (vi). Transmission Pricing framework as specified under Multi-
Year Tariff Regulations (In STS Order dated 12 September, 2018 passed
by the Commission and other relevant Orders/Directions issued by the
Commission in respect of Indian Railways); and (vii) Commission’s
Orders/Practice directions/ amendments, if any in the Regulations
mentioned above in relating to Indian Railways; and the above conditions
would be applicable till issuance of Specific Conditions. Indian Railways
was directed to examine other Regulations notified by the MERC, and
submit its Petition proposing the Specific Conditions of its Distribution
License, considering the peculiarity of operations of the Indian Railways
within six months; and the Petition should cover aspects such as the area
of operations for the Indian Railways in the State of Maharashtra (Central
Railway, Western Railway and South Eastern Railway), and any other
additional condition applicable to the Indian Railways etc.

In its order in Petition No. 154 of 2019 dated 05.04.2019, impugned in

the present appeal, MERC relied on the Judgment of the Supreme Court, in
Sesa Sterlite Limited v. Orissa Electricity Regulatory Commission and
Ors (2014) 8 SCC 444, as regards applicability of cross subsidy surcharge
on the Indian Railways, and held that, prima facie, Indian Railways would
be required to pay cross subsidy surcharge and such other charges as may

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be applicable under the Open Access Regulations to the incumbent
Licensee.

MERC further held that the term of Distribution License for Indian
Railways shall be 25 years with effect from 5th November, 2015 and the
same shall be valid till 4th November, 2040, unless revoked by the
Commission; Section 18 of the EA relating to License amendment and
Section 19 of the EA relating to License revocation were equally applicable
to Indian Railways as no distinction had been made in these provisions for
Deemed Licensees; the Distribution License of Indian Railways was liable
to be revoked in case of non-compliances / willful and prolonged defaults/
breach of terms and conditions of Distribution License in accordance with
the procedure laid down under EA in case such circumstances get created
in future; there could be amendments, in the terms and conditions of
license, based on requirements / issues that may be raised in future; it was
essential that Indian Railways adhered to the same payment security
mechanism as was provided in the TOA Regulations; hence, they were not
inclined to grant the prayer made by Indian Railways to permit it to provide
Letter of Assurance from RBI or Letter of Mandate from RBI or any other
similar mode of payment security mechanism as may be provided for by
RBI, towards compliance of Regulation 24 of TOA.

Appeal No. 133 of 2020 is filed by the Indian Railways against the
order passed by the Haryana Electricity Regulatory Commission (“HERC”
for short) in Petition No. HERC/PRO-11 of 2017 dated 17.06.2020. Dakshin
Haryana Bijli Vitran Nigam Ltd. (Respondent No.1 in the Appeal) had filed
the petition before the HERC seeking clarification on various applicable
charges in terms of the Regulations framed by the State Commission to be

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levied on Indian Railways for availing medium term open access as a
Deemed Licensee.
In the Order, now under appeal before us, HERC held, on the issue
of Deemed Licensee Status, that this issue was res-judicata; the
Commission had examined whether Northern Railway was a deemed
distribution licensee in Haryana; in view of the judgement of APTEL dated
3rd May, 2013 and the Judgement of the Supreme Court dated 25th April,
2014 in Civil Appeal No. 5479 of 2013 (M/s Sesa Sterlite Vs. OERC &
Ors), Northern Railway was not in the business of supplying electricity to
public/consumers at large, but was distributing electricity within its own
operational area and in connection with the working of the Railways; an
entity i.e. Northern Railway which utilizes the entire quantum of electricity
for its own consumption, and does not have any other consumers, cannot
be deemed to be a distribution licensee; if this was to be so, quite a few
consumer category (Government Connections like Public Water Works,
Street Light, Lift Irrigation / MITC etc) would also become deemed
distribution licensee(s) and, in case they also fully source power under
Open Access mechanism, they would also claim exemption from various
charges, making the distribution and retail supply business of the existing
distribution licensee(s) unviable; Northern Railway, by merely being
authorized to operate and maintain a distribution system under the
Railways Act, 1989, could not be conferred the status of distribution
licensee in Haryana; a deemed distribution licensee is merely exempted
from obtaining license under Section 14 of the Electricity Act, 2003;
pursuant to Section 16 of the Electricity Act, the Commission had framed
and notified the Haryana Electricity Regulatory Commission (Conditions of
License for Distribution and Retail Supply Business) Regulations, 2004

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dated 30th November, 2004; all the general terms and conditions specified
therein had to be necessarily complied with by a distribution licensee,
including a deemed distribution licensee, which is not the case in the
present matter of Northern Railway as well as Military Engineering Services
(MES) - a case earlier dealt with by the Commission; the dispensation
flowing from the judgements of the Supreme Court, as well as Appellate
Tribunal for Electricity, was squarely applicable to Northern Railway; and,
as far as Haryana was concerned, Northern Railway was fully a Medium-
Term Open Access Consumer having connectivity agreement and medium-
term open access agreements.

Having so held, the Commission (which was also agreed to by the

parties i.e. HVPNL, Discoms and NR) considered it appropriate to frame /
notify specific set of Regulations applicable to the deemed distribution
licensee, as some of the terms and conditions in the HERC (Conditions of
License for Distribution and Retail Supply Business) Regulations, 2004
may not be relevant in the case of a deemed to be a distribution licensee.
HERC held that Northern Railway was liable to bear, besides intra state
transmission loss, the distribution system network cost as determined by
the Commission for the relevant year; and, in addition to the above, Indian
Railways was liable to pay Cross Subsidy Surcharge and Additional
Surcharge.

Appeal No. 320 of 2018 is filed by the Punjab State Power

Corporation Ltd against the Order passed by the Punjab State Electricity
Regulatory Commission (“PSERC” for short) in Petition No. 3 of 2017 dated
28.02.2018. The appellant herein filed a petition before the PSERC to
direct the respondent-railways to follow Section 16 of the Electricity Act,

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2003 while getting STOA and MTOA in the State of Punjab, and to direct
the respondent-railways to follow the terms and condition required to be
followed while getting STOA and MTOA as per PSERC (Terms and
condition for intra state open access) Regulations, 2011. PSPCL claimed
two charges namely (i) charges for actual consumption of electricity, and (ii)
charges for stranded power.

In the Order, now under appeal before us, the PSERC held, with
respect to stranded power charges, that such exigencies / overdrawals by
open access customers are to be dealt under “Imbalance Charges” as per
the provisions of the Punjab State Commission terms and conditions for
intra state open access) Regulations, 2011; the provisions for standby
charges, as proposed by PSPCL, did not exist in the existing Regulations;
and Regulation 31(1)(a) of the Punjab State Electricity Regulatory
Commission (Terms and conditions for Intra-state Open Access)
Regulations, 2011, in case of overdrawal by Open Access Customers,
provided for charging of highest tariff for any permanent consumer category
applicable at that point of time.

On the proposal of fixed charges, the Commission held that the

Punjab State Commission (Terms and conditions for intra state open
access) Regulations, 2011 did not include any such provision for payment
of fixed charges. Moreover, Fuel Cost Adjustment Charges (FCA) and Time
of Day (ToD)/Peal Load exemption charges were also denied to the
appellant.

III.RIVAL CONTENTIONS AND ANALYSIS: ISSUE WISE:

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 Issues were framed with the consent of Learned Senior Counsel and
learned counsel appearing for all the parties in this batch of appeals. As 14
issues were framed, some of them again containing sub-issues, and
submissions have been repeated by Learned Senior Counsel and Learned
Counsel appearing on both sides, we could not avoid repeating our
analysis and findings as each issue had to be dealt separately.
While several of the appeals, in this batch, have been filed by Indian
Railways, some others have filed appeals also. Apart from the Railways,
the other parties to this batch of appeals are, for convenience sake, being
commonly referred to as the Respondents.
While we would, ordinarily, have examined the rival submissions with
respect to each issue seriatim, the submission urged on behalf of the
Respondents that Indian Railways is not the Appropriate Government must
be examined at the outset, since the third proviso to Section 14 of the
Electricity Act is applicable only to the “Appropriate Government”, and none
else.

IV.ISSUE 14:
Whether Indian Railways falls within the term “Appropriate Government”
under Section 14 of the Electricity Act, 2003?

A.SUBMISSION ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on
behalf of the Railways, would submit that Indian Railways is a department
of the Central Government and, therefore, the Appropriate Government
under Section 14-third proviso; the description of Indian Railways as
‘Railways Administration’, ‘General Manager’, ‘Zonal Railway’, ‘Union of

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India’, or similar such expressions in the proceedings filed before the Court,
cannot render the Indian Railways not being an appropriate government;
and the contentions to the contrary are misplaced.
B.SUBMISSION OF RESPONDENTS:
It is submitted, on behalf of the Respondents, that the appeals filed
by Railways proceed on the basis that they fall within the scope and ambit
of the third proviso to Section 14 of the Electricity Act; however, Railways
has not made any submission as to whether it fulfils the twin tests/ criteria
to fall within the scope of the third proviso to Section 14, namely: (a) is
Railways the “Appropriate Government” within the meaning of the third
proviso to Section 14?, and (b) whether Railways distributes electricity
within the meaning and scope of the third proviso to Section 14?
On the first test, it is submitted that the term/expression “Appropriate
Government” in the third proviso to Section 14 means the State
Government, and not the Central Government; the ownership of the
Railway Administration/Railways by Union of India/Central Government is
not being questioned in these submissions; Section 2(5) of the electricity
Act, defining “Appropriate Government”, does not apply to the third proviso
to Section 14 of the Electricity Act; Section 2 starts with the words “unless
the context otherwise requires"; Section 2(5), defining “Appropriate
Government”, applies to Sections 13, 15(7), 37, 64(4), 67(2), 68, 90(2)(b),
91(3), 106, 132, 143, 148, 152, 161(2), 162, 164, 165, 166(5), 168, 171,
172(b) of the Electricity Act; it would be the Central Government “in relation
to… Railways” for the purposes of Sections 67(2), 68, 150(2), 161(2), 162,
165, 171, but not the third proviso to Section 14; if Section 2 (5) of the
Electricity Act were to be interpreted in a way that the Central Government
is Railways for all purposes wherever the term “Appropriate Government” is

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used in the Electricity Act, then all “inter-State generation, transmission,
trading or supply of electricity” would be the Central Government, but that is
not the case since private enterprises also won and operate “inter-State
generation, transmission, trading or supply of electricity”; private companies
also own “mines, oilfields”; Port Trusts also own “dockyard’; hence, the
interpretation cannot be that the Central Government is “inter-State
generation, transmission, trading or supply of electricity “mines, oilfields,”
“dockyard’; Section 51A of the 1910 Act was inserted by Act 32 of 1959; the
State Government was engaged in the business of supplying energy to the
public, and had all the powers and obligations of a licensee under the 1910
Act; hence “Appropriate Government” means the State Government, and
not the Appellant which is part of the Central Government; absence of the
words “Railway Administration”, used in Section 11 of the Railways Act, in
the third proviso to Section 14, means that Parliament never intended the
third proviso to Section 14 to include the Railways; Section 11 of the
Railways Act, through Clauses (a) to (h), gives various powers to “the
Railway Administration” inter alia to make electricity supply lines, erect,
operate and maintain or repair electric traction equipment, power supply
and distribution installation in connection with the working of the Railway;
Parliament could not have intended “Railway Administration”/ Railways” to
be an “Appropriate Government” in the third proviso to Section 14, when
the proviso to Section 54 (1) of the 2003 Act employs the word “Railway”,
Section 67(1)(a) & (b), (2)(j), (m) employ the word “Railway”, and Section
57 uses the word “Railway”; the Railways, being owned by the Union of
India, does not automatically make the third proviso to Section 14
applicable to the Railways; and the fact that it is “the General Manager of a
Zonal Railway” or the “Railway Administration” which sues by the said

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names / nomenclature, and when it is sued Section 80 of the Code of Civil
Procedure, 1908 would mandate that the Union of India be impleaded,
would necessarily indicate that the third proviso to Section 14 ought to have
used the words “the General Manager of a Zonal Railway” or “the Railway
Administration” instead of the words “Appropriate Government”.
C.ANALYSIS:
The submissions, urged on behalf of the Respondents under this
head, are two-fold. Firstly, Railways is not the Appropriate Government, as
referred to in third proviso to Section 14 of the Act; and (2) as it is not
distributing electricity, it cannot be held to be a distribution licensee in terms
of the third proviso to Section 14. The question whether Railways is, in fact,
distributing electricity shall be examined later in this order. We shall,
therefore, confine our analysis under this head only to the question whether
Railways is the Appropriate Government referred to in the third proviso to
Section 14.
Section 2(5)(a)(ii) of the Electricity Act defines “Appropriate
Government” to mean the Central Government in relation to, among others,
supply of electricity and with respect to, among others, the Railways. On a
plain reading of Section 2(5)(a)(ii), in case Railways are held to be
supplying electricity, the Appropriate Government would be the Central
Government.
Since reference is made, on behalf of the Respondents, to several
provisions of the Electricity Act, it is useful to note what some of these
provisions relate to. Section 13 relates to the power to exempt, and enables
the Appropriate Commission, on the recommendations of the Appropriate
Government, to direct that the provisions of Section 12 (which prohibits a
person from distributing electricity unless he is authorized to do so) shall

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not apply to any local authority, Panchayat Institution, users’ association
etc. It is not even contended before us that the Railway is entitled to be
granted exemption under Section 13 of the Act.
Section 15(7) requires the Appropriate Commission, immediately after
issuance of a license, to forward a copy to the Appropriate Government and
to others. It is nobody’s case that the Central Government consists only of
the Railways. As noted hereinabove, Section 2(5)(a)(ii) brings within its
ambit mines, oil fields, railways, national highways, airports, telegraphs,
broadcasting stations and any works of defence, dockyard, nuclear power
installations, as also entities referred to under clauses (i), (iii) and (iv) of
Section 2(5)(a).
Section 107 of the Electricity Act requires the Central Commission to
be guided by the directions issued by the Central Government in the public
interest. The direction which the Central Government gives, under Section
107, is ordinarily through the Ministry of Power. What Section 2(5)(a)
stipulates is that, in relation to supply of electricity with respect to Railways,
the Appropriate Government is the Central Government. That does not
mean that, wherever the word “Appropriate Government” is used, the said
word should be substituted with the word “Railways”. We have referred to
those provisions which deal with licenses, and what has been held herein
would apply equally to the other provisions referred to on behalf of the
Respondents. It would be difficult for us, therefore, to agree with the
submission of the Respondents, or to hold that Railways would not form
part of the “Appropriate Government” with respect to which the third proviso
to Section 14 of the Electricity Act is attracted.
Section 51(a) of the Indian Electricity Act, 1910 provided that,
when the State Government engages in the business of supplying energy

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to the public, it shall have all the powers and obligations of the licensee
under the Act. Reliance placed, on behalf of the Respondents, on Section
51(a) of the 1910 Act is misplaced since, by Section 185 of the Electricity
Act, the Indian Electricity Act, 1910 stood repealed.
Further, where an expression is defined under the Electricity Act,
2003, it would be wholly inappropriate to refer to the provisions of any other
enactment to understand what the said expression means. As Section
2(5)(a)(ii) of the Electricity Act is attracted in relation to supply of electricity
with respect to Railways, in case Railways is held to be supplying
electricity, it must be held to be the appropriate government falling within
the ambit of the third proviso to Section 14 of the Electricity Act.
Section 2(32)(a) of the Railways Act, 1989, defines “Railway
Administration, in relation to a Government Railway, to mean the General
Manager of the Zonal Railway”. Section 3(1) enables the Central
Government, for the purpose of efficient administration of the Government
Railways, by notification, to constitute such railways into as many Zonal
Railways as it may deem fit and to specify, in such notification, the names
and headquarters of such Zonal Railways, and the area in respect of which
they shall exercise jurisdiction.
Section 4(1) of the Railways Act requires the Central Government, by
notification, to appoint a person to be the General Manager of the Zonal
Railway. Section 4(2) stipulates that the general superintendence and
control of Zonal Railway would vest in the General Manager. The aforesaid
provisions entrust the general superintendence and control of Zonal
Railway to the General Manager. That does not mean that the General
Manager or the Railway Administration, referred to in the aforesaid
provisions, must be held to be the Railways itself. The word “Railway” is a

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defined expression under Section 2(31) of the Railways Act, and means not
only a railway or any portion of a railway for the public carriage of
passengers or goods, but includes everything contained in Clauses (a) to
(f) thereunder. The submission, that failure to use the words “General
Manager of the Zonal Railway” or the “Railway Administration” in the third
proviso to Section 14, instead of the words “Appropriate Government”, is
fatal, does not merit acceptance.
The first limb of the submission urged on behalf of the
Respondent under this head, that Railways is not the Appropriate
Government under the third proviso to Section 14 of the Act, necessitates
rejection. The second limb of the submissions, put forth on behalf of the
Respondents, shall be examined later in this order.

V.ISSUE NO. 1:
Issue No.1 is divided into two parts, Issue Nos. 1(A) and 1(B) which
read thus:-

ISSUE 1(A):
Whether the activities of Railways, as provided under Section 11(g) and (h)
read with Section 2(31) of the Railways Act, 1989, constitute ‘distribution
of electricity’?
ISSUE 1(B):
Whether the activity of Indian Railways, of conveying electricity from its
traction sub-station to the various points of consumption, including
locomotives, station premises, vendors and service providers constitutes
‘distribution of electricity’ as contemplated under the Electricity Act,
2003?

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A. SUBMISSIONS ON BEHALF OF RAILWAYS:
Mr. M.G. Ramachandran, Learned Senior Counsel appearing on
behalf of the Indian Railways, would submit that the authority, powers,
rights, privileges and obligations of the Indian Railways, vis a vis others
including licensees, in regard to electricity matters, regulatory control over
Railways etc, should be considered in terms of the provisions of the
Railways Act, 1989 and the Electricity Act, 2003; the Railways Act, 1989
specifically deals with ‘electric traction equipment’, ‘power supply and
distribution installation’ in connection with or for the purposes of the
Railways” (Sections 2(31)(c) and 11(g) of the Railways Act, 1989); these
are obviously for (a) conveyance of electricity in the area of operation of the
Railways for end use or consumption, and (b) is not restricted to any one
specific use or to locomotive operations, but for a wide range of works,
operations and activities, so long as they are (i) ‘for the purposes of
constructing or maintaining a railway’ as stated in the opening part of
Section 11, (ii) ‘in connection with the working of the railway’ as stated in
Section 11 (g), and (iii) further to do all other acts necessary for making,
maintaining, altering or repairing; and using the railway, as stated in
Section 11(h); Section 11(d) of the Railways Act, 1989 extends the authority
of Railways to erect and construct such houses, warehouses, offices and
other buildings, and such yards, stations, wharves, engines, machinery
apparatus and other works and conveniences as the railway administration
thinks proper; Section 18 of the Railways Act, 1989 empowers the Central
Government to fence the Railway area of operations, and no trespass in
the said area is permissible; it is only the Indian Railways, or a person duly
authorized by the Indian Railways and no other, which can undertake

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activities, including in regard to electricity activities in the said area;
conveyance of electricity in the area of operation of Railways is also not
merely point to point as per the definition of ‘transmission line’ in Section
2(72), or ‘transmit’ or ‘transmission’ in Section 2(74), of the Electricity Act,
2003; and electricity gets distributed to several and diverse end
uses/consumption through the network/system in an integrated manner
throughout the area of operation of the Railways in the country.
Learned Senior Counsel would submit that conveyance of electricity,
in the area of operation of Railways, is through electric wires and
installations including overhead equipment (OHE) running along the railway
traction from where (i) the locomotives draw electricity on a continuous
basis, and use/consume electricity at different points, for running of the
trains; and (ii) other installations which draw electricity for end
use/consumption for signalling, communication equipment, railway yards,
railway sidings and other works at different places, station facilities,
vendors and other service providers etc; electricity is also conveyed from
the Non-TSS sub-stations/switchyards receiving electricity at the inter-
connection point of the grid within a railway network for various purposes
including for end use/ consumption by other entities/agencies providing
facilities and amenities to passengers; and each traction sub-station/non
traction sub-station/switchyard of Railways, which receives electricity from
outside the area of operations of the Railways, is the starting point for
distribution of electricity with each section running into around 20 to 30 Kms
and servicing the requirement of electricity at different places of
consumption.
Learned Senior Counsel would further submit that the term ‘distribute’
or ‘distribution’ is not a defined term either under the Railways Act, 1989 or

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 the Electricity Act, 2003; the term ‘distribute’ would, in its natural sense,
mean spreading of goods anywhere by whatever means that may be
employed; from (1) P Ramanathan Aiyar, 6th Edition, (2) State -v-
Nathulal Damumal, AIR 1962 Bom 21; and (3) Halsbury’s Laws of
England, 5th Edition, referring to the English Act on Electricity, it is clear
that distribute or distribution of electricity is not synonymous with ‘sale’ of
electricity by one to another; the activities undertaken by Railways
constitutes distribution of electricity within the area of operation of the
Railways, and further in connection with or for the purposes of Railways as
defined in Section 2(31) of the Railways Act, 1989; there is, indisputably,
conveyance of electricity within the area of operation of the Railways from
the traction sub-stations (TSSs)/ sub stations/switchyard of Railways
(connected upstream to the Grid/ power system of other licensees) to
different points of end use of electricity namely where electricity gets
consumed within the area of operations of the Railways; thus there is
distribution of electricity, and not merely transmission or use of electricity in
the area of operations of the Railways; and such distribution of electricity
also constitutes “distribution of electricity” within the meaning and scope of
the Electricity Act, 2003 also, as dealt with separately under Issue No.5.

B. SUBMISSIONS ON BEHALF OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that, in order to
ascertain whether the activities of Indian Railways constitute ‘distribution of
electricity’, it is important to understand what ‘distribution of electricity’
means; ‘Distribution of electricity’, as envisaged under the Electricity Act,
2003, is a function which is performed by a ‘distribution licensee’ (Section
2(17) of the Electricity Act); as held in Sesa Sterlite Ltd. v. OERC & Ors:

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(2014) 8 SCC 444, a ‘distribution licensee’ has mainly two important
components, namely: (a) operate and maintain a distribution system for
supplying electricity to consumers, and (b) actual supply of electricity to the
consumers in his area of supply; with respect to the first ingredient of a
‘distribution licensee’, the term ‘distribution system’ is defined in Section
2(19) of the Electricity Act; the purpose of the ‘distribution system’, as
envisaged under the Electricity Act, is for ‘connection to the installation of
the consumer’ or in other words last mile connectivity; a ‘system’ which
does not ultimately connect to the installation of the consumer, is not a
‘distribution system’ within the scheme of the Electricity Act; a ‘distribution
system’ is also distinct from a ‘transmission line’, which is not an essential
part of the distribution system of a licensee under Section 2(72) of the
Electricity Act; there is no requirement for a ‘transmission line’ to be
connected to the installation of the consumer, which is a specific
requirement for a ‘distribution system’; with respect to the second
ingredient of ‘distribution licensee’, i.e., supply of electricity to the
consumers in his area of supply; the term ‘supply’ is defined in Section
2(70) of the Electricity Act, and ‘area of supply’ is defined in Section 2(3) of
the Electricity Act; ‘area of supply’ is designated by the relevant State
Electricity Regulatory Commissions while granting license, and thereafter
license conditions of a ‘distribution licensee’ are determined; and no
alteration or modification can be carried out in this ‘area of supply’ without
seeking approval of the relevant SERC under Section 18 of the Electricity
Act.
It is submitted, on behalf of the Respondents, that a common aspect in
the definitions of ‘distribution licensee’, ‘distribution system’ and ‘supply’, is
a ‘consumer’; therefore, distribution of electricity is for the specific purpose

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of ‘supply’ of electricity to a ‘consumer’; a ‘consumer’ is defined under
Section 2(15) of the Electricity Act; Section 42 and 43 of the Electricity Act
provides for duties of a distribution licensee; the handbook on power supply
installation in electric traction, issued by the Indian Railway Engineering
Institute, gives details of the power supply arrangement at the Railway
installations and supply system for Railway traction sub-stations; power is
availed by the Railways, through the power supply and distribution system
maintained by them, from the ‘supply authority’ either as a consumer of a
distribution licensee or through a bilateral transaction (via open access);
however, in both situations, power delivery from the supply authority
remains at the traction sub-station.
It is submitted, on behalf of the Respondents, that the definition of
‘distribution system’ reveals that a distribution system is a system of wires
between two points i.e.,(a) delivery point on the transmission
line/generating station connection; and (b) point of connection of the
consumers; ‘distribution of electricity’ is done by a ‘distribution licensee’
through a ‘distribution system’ whereby electricity is ‘supplied’ to a
consumer by way of sale; the words ‘distribution of electricity’ should be
strictly interpreted; mere conveyance of electricity from one point to another
is not ‘distribution of electricity’; and mere construction of an electric
system, for transfer of electricity to various points of consumption within the
premises of an establishment, is also not ‘distribution of electricity’.
On the activities of Railways under the Railways Act, it is submitted, on
behalf of the Respondents that the two primary requirements for being a
‘distribution licensee’ (or a ‘deemed distribution licensee’ as the case may
be), are (i) distribution system and (ii) supply of electricity to the
consumers; the functions of the Railways should be looked at from this

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prism; it is only when the aforesaid two criteria are fulfilled, that the
Railways can be stated to be performing the activity of ‘distribution of
electricity’; Chapter IV of the Railways Act, 1989 deals with “Construction
and Maintenance of Works”; Section 11 of the Railways Act relates to the
power of the Railways Administration to execute all necessary works, for
the purposes of constructing and maintaining a railway; Section 2(31)(c) of
the Railways Act defines Railways; the above provisions, including
Sections 11(g) and 11(h), cannot be read in isolation, and should be looked
at, considering the object and reasons; the scheme of the Railways Act,
entrusting the power of construction upon the Railway Administration, is
clear from the heading of Chapter-IV ie “Construction and Maintenance of
Works”; the clauses under Section 11 of the Railways Act must therefore
receive a limited construction; the power conferred by Section 11 is only to
be exercised for the purpose of construction of the railways; to test the
submission, that the activities described under Section 11(g) constitute
‘distribution of electricity’, it is necessary to consider whether the following
essential criteria are being met by the Railways under Section 11(g): (a)
whether Railways has been authorised to operate and maintain a
distribution system?, (b) whether Railways has been authorised to supply
electricity to the consumers in its area of supply?; this condition pre-
supposes existence of ‘consumers’, ‘area of supply’ and sale of electricity;
Railways does not fulfil any of the above criteria; Railways neither
maintains nor operates a ‘distribution system’, nor does the Railways have
any ‘consumer’ or ‘area of supply’ for sale of electricity to qualify as supply
of electricity; neither of the above Sections empower the Railways or the
Railways Administration to ‘supply’ electricity to ‘consumers’ by way of sale;

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and, further, the Railways do not also have an ‘area of supply’ for alleged
distribution of electricity by it.
It is submitted, on behalf of the Respondents, that the mere act of
operation or maintenance of a ‘power supply and distribution installation’ is
not akin to ‘distribution of electricity’; even if it is assumed, for the sake of
argument, that the installation of Railways is similar to the installation of a
distribution licensee, the activities of the Railways, of transferring electricity
from its traction sub-station to the various points of consumption, would still
not constitute ‘distribution of electricity’ as contemplated under the
Electricity Act; admittedly, supply of power to the Railways occurs at
various traction sub-stations of the Railways; the Railways Handbook also
makes it clear that supply of power at the traction sub-station from the
supply authorities is 3-phase power supplied at 132 kV, Railways uses
stepping down transformers installed at the traction sub-stations to step
down the said power to single-phase power at 22 kV, thereafter Railways
uses this single-phase 50 Hz power (at 22 kV), primarily for electric traction
and, in the process, also conveys the same to different locations within the
Railway premises; when the said power supply and distribution installation
being maintained by the Railways, beyond its traction sub-station, is
examined through the lens of Section 2(19) of the Electricity Act, it
becomes clear that the said system can never be a distribution system as
defined therein in as much as (a) if the traction sub-station (the point of
delivery of power) is to be construed as the first point as mentioned in
Section 2(19) i.e. delivery point on the transmission line/generating station
connection, since consumption of power is also at this very traction sub-
station, the same also becomes the second point as mentioned in Section
2(19) i.e. the point of installation of the consumer leaving no scope for any

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system of wires to exist between them; (b) on the other hand, if the traction
sub-station is presumed not to be the point of installation of the consumer,
and the various entities located within the Railway premises are to be
construed as the point of installation of the consumer, the same would
mean that the sad entities are different/distinct from the Railways which is
in direct contradiction to Section 2(31) of the Railways Act and particularly
sub-clause (d); as such, it is clear that it is the traction sub-station itself
which is the ‘installation of the consumer’ within the meaning of Section
2(19) of the Electricity Act; and anything beyond the said point, i.e the
power supply and distribution installation being maintained by the Railways,
cannot be construed as a distribution system as defined under Section
2(19) of the Electricity Act.
On the contention of the Railways, that Electricity is conveyed to
various points of consumption, including locomotives, station premises,
vendors, and service providers, it is submitted, on behalf of the
Respondents, that the purpose of the ‘distribution system’, as envisaged
under the Electricity Act, is for ‘connection to the installation of the
consumer’ or last mile connectivity; the Electricity Act defines ‘consumer’
under Section 2(15) of the Electricity Act; ‘person’ is defined in Section
2(49) of the Electricity Act; Railways has alleged that electricity is ‘supplied’
to various consumers such as trains/ locomotives, signaling,
communication yard, sidings etc; in the light of the definition in Section
2(49), such entities/ instruments do not qualify to be consumers within the
meaning of the Electricity Act; such entities/ instruments are not ‘person’,
and are in fact an extension of the Railways itself; and a person is
someone/ something capable of having rights and duties, which is
concededly missing in the case of the alleged consumers of the Railways

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(Refer: S. Kireetendranath Reddy v. A.P. TRANSCO, Vidyut Soudha,
Hyderabad & Ors. (1999 (5) ALD 398).
It is submitted, on behalf of the Respondents, that, at the time of
enactment of the Railways Act by Parliament, the .1910 Act was holding the
field; the said 1910 Act provided for supply of electricity as a licensed
activity; therefore, the provisions of the Railways Act, and especially with
regard to the power of the Railway Administration to execute all necessary
works for the purpose of constructing and maintaining a Railway by
erecting, operating, maintaining or repairing any electric traction equipment,
power supply and distribution installation in connection with the working of
the Railways, has nothing to do with the distribution of electricity; the
provisions of Section 11(g) & (h) read with Section 2(31) of the Railways
Act authorise transmission of electricity for the purposes of running of the
Railways; the distribution installations help conveyance of electricity in the
traction lines to go in different directions, so that the locomotives can carry
passengers or goods to different destinations within India; this is nothing
but a traction distribution system for transmission of electricity; the
definition of ‘overhead line’ in Section 2(48) does not include live rails of a
traction system; therefore, the traction lines, being overhead lines, are not
“transmission lines” as understood under Section 2(72) of the Electricity
Act; therefore working of the Railways within their premises, as authorized
under the above referred provisions of the Railways Act operating through
electric traction system, is peculiar to the Railways; conveyance of
electricity under such traction designed at 25 KV, for use by locomotives
and stations etc, are not through transmission lines or distribution lines or
system as understood under the Electricity Act; even assuming that the
Railway engine is a consumer of electricity, its point of consumption is the

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entire traction line, and there is no specific installation of the consumer; the
entire traction line is the installation of the consumer being the Railways
itself through its locomotive(s); and further there is no billing to such
consumer being the Railways itself.

C.ANALYSIS:
Before examining the submissions, urged on behalf of the Railways
under this head, one of the submissions, urged on behalf of the
Respondents, must be considered at the outset. Relying on the definition
of “person” under Section 2(49) of the Electricity Act, it is contended, on
behalf of the Respondents, that Indian Railways does not fall among any of
the entities referred to in the said definition; and, since only a person can
be a licensee under Section 2(39), they cannot claim the status of a
deemed licensee. Reliance is placed in this regard on
S.KIREETENDRANATH REDDY vs. A.P. TRANSCO (1999 (5) ALD 398).
It is necessary therefore to take note of the law declared in the said
judgment.

In S. Kireetendranath Reddy v. A.P. Transco: 1999 SCC OnLine AP

843, it was held that legal rights and legal duties cannot be conceived
without the holder of the rights; the duties and the holder, in legal theory, is
the ‘person’; in Salmond on Jurisprudence (11th Edition) at pages 350-351,
it is stated that, so far as legal theory is concerned, a person is any being
whom the law regards as capable of rights or duties; any being that is so
capable is a person, whether a human being or not, and no being that is
not so capable is a person, even though he be a man; persons are the
substances of which rights and duties are the attributes; it is only in this

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respect that persons possess juridical significance, and this is the exclusive
point of view from which the personality receives legal recognition; persons
as so defined are of two kinds, distinguishable as natural and legal; a
natural person is a human being; and legal persons are beings, real or
imaginary, who, for the purpose of legal reasoning, are treated in greater or
less degree in the same way as human beings.

The law declared in S. Kireetendranath Reddy is that legal rights can

be exercised, and legal duties can be fastened, only on a person. Section
2(39) of the Electricity Act defines “licensee” to mean a person who has
been granted a license under Section 14. Section 2(49) of the Electricity
Act defines “person” to include any company or body corporate or
association of body of individuals, whether incorporated or not, or an
artificial juridical person. Reliance placed by the respondents, on S.
Kireetendranath Reddy, is of no avail since the definition of “Person” in
Section 2(49) of the Electricity Act is an inclusive definition. By use of the
word ‘includes’ therein, Parliament has made it clear that a person would
not only mean (1) a company (2) a body corporate (3) an association or
body of individuals, whether incorporated or not, and (4) an artificial
juridical person, others, not falling within any of the aforesaid categories,
may also be held to be “persons”. We see no reason, in such
circumstances, to hold that the Indian Railways is not a “person” and
cannot, therefore, claim the right of being a distribution licensee.

The words used in the third proviso to Section 14 of the Electricity Act
is the “appropriate government” and, as has been explained earlier in this
order, Indian Railways forms part of the Central Government, and would fall

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within the definition of an “Appropriate Government” under Section 2
(5)(a)(ii) of the 2003 Act.

D. SECTION 2(31) & 11 OF THE RAILWAYS ACT: ITS SCOPE:

As the dispute under this head relates mainly to whether the activities
of the Railways under Section 11(g) and (h) read with Section 2(31) of the
Railways Act,1989, of conveying electricity from its traction sub-station/non-
traction substation/switch-yard to the various points of consumption,
including locomotives etc, constitutes ‘distribution of electricity’, as
contemplated under the Electricity Act, 2003, it is useful to note the
provisions relevant thereto, both under the Railways Act, 1989 and the
Electricity Act, 2003.
Section 2(31) of the Railways Act, 1989 defines the term “Railways”
to mean a railway, or any portion of a railway, for the public carriage of
passengers or goods, and to include, among others, (a) all lands within the
fences or other boundary marks indicating the limits of the land appurtenant
to a railway; (c) all electric traction equipment, power supply and
distribution installation used for the purposes of, or in connection with, a
railway; and (d) all rolling stock, stations, offices, ware houses, wharves,
workshops, manufactories, fixed plant and machinery, roads and streets,
running rooms, rest houses, institutes, hospitals, water works and water
supply installations, staff dwellings and any other works constructed for the
purpose of, or in connection with, the railway.

Chapter IV of the Railways Act 1989 bears the heading

‘construction and maintenance of works’. Under Chapter IV is Section
11 which, in turn, bears the heading ‘power of railway administration to
execute all necessary works’. Section 11 relates to the power of the

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railway administrations to execute all necessary works and stipulates that,
notwithstanding anything contained in any other law for the time being in
force, but subject to the provisions of the Railways Act and the provisions
of any law for the acquisition of land for a public purpose or for companies,
and subject also, in the case of a non-Government railway, to the
provisions of any contract between the non-Government railway and the
Central Government, a railway administration may, for the purposes of
constructing or maintaining a railway, among others, (g) erect, operate,
maintain or repair any electric traction equipment, power supply and
distribution installation in connection with the working of the railway; and (h)
do all other acts necessary for making, maintaining, altering or repairing
and using the railway.

E. THE HEADING OF A CHAPTER IS A GENERAL INDICATOR OF ITS

SUBJECT MATTER:
Chapter headings are parts of the statute enacted by Parliament.
Chapter heading is a permitted tool of interpretation. It is considered to be a
preamble of that Section to which it pertains. (Tata Power Co. Ltd. v.
Reliance Energy Ltd., (2009) 16 SCC 659). The “heading” of Chapter-IV
or the “heading” or “title” prefixed to Section 11 of the Railways Act, 1989
may be taken as broad and general indicators of the nature of the subject-
matter dealt with thereunder. (Sarah Mathew v. Institute of Cardio
Vascular Diseases, (2014) 2 SCC 62). The heading or title may also be
taken as a condensed name assigned to indicate collectively the
characteristics of the subject-matter dealt with by the enactment
underneath, though the name would always be brief having its own

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limitations. (Raichurmatham Prabhakar v. Rawatmal Dugar, (2004) 4
SCC 766 : 2004 SCC OnLine SC 465).

The headings, prefixed to Sections or sets of Sections in some

modern statutes, are regarded as preambles to those Sections. (Maxwell
on the Interpretation of Statutes. (12th edn page 11); Monopol
Chemicals Pvt. Ltd. v. Municipal Corporation of Greater Bombay, 1984
SCC OnLine Bom 284). They can be referred to in construing an Act of the
legislature. While they cannot control the meaning of the plain words of a
statute, they may explain ambiguities. (Principles of Statutory
Interpretation by Justice G.P. Singh, 9th Edn., 2004, pp. 152 and 155;
Raichurmatham Prabhakar v. Rawatmal Dugar, (2004) 4 SCC 766 :
2004 SCC OnLine SC 465; Frick India Ltd. v. Union of India, (1990) 1
SCC 400). They may also be a useful and effective tool of interpretation in
harmonizing the Section and the other provisions of the statute. (Amar
Nath Gupta v. Kolkata Municipal Corporation, 2017 SCC OnLine Cal
5212).

Black’s Law Dictionary defines ‘construction’ to mean the act of

building by binding or arranging parts of elements, the thing so built, and
‘maintain’ to mean engage in general repair or upkeep. The Concise Oxford
English Dictionary defines ‘construct’ to mean build or erect and
‘construction’ to mean the action or process of constructing; ‘maintain’ to
mean keep in good condition by checking or repairing it regularly; and
‘work’ to mean the activities involving construction or repair, a thing or
things done or made, denoting things or parts made of a specified material
or with specified tools. As the heading, ie ‘construction and maintenance of
works’, must be understood as the condensed name assigned to indicate

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collectively the characteristics of the subject-matter dealt with in Chapter IV
of the Railways Act, what the provisions (including Section 11) must be
understood as providing for, generally, is building and engaging in the
repair and upkeep of the things specified thereunder.

F. ‘MEANS’ and ‘INCLUDES’: ITS SCOPE:

The word ‘railway’, is defined under Section 2(31) of the Railways

Act, to mean a railway, or any portion of a railway, for the public carriage of
passengers or goods and includes clauses (a) to (f) there-under. The word
‘means’ in Section 2(31) is intended to exhaustively define the said
provision, make the definition a hard and fast definition, and prevent any
other meaning to be assigned to the said expression, than that is put down
in the definition. (P.Kasilingam & Ors. Vs. P.S.G. College of
Technnology (AIR 1995 SC 1395: 1995 SCC Supl. (2) page 348;
Gough v. Gough: (1891) 2 QB 665; Punjab Land Development and
Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court: (1990) 3
SCC 682).
Craies on Statute Law (7th Edn., 1.214) states that an interpretation
clause which extends the meaning of a word does not take away its
ordinary meaning, and is not meant to prevent the word receiving its
ordinary, popular, and natural sense whenever that would be properly
applicable, but to enable the word as used in the Act to be applied to
something to which it would not ordinarily be applicable. Therefore, the
inclusive part of the definition cannot prevent the main provision from
receiving its natural meaning. The first part of the definition of “Railway” in
Section 2(31) must, therefore, be given its ordinary, popular or natural
meaning. (Black Diamond Beverages v. CTO, (1998) 1 SCC 458).

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Interpretation thereof is in no way controlled or affected by the second part
which “includes” certain other things/aspects in the definition. The
definition of ‘railway’ in the first limb of Section 2(31) would therefore mean
a Railway or a portion of a railway which is used for the public carriage of
passengers or goods.
The second limb of Section 2(31) brings within its ambit clauses (a) to
(f) there-under and, by the use of the word ‘includes’, conveys an extensive
meaning. The word “include” is generally used in interpretation clauses in
order to enlarge the meaning of words or phrases occurring in the body of
the statute and, when it is so used, these words or phrases must be
construed as comprehending not only such things as they signify according
to their natural import but also those things which the interpretation clause
declares that they shall include. (ESI Corpn. v. High Land Coffee
Works, (1991) 3 SCC 617;Oswal Fats & Oils Ltd. v. Commr.
(Admn.), (2010) 4 SCC 728; Municipal Corpn. of Greater
Bombay v. Indian Oil Corpn. Ltd., 1991 Supp (2) SCC 18 : AIR 1991 SC
686; Associated Indem Mechanical (P) Ltd. v. W.B. Small Industries
Development Corpn. Ltd., (2007) 3 SCC 607;CTO v. Rajasthan
Taxchem Ltd., (2007) 3 SCC 124; P. Kasilingam v. P.S.G. College of
Technology, 1995 Supp (2) SCC 348).The word “include”, a word of
extension, is used in an interpretation clause when it seeks to expand and
enlarge the meaning of the words or phrases occurring in the body of the
statute. (Forest Range Officer v. P. Mohammed Ali, 1993 Supp (3) SCC
627; Doypack Systems (P) Ltd. v. Union of India, (1988) 2 SCC 299;
CTO v. Rajasthan Taxchem Ltd., (2007) 3 SCC 124). It gives extension
and expansion to the meaning and import of the preceding words or
expressions. When the word “include” is used, it must be construed as

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comprehending not only such things as they signify according to their
natural import, but also those things which the interpretation clause
declares that they shall include. In using the word “includes”, the legislature
does not intend to restrict the definition. it makes the definition
enumerative, but not exhaustive. The term defined will retain its ordinary
meaning but its scope would be extended to bring within it matters which its
ordinary meaning may or may not comprise. (Mamta Surgical Cotton
Industries v. Commr. (Anti-Evasion), (2014) 4 SCC 87).
The word “include” is susceptible of another construction, which may
become imperative, if the context of the Act is sufficient to show that it was
not merely employed for the purpose of adding to the natural significance of
the words or expressions used. It may be equivalent to “mean and include”
and in that case it may afford an exhaustive explanation of the meaning
which, for the purposes of the Act, must invariably be attached to those
words or expressions. (Oswal Fats & Oils Ltd. v. Commr.
(Admn.), (2010) 4 SCC 728). The word “includes” is also used in
interpretation clauses in the normal standard sense, to mean “comprises”
or “consists of” or “means and includes”, depending on the context. (N.D.P.
Namboodripad v. Union of India, (2007) 4 SCC 502).
Section 2(31) uses both the expressions ‘means’ and ‘includes’. The
words “means” and “includes” indicate “an exhaustive explanation of the
meaning which, for the purposes of the Act, must invariably be attached to
these words or expressions”. (Dilworth v. Commissioner of
Stamps [1899 AC 99, 105-106:(1895-9) All ER Rep Ext
1576); Mahalakshmi Oil Mills v. State of A.P. (1989) 1 SCC 164, 169).
The use of these words, in Section 2(31) of the Railways Act, suggests that
the definition of ‘Railway’ is intended to cover only those categories

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specified therein. (P. Kasilingam v. P.S.G. College of Technology, 1995
Supp (2) SCC 348). It must be understood to be an extensive explanation
of the meaning which, for the purpose of the Railways Act, must invariably
be attached to these words or expressions. Consequently, the definition of
‘railway’ under Section 2(31) would, besides the main part of the provision,
be confined only to clauses (a) to (f) there-under, and not anything else.

Section 2(31)(c) defines railway to include all electric traction

equipment, power supply and distribution installation used for the purposes
of, or in connection with, a railway. Black’s Law Dictionary defines
“purpose” to mean an objective, goal or end. The Concise Oxford English
dictionary defines “purpose” to mean the reason for which something is
done; to have as one’s objective. It is only the power supply and distribution
installation which are used for the object of the railway, which falls within
the definition of “railway”. Power supply and distribution installation used
for any other object or reason, apart from that of the railway, would not fall
within the ambit of Section 2(31)(c) of the Railways Act.
As the power conferred on the railway administration under
Section 11(g) is in connection with the working of the Railway, it is also
necessary to understand what the expression “in connection with” means.
The word “connected” means intimately connected or connected in a
manner so as to be unable to act independently. (Kashi Nath Misra v.
University of Allahabad, 1965 SCC OnLine All 416). The words
“connected with” are also used in the sense that they are really “incidental
to”. (STRONG & CO., OF ROMSEY, LIMITED vs WOODIFIELD
(SURVEYOR OF TAXES): [1906] A.C. 448). The connection contemplated
must be real and proximate, and not far-fetched or problematical. (Rex v.

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Basudev, 1949 SCC OnLine FC 26). To fall within the ambit of Section
11(g), the power to erect, operate, maintain or repair any power supply and
distribution installation can be exercised only if there is an intimate or
proximate connection thereto with the working of the Railway, or its
objective/ reason is the working of the railway.

As the expression “in connection with the working of the railway” is

used both in clauses (f) and (g) of Section 11, it must bear the same
meaning in both these provisions. The power conferred on a railway
administration, under Section 11(f), is to erect, operate, maintain or repair
any telegraph and telephone lines in connection with the working of the
railway, and not for any other purpose (such as, for instance, for providing
telephone connections to the public at large). Similar to that of telegraph
and telephone lines, the power to erect, operate, maintain or repair a power
supply and distribution installation can be exercised by the Railway
Administration only if its object is the working of the railway, and the
erection, operation, maintenance and repair is closely connected with the
working of the railway ie only if its connection with the working of the
railway is intimate or proximate and is not remote.

G. IN THE ABSENCE OF ANY DEFINITION, THE MEANING OF WORDS

USED IN A STATUTE CAN BE GATHERED FROM DICTIONARIES:
Several words used in Section 2(31) which defines a “Railway”, and
in Section 11 of Chapter IV of the Railways Act which relates to the power
of railway administration to execute all necessary works, are not defined
under the Railways Act. While it may be hazardous to interpret a word in
accordance with its definition in another statute or statutory instrument,

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more so when such statute or statutory instrument is not dealing with a
cognate subject (MSCO. (P) Ltd. v. Union of India, (1985) 1 SCC 51), in
the absence of any definition in that very document, a word which occurs in
a statute or a statutory instrument should be construed giving it the same
meaning which it receives in ordinary parlance or is understood in the
sense in which people conversant with the subject-matter of the statute or
statutory instrument understand it. (MSCO. (P) Ltd. v. Union of India,
(1985) 1 SCC 51).
In the absence of its definition under the said Act, it is open to the
Court/Tribunal, while interpreting those words, to assist themselves by any
literary help they can find, including the consultation of standard authors
and reference to well-known authoritative dictionaries. (Camden
(Marquis) v. I.R.C :(1914) 1 KB 641; CIT v. Raja Benoy Kumar Sahas
Roy: AIR 1957 SC 768; Mohinder Singh v. State of Haryana, (1989) 3
SCC 93; Star Paper Mills Ltd. v. Collector of Central Excise, (1989) 4
SCC 724; R. v. Peters:(1886) 16 QBD 636), and to take its aid to ascertain
the meaning of a word in common parlance. (State of Orissa v. Titaghur
Paper Mills Co. Ltd., 1985 Supp SCC 280)
As a dictionary gives all the meanings of a word, the court should
select the particular meaning which would be relevant to the context in
which it has to interpret that word. (State of Orissa v. Titaghur Paper
Mills Co. Ltd., 1985 Supp SCC 280). The shade of meaning of a word, its
different connotations and collocations, which one finds in a dictionary does
not relieve the Court/Tribunal of the responsibility of having to make the
ultimate choice of selecting the right meaning. The meaning which is most
apt in the context, the colour and diction in which the word is used should

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be chosen from the dictionaries. (Bolani Ores Ltd. v. State of Orissa,
(1974) 2 SCC 777).
Neither is the expression “distribution installation”, nor are the words
“erect”, ‘distribution’, ‘installation’ ‘construction’, ‘operation’, ‘maintenance’,
“repair” etc defined under the Railways Act. As they are not defined words
or expressions, the meaning of these words must be ascertained from
dictionaries. The Concise Oxford English Dictionary defines ‘erect’ to mean
“construct”; the word ‘operate’, with reference to a machine, to mean the
function or control the functioning of. In the context of Section 11(g), the
word ‘operate’ would mean controlling the functioning of the power supply
and distribution installation. The Concise Oxford English Dictionary defines
the word ‘repair’ to mean restore something damaged, worn, or faulty to a
good condition, and the word ‘installation’ to mean the action or process of
installing or being installed; a large piece of equipment installed for use.
The equipment through which electricity can be distributed is a
distribution installation. What is permissible for a railway administration to
do, for the purpose of constructing or maintaining a railway, is to erect,
operate, maintain or repair a power supply and distribution installation i.e.
the equipment through which power is supplied and distributed.

Webster's Dictionary gives several meanings of the word “distribute”

as follows: (1) to divide among several or many; to deal out; apportion;
allot; (2) to spread out so as to cover a surface or a space; (3) to divide or
separate, as into classes, orders, kinds, or species; to classify; assort, as
specimens, letters, etc. The same meaning is found in the Oxford Concise
Dictionary. Murry's Standard Dictionary gives a somewhat better definition.

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The second meaning attached to the word is “to spread or disperse abroad,
through a whole space or over a whole surface; properly, so that each part
of the space or surface receives a portion; less definitely, to spread
generally, scatter”. Halsbury’s Laws of England, 5th Edition, referring to the
English Act on Electricity, defines the term ‘distribute' in relation to
electricity, to mean distribute by means of a ‘distribution system’. P
Ramanathan Aiyar, 6th Edition states that the term ‘distribute’ would, in its
natural sense, mean spreading of goods anywhere by whatever means that
may be employed. The ordinary and general meaning of the word
“distribute” is conveying/spreading of goods anywhere by whatever means
that may be employed. (State v. Nathumal Damumal : AIR 1962 Bom
21).

H. ELECTRICITY IS “GOODS”:
Though it is not tangible, “Electricity” is movable property, and a
commodity like other goods, as it can be manufactured, transmitted and
sold. It falls within the definition of “goods” under the provisions of the Sale
of Goods Act. (Kartar Singh v. Punjab State Electricity Board, 2014
SCC OnLine P&H 5917; Commissioner of Income Tax v. The Hutti
Gold Mines Co. Ltd: Judgment of the Karnataka High Court in ITA No.
08/2014 dated 16.09.2014; CIT v. NTPC SAIL POWER CO. (P) Ltd:
(2020) 428 ITR 535) as well as under the Electricity Act, 2003. (State of
A.P. v. National Thermal Power Corpn. Ltd. AIR 2002 SC 1895, (2002) 5
SCC 203; Commissioner of Sales Act, Madhya Pradesh,
Indore v. Madhya Pradesh Electricity Board, Jabalpur (1969) 1 SCC
200, Kartar Singh v. Punjab State Electricity Board, 2014 SCC OnLine
P&H 5917; Sukhwinder Singh v. Raj Kaur, 2014 SCC OnLine P&H

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 9003). As “electricity” is also “goods”, the words “distribution installation”,
used in Section 2(31)(c) and 11(g) of the Railways Act can be understood
to mean an installation, through which electricity is spread or disbursed and
power is supplied, in connection with the working of the railway.

I. RELIANCE SHOULD NOT BE PLACED ON DICTIONARIES, WHERE A

WORD OR EXPRESSION IS STATUTORILY DEFINED:
The submission urged, on behalf of the Railways, is that, since the
Railways maintains a distribution installation through which power is supplied
for the purpose of or in connection with the working of the railway, such a
distribution installation, referred to in Section 2(31)(c) and Section 11(g) of the
Railways Act, is the “Distribution System” referred to in Section 2(19) of the
2003 Act; and operation and maintenance of a distribution installation would
suffice for the Railways to be held to be a distribution licensee even if the
power supplied, through such a distribution installation, is to itself and to no
other.
While it is true that neither the Railways Act nor the Electricity Act defines
the words “distribute” or “installation”, that does not, by itself, require the
expression “distribution installation” used in Section 2(31)(c) and Section
11(g) of the Railways Act to be given the same meaning as a “distribution
system” which is a defined expression under Section 2(19) of the 2003 Act.
Besides the expression “distribution system”, the words “distribution licensee”
and “supply” are defined under Sections 2(17) and 2(70) of the Electricity Act.
In order to understand what the expression “deemed distribution licensee”, as
has been used in the third proviso to Section 14 of the Electricity Act means,
reliance can only be placed on the definition of these words and expressions
in the Electricity Act, and not on dictionaries, for it is well settled that the

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dictionary meaning of a word cannot be looked at where that word has been
statutorily defined or judicially interpreted (State of Orissa v. Titaghur Paper
Mills Co. Ltd., 1985 Supp SCC 280). Where the definition has been given in
the statute itself, it is neither proper nor desirable to look to dictionaries to find
out the meaning of the expression. The definition given in the statute is the
determinative factor. (S. Gopal Reddy v. State of A.P., (1996) 4 SCC 596).
The words “distribution installation”, used in Sections 2(31)(c) and 11(g)
of the Railways Act, should also not be equated to the expression “distribution
system” as defined in Section 2(19) of the Electricity Act for the definition of a
word or expression in other enactments should not be blindly applied while
interpreting a word or expression in the enactment in question. (P.C.
Cheriyan v. Barfi Devi, (1980) 2 SCC 461; Bangalore Turf Club Ltd. v. ESI
Corpn., (2009) 15 SCC 33). One cannot read provisions of one Act into
another Act unless the Legislature, by specific provision made to that effect,
has stated that the provisions of one Act can be read into the other Act.
(Thane Janta Sahakari Bank v. Election Commission of India, 2009 SCC
OnLine Bom 1517).
In construing a word in an Act, caution is necessary in adopting the
meaning ascribed to the word in other Acts. “It would be a new terror in the
construction of Acts of Parliament if we were required to limit a word to an
unnatural sense because in some Act, which is not incorporated or referred
to, such an interpretation is given to it for the purposes of that Act alone.
(Craies on Statute Law, Sixth Edn p. 164; Macbeth & Co. v. Chislett [1910
AC 220, 223 (HL); MSCO. (P) Ltd. v. Union of India, (1985) 1 SCC 51). The
meaning of a word may vary with the setting or context. (R.L. Arora v. State
of U.P: AIR 1964 SC 1230), and the objects to be achieved not only as set
out in the Preamble but also as gatherable from the antecedent history of the

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legislation may be widely different. Even the same words may mean one thing
in one context and another in a different context. This is the reason why
decisions on the meaning of particular words or collection of words found in
other statutes are scarcely of much value when a specific statute has to be
dealt with. (D.N. Banerji v. P.R. Mukherjee : 1952 SCC OnLine SC 136).
It is not a sound principle of construction to interpret expressions used in
one Act with reference to their use in another Act. (Pandit Ram Narain v.
State of U.P: AIR 1957 SC 18). It is well settled that observations made with
reference to the construction of one statute cannot be applied with reference
to the provisions of another statute which is not in pari-materia with the statute
which forms the subject-matter of the previous decision. (Lila Vati Bai v.
State of Bombay: AIR 1957 SC 521). Expression in an Act should not be
construed in the light of the construction placed on a similar expression.
(State of Maharashtra v. Mishrilal Tarachand Lodha: AIR 1964 SC 457).
Further, when there is no ambiguity in the statute, it may not be permissible to
refer to, for purposes of its construction, any previous legislation or decisions
rendered thereon. (Board of Muslim Wakfs v. Radha Kishan, (1979) 2 SCC
468;S. Mohan Lal v. R. Kondiah, (1979) 2 SCC 616; Gwalior Rayons Silk
Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests, 1990 Supp SCC
785).
It is not as if, in the present case, the words used in both the Statutes are
the same. As different words are used, and it is not a sound principle of
construction to interpret expressions defined in one Act with reference to their
use in another Act or to gather its meaning from dictionaries, the expression
“Distribution System” as defined in Section 2(19) of the 2003 Act ought not to
be given the same meaning as is given to the undefined expression

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“distribution installation” used in Section 2(31)(c) and Section 11(g) of the
Railways Act,
Even if we were to proceed on the premise that the system of wires and
associated facilities (which words find place in the definition of a “distribution
system” under Section 2(19) of the 2003 Act) is what the words “distribution
installation” mean, that, by itself, would not suffice to equate the expression
“distribution installation”, referred to in Section 2(31)(c) and Section 11(g) of
the Railways Act, to a “distribution system” as defined under Section 2(19) of
the 2003 Act, for Section 2(19) does not confine a “distribution system” only to
a system of wires and associated facilities, but also requires such a system of
wires and associated facilities to exist between the delivery points on the
transmission lines or the generating station connection, and the point of
connection to the installation of the consumers. The definition of the term
“distribution licensee”, under Section 2(17) of the Electricity Act, 2003,
emphasises upon the distribution licensee operating and maintaining a
distribution system, for supply of power to consumers ie sale of electricity to
consumers. (Sesa Sterlite Ltd. v. Orissa Electricity Regulatory
Commission, (2014) 8 SCC 444). In short, it is only if the system of wires and
associated facilities connects the end point of the transmission lines or the
generation station with the point of connection to the consumer’s installation,
would it fall within the definition of a “distribution system” under Section 2(19)
of the 2003 Act.

Even if the distribution installation, through which power is supplied to

different consumption points of the Railways, is held to be a system of electric
wires and installations and, from the overhead equipment running along the
electric traction, the locomotives use/consume electricity at different points for

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running of trains and for end use/consumption for signalling, communication,
equipment etc, the test of “supply” of electricity” under Section 2(70) of the
Electricity Act is not satisfied for Railways to be held to be a deemed
distribution licensee under the third proviso to Section 14 of the Electricity Act.

While it may be possible to contend that the “distribution installation” of

the Railways is connected from the generating station, through its own
transmission lines, what must also be satisfied, for such a “distribution
installation” to be held to be a “distribution system” under Section 2(19) of the
2003 Act, is for it to also be connected to the point of installation of the
consumer. If it does not, then the words “distribution installation”, as referred
to in the Railways Act, cannot be understood to have the same meaning as a
“distribution system” under Section 2(19) of the 2003 Act.
J. “AND” / “OR”: ITS MEANING:
The words “power supply and distribution installation” are used both
in Section 2(31)(c) and Section 11(g) of the Railways Act. What is urged
before us, on behalf of the Railways, is that the words “power supply” and
“distribution installation” should be treated as two distinct and separate
activities, and should not be understood either as being inseparable or as
being integrally connected with each other ie the words “power supply” should
be read disjunctively and separate from the words “distribution installation”.
In this context, it is useful to note that, in Stroud's Judicial Dictionary, 3rd
Edn it is stated at p. 135 that “and” has generally a cumulative sense,
requiring the fulfilment of all the conditions that it joins together, and herein it
is the antithesis of “or”. (Ishwar Singh Bindra v. State of U.P., (1969) 1 SCR
219). The expression ‘and’ has generally a cumulative effect, requiring the
fulfillment of all the conditions that it joins together. (M.

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Satyanarayana v. State of Karnataka(1986) 2 SCC 512; A.K.
Gopalan v. The State of Madras 1950 SCC 228 ; Ishwar Singh
Bindra v. The State of U.P. (196) 1 SCR 219). In Maxwell on Interpretation of
Statutes, 11th Edn., it has been accepted that “to carry out the intention of the
legislature it is occasionally found necessary to read the conjunctions ‘or’ and
‘and’ one for the other”. (Ishwar Singh Bindra v. State of U.P., (1969) 1 SCR
219). The word ‘or’ is normally disjunctive, and ‘and’ is normally conjunctive,
but at times they are read as vice versa. We do sometimes read ‘and’ as ‘or’
in a Statute. But we do not do it unless we are obliged, because ‘or’ does not
generally mean ‘and’, and ‘and’ does not generally mean ‘or’. (Municipal
Corporation of Delhi v. Tek Chand Bhatia(1980) 1 SCC 158; Maxwell on
Interpretation of Statutes, 11th Edn., p. 229-30; Competition Commission
of India v. Steel Authority of India Ltd. (2010) 10 SCC
744; Green v. Premier Glynrhonwy State Co. (1928) 1 KB 561). One will
find it said in some cases that ‘and’ means ‘or’; but ‘and’ never does mean
‘or’. (Tek Chand Bhatia(1980) 1 SCC 158; Stroud's Judicial Dictionary,
3rd Edn., Vol. 1 and 3). Reading of ‘and’ as ‘or’ is not to be resorted to unless
some other part of the same statute, or the clear intention of it, requires that to
be done. (Tek Chand Bhatia(1980) 1 SCC 158; Marsey Docks & Harbour
Board v. Henderson L.R. (1888) 13 A.C. 603; Competition Commission of
India (2010) 10 SCC 744; Commissioner Central Excise and Customs v.
Dujodwala Resins and Terpenes Ltd., 2019 SCC OnLine Utt 577).
Yet another reason why “and” should not be read as “or” is that the duty
of the Court is to interpret the word that the legislature has used. Even if these
words are found ambiguous, the power and duty of the Court to travel outside
them, on a voyage of discovery, are strictly limited. To do so, is a naked
usurpation of legislative function under the thin disguise of interpretation.

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(Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC
530; Magor & St. Mellons R.D.C. v. Newport Corporation (1951) 2 All ER
839 (HL); Punjab Land Development and Reclamation Corporation
Ltd. v. Presiding Officer, Labour Court(1990) 3 SCC 682). Use of the
conjunction “and”, in Sections 2(31)(c ) and 11(g), between the words “power
supply” on the one hand, and “distribution installation” on the other, makes it
clear that reference therein is to the installation through which power is
supplied and distributed, and not independently to a distribution installation
through which supply of power may or may not take place.
K. “REDDENDO SINGULA SINGULIS” RULE:
The submission urged before us, on behalf of the Respondents, is that
the Reddendo Singula Singulis rule would require the word ‘erect’ in Section
11(g) to be understood with reference to the power supply and distribution
installation which requires erection; the word ‘operate’ as referring to the
power supply and distribution installation which requires to be operated
regularly; the word ‘maintain’, with reference to the power supply and
distribution installation which is required to be maintained regularly; ‘repair’ as
referring to the power supply and distribution installation, which is required to
be repaired from time to time; and all the above activities are with reference to
the working of the Railways.
The rule of “Reddendo Singula Singulis” is applicable where a sentence
in a statue contains several antecedents and several consequences. In such
a case, they are to be read distributively, ie each phrase or expression should
be referred to its appropriate object (Koteswar Vittal Kamath vs. K. Rngapa
Baliga & Co (1969 SCR (3) 40 : AIR 1969 504). Francis Bennion —
Statutory Interpretation [1984 Edition] explains the rule of Reddendo
Singula Singulis as “where a complex sentence has more than one subject,

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and more than one object, it may be the right construction to render each to
each, by reading the provision distributively and applying each object to its
appropriate subject.”
Applying the said rule of Reddendo Singula Singulis to the case on hand,
would show that, if the words ‘power supply’ and ‘distribution installation’,
used in Section 2(31)(c) and Section 11(g) of the Railways Act, are read
disjunctively, Section 11(g) would be rendered meaningless. When so read,
the words ‘erect’, ‘operate’, ‘maintain’, or ‘repair’ would apply separately to the
expressions ‘power supply’ and ‘distribution installation’. The word ‘repair’, as
noted hereinabove, means to restore something, which is damaged or worn or
faulty, to a good condition and the word ‘erect’ means “construct”. While a
distribution installation can no doubt be repaired or erected, it would make no
sense to state that power supply can be repaired or that power supply can be
erected. As Parliament cannot be said to have undertaken a meaningless
exercise of legislation, the words ‘power supply’ and ‘distribution installation’
should not be read disjunctively and, on being read conjunctively, would only
mean an installation through which power is supplied and distributed. Further,
operation, maintenance, and repair of the power supply and distribution
installation can only be in connection with the working of the railway and,
consequently, such activities would be confined for the use of the railways
alone, and not for any other purpose.
What is conferred by Section 11 of the Railways Act is the power to
execute works which, as noted hereinabove, means to execute the activity of
construction or repair. Such a power to execute works is to be exercised for
the purposes of constructing or maintaining a railway. In effect, the power
conferred by Section 11 is the power to undertake the activity of constructing,
keeping in good condition and to repair those things mentioned in clauses (a)

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to (h) of Section 11. Consequently, the installation, through which power is
supplied and distributed, is required to be constructed and kept in a good
condition only for the purpose of the Railways, and not for any other purpose
including the purpose of distributing and supplying electricity to consumers (ie
the public), which a “distribution licensee’ is obligated to do under the
provisions of the Electricity Act.

L. IS THE AREA COVERED BY SECTION 2(31) READ WITH SECTION

18 OF THE RAILWAYS ACT, THE “AREA OF SUPPLY” AS DEFINED
UNDER SECTION 2(3) OF THE ELECTRICITY ACT?
The submission, urged on behalf of the Railways, is that, on a conjoint
reading of clauses (a), (b) and (d) of Section 2(31) with Section 18 of the
Railways Act, the area falling within the boundary marks and fences provided
for a railway or part thereof, as also within the gates, chains, bars, stiles or
handrails to be erected at level crossings, is the area of operations of the
Railways within which it has the power to exclusively distribute electricity,
notwithstanding what the Electricity Act, 2003 stipulates.
It is useful therefore to consider what these provisions stipulate. Section
2(31) of the Railways Act, 1989 defines "railway" to mean a railway, or any
portion of a railway, for the public carriage of passengers or goods, and to
include, among others, (a) all lands within the fences or other boundary marks
indicating the limits of the land appurtenant to a railway; (b) all lines of rails,
sidings, or yards, or branches used for the purposes of, or in connection with,
a railway; and (d) all rolling stock, stations, offices, warehouses, wharves,
workshops, manufactories, fixed plant and machinery, roads and streets,
running rooms, rest houses, institutes, hospitals, water works and water

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supply installations, staff dwellings and any other works constructed for the
purpose of, or in connection with, railway.
Section 18 of the Railways Act, 1989, which relates to fences, gates and
bars, enables the Central Government, within such time as may be specified
by it or within such further time, as it may grant, to require that (a) boundary
marks or fences be provided or renewed by a railway administration for a
railway or any part thereof and for roads constructed in connection therewith;
(b) suitable gates, chains, bars, stiles or hand-rails be erected or renewed by
a railway administration at level crossings; and (c) persons be employed by a
railway administration to open and shut gates, chains or bars.
What clauses (a), (b) and (d) of Section 2(31) stipulate are that all lands
within fences and boundaries are the limits of the land of the Railways, and all
railway lines and sidings, roads and streets etc, as referred to in the aforesaid
clauses, form part of the Railways. Section 18 is a statutory power conferred
on the Central Govt to direct the Railway Administration to put up fences etc
to earmark the railway boundaries. The Railway administration would
undoubtedly exercise exclusive jurisdiction, within the areas falling within
these boundaries, with respect to matters falling within clauses (a) to (h) of
Section 11 of the Railways Act, including, under Section 11(h), to erect,
maintain, operate or repair a power supply and distribution installation.
The fact, however, remains that the aforesaid provisions do not even use
the expression “area of operations” which is then sought to be equated, by the
Learned Senior Counsel appearing on behalf of the Railways, to the
expression “area of supply”. The expression used in the Electricity Act is not
“area of operations”, but “area of supply” - an expression defined under
Section 2(3) of the Electricity Act. As noted hereinabove, it is not a sound

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principle of construction to draw meaning of words, used in one Act, with
reference to similar but not identical words used in another Act.
Section 2(3) of the Electricity Act,2003 defines "area of supply" to mean
the area within which a distribution licensee is authorised by his licence to
supply electricity, and Section 2(70) defines "supply", in relation to electricity,
to mean the sale of electricity to a licensee or consumer. To fall within the
definition of "area of supply" under Section 2(3) of the Electricity Act, 2003 the
following conditions must be fulfilled (a) the area must be one which is
authorised in favour of a distribution license; (b) such an authorisation must
be by way of a license; and (c) the license must relate to the sale of electricity
to another licensee or consumer.
The power to grant a license, for distribution of electricity, is conferred by
Section 14(b) of the Electricity Act, only on a State Commission. By way of a
license so granted, the State Commission confers power on the distribution
licensee to exclusively sell electricity within the prescribed area ie the area of
supply stipulated by the Commission. Sale of electricity, to constitute "supply",
must be to another licensee or consumer.
In terms of the provisions of the Sale of Goods Act, (as shall be detailed
later in this order), one cannot sell goods to oneself. Consequently, electricity
consumed by the licensee itself would not constitute either sale or supply.
Self-consumption of electricity by the Railways would not constitute “supply”,
and the areas within which such consumption takes place would not constitute
“area of supply” under Section 2(3) of the Electricity Act.
M. SECTIONS 2(72) AND 2(74) OF THE ELECTRICITY ACT : ITS SCOPE:
Section 2(73) defines "transmission licensee" to mean a licensee
authorised to establish or operate transmission lines, and Section 2(74)
defines "transmit" to mean conveyance of electricity by means of transmission

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lines and the expression "transmission" to be construed accordingly. Section
2(72) of the Electricity Act,2003 defines "transmission lines” as not being an
essential part of the distribution system of a licensee. While such an issue
does not arise for consideration in this batch of appeals, even if we were to
proceed on the premise that Railways is a transmission licensee, neither does
it flow therefrom nor does it automatically make Railways a distribution
licensee also, as a transmission licensee is authorised to establish or operate
transmission lines which, as noted hereinabove, is not an essential part of the
distribution system of a licensee.
While conveyance of electricity, in the Railway system, may not be from
point to point in terms of Sections 2(72) and 2(74) of the Electricity Act, the
fact remains that, for the Railways to be deemed to be a distribution licensee,
they must satisfy the requirements of Section 2(17) of the Electricity Act, and
must be operating or maintaining a distribution system, i.e., the system of
wires and associated facilities between the delivery point of the transmission
line or the generating station connection and the point of connection to the
installation of the consumers, for the sale of electricity to a licensee or
consumer in the area within which the distribution licensee is authorised by
his license to sell electricity to another licensee or consumer.
N. CONVEYANCE OF ELECTRICITY THROUGH THE DISTRIBUTION
INSTALLATION DOES NOT, BY ITSELF, AMOUNT TO SUPPLY:
Even though the word ‘distribute” is not defined in the Electricity Act, the
word “distribution licensee” is defined in Section 2(17) thereof, and each of the
words used therein i.e. (i) “distribution system”, (ii) “supply”, (iii) “consumer”
and (iv) area of supply” are again defined expressions under clauses (19),
(70), (15) and (3) of Section 2 of the said Act. It would not be possible for us,
therefore, to hold that, by mere conveyance of electricity from the traction sub-

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station/sub-station/switchyard of the Railways to different points of end use of
electricity, namely where electricity gets consumed within its geographical
area, the Railways should be understood as discharging the functions of a
deemed distribution licensee falling within the ambit of the third proviso to
Section 14 of the Electricity Act, more so as neither Section 11(g) nor 11(h) of
the Railways Act empower Railways to supply electricity, by way of sale, to
consumers (ie the general public).
The mere fact that the electricity, received at the traction sub-station/non-
traction sub-station/switchyard of the Railways, is distributed for consumption
by the Railways including the Railway locomotive, would not suffice for the
Railways to be held to be a deemed distribution licensee since Railways, as a
distribution licensee, could not have sold electricity to itself as a consumer
much less for a consideration. Sale of electricity necessarily involves a seller,
a buyer and the price; and, in the present case, this distinction is completely
obliterated. In the absence of sale of electricity to a consumer at a price, the
test of “supply of electricity” under Section 2(70) is not satisfied for Railways
to be held to be a deemed distribution licensee under the third proviso to
Section 14 of the Electricity Act, even if the overhead equipment running
along the electric traction, and locomotives, are held to use electricity at
different points for running of trains and for end use for signalling,
communication, equipment etc.
On their own showing, the traction substation/non-traction
substation/switchyard of the Railways, which receive electricity from outside
their area, is the starting point, with each section running into around 30 KMs
and meeting their requirement of electricity at different places of its
consumption. It is at the traction sub-station point that Railways receives
electricity from outside its area as specified in Section 18 of the Railways Act.

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The electricity received by the Railways at this point is as a consumer and not
as a distribution licensee, since the electricity so received is consumed by the
Railways itself and is not sold to third parties, much less at the point of
connection to the installation of the consumer.
As distribution of electricity, through the system of wires and associated
facilities, is undertaken by them for the specific purpose of supplying
electricity to their consumers, mere operation and maintenance of the system
of wires and associated facilities would not suffice to hold the person
discharging such functions to be a distribution licensee. Not only should such
a system of wires and associated facilities exist between the delivery point on
the transmission line or generating station on the one hand and the point of
connection to the installation of the consumer on the other, the said system
must also be operated and maintained for the purpose of supplying electricity
to consumers in the area of supply of such a licensee.
As rightly contended on behalf of the Respondents, the activities of the
Railways, of transferring electricity from its traction sub-station/non-traction
sub-station/switchyard, to various points of consumption, would not constitute
‘distribution of electricity’ as (a) if the traction sub-station (the point of delivery
of power) is construed as the delivery point of the transmission
lines/generating station connection under Section 2(19), it also becomes the
second point mentioned in Section 2(19), ie the point of installation of the
consumer, since consumption of power is also at the very same place, leaving
no scope for any system of wires to exist between them. On the other hand, if
the traction sub-station/non-traction sub-station/switchyard is presumed not to
be the point of installation of the consumer, and the point of consumption by
various entities located within the Railway premises are considered as the
point of installation of the consumer, it would then mean that the entities are

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different/distinct from Railways which would run contrary to Section 2(31)(d) of
the Railways Act, which bring all these entities within the definition of
“Railways”. Anything beyond the said point, ie the power supply and
distribution installation being maintained by the Railways, cannot be
construed as a “distribution system” under Section 2(19) of the Electricity Act.
It is difficult for us, therefore, to disagree with the submission, urged on behalf
of the Respondents, that the traction sub-station/non-traction sub-
station/switchyard is the installation of the consumer within the meaning of
Section 2(19) of the Electricity Act.
O. JURISDICTION EXERCISED BY REGULATORY COMMISSIONS OVER
DISTRIBUTION LICENSEES ABSENT IN THE CASE OF RAILWAYS:
In this context, it is useful to note that the proviso to Section 16 of the
Electricity Act requires the Appropriate Commission to specify the conditions
of license for a deemed licensee under the third proviso to Section 14. The
area of supply of any such licensee is among the conditions to be stipulated
by the State Commissions, under the proviso to Section 16. The power to
alter or amend the terms and conditions of the license is conferred by Section
18 only on the Appropriate Commission. There is nothing in the Railways Act
which makes the right of Railways, to exercise its powers and discharge its
functions, subject to the jurisdiction of the Regulatory Commissions under the
Electricity Act, nor is there any provision therein making the powers, conferred
on the Regulatory Commissions under the Electricity Act, inapplicable to the
Railways.

P. DOES A CONSUMER’S RIGHT TO SEEK OPEN ACCESS DISCHARGE

A DISTRIBUTION LICENSEE OF ITS OBLIGATION TO SUPPLY
ELECTRICITY TO OTHER CONSUMERS?

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 While it is true that the Electricity Act, 2003 has relaxed the rigour of the
previous laws, and has given freedom to a consumer to procure electricity
through open access from sources of its choice, the fact remains that a
distribution licensee has no such freedom to refuse supply to its consumers
as it is obligated by law not only to operate and maintain a distribution system
but also to supply electricity to consumers, in its area of supply, through such
a system.
Q. PROVISIONS OF THE ELECTRICITY ACT APPLICABLE TO
DISTRIBUTION LICENSEES:
The Electricity Act is a consolidating statute. It brings within its purview
generation, transmission, distribution, trade and use of electricity. Whereas
generation of electricity has been brought outside the purview of the licensing
regime, transmission, distribution and trading are subject to grant of licence
and are kept within the regulatory regime. The statute provides for measures
to be taken which would be conducive to development of the electricity
industry, for promoting competition and for protection of interest of consumers
and supply of electricity to all areas. (Tata Power Co. Ltd. v. Reliance
Energy Ltd., (2009) 16 SCC 659).
Section 16 of the Electricity Act, 2003 relates to the conditions of licence.
The proviso to Section 16 requires the Appropriate Commission to specify any
general or specific conditions of licence applicable to licensees referred to in
the first, second, third, fourth and fifth provisos to Section 14 ie to several
categories of deemed licensees. Section 17, which prohibits a licensee from
doing certain things except with the approval of the Appropriate Commission,
would apply to a deemed licensee also.
Part VI of the Electricity Act deals with the distribution of electricity and
contains provisions with respect to distribution licensees. Section 42

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thereunder relates to duties and open access. The duties of a distribution
licensee under Section 42(1) is not only to develop and maintain the
distribution system in its area of supply, but also to supply electricity in
accordance with the provisions of the Electricity Act. No power is conferred on
the Railways, by Section 2(31)(c) and 11(f) of the Railways Act, to “supply”
electricity, in terms of Section 2(70), which is a statutory duty cast on a
distribution licensee under Section 42(1) of the Electricity Act.
Section 42(2) requires a State Commission to introduce open access in
phases, subject to such conditions (including cross subsidies, and other
operational constraints) as may be specified by it. In specifying the extent of
open access in successive phases, and in determining the charges for
wheeling, the State Commission is required to have due regard to all relevant
factors including cross subsidies, and other operational constraints. The first
proviso to Section 42(2) requires open access to be allowed by a distribution
licensee on payment of a surcharge, in addition to the charges of wheeling, as
may be determined by the State Commission. Under the second proviso, such
surcharge shall be utilised to meet the requirements of the current level of
cross subsidy within the area of supply of the distribution licensee. Under the
third proviso such surcharge and cross subsidies shall be progressively
reduced in the manner as may be specified by the State Commission. Under
the fourth proviso 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. Under the fifth proviso
the State Commission shall, by regulations, provide such open access to all
consumers who require supply of electricity where the maximum power to be
made available at any time exceeds one megawatt. Section 42(3) stipulates
that where any person whose premises are situated within the area of supply

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of a distribution licensee, other than a local authority, requires supply of
electricity from a generating company or any licensee other than such
distribution licensee, such person may, by notice, require the distribution
licensee to allow for wheeling of such electricity in accordance with
regulations made by the State Commission, and the duties of the distribution
licensee with respect to such supply shall be of a common carrier providing
non-discriminatory open access. Section 42(4) stipulates that, where the State
Commission permits a consumer or class of consumers to receive supply of
electricity from a person other than the distribution licensee of his area of
supply, such consumer shall be liable to pay additional surcharge on the
charges of wheeling, as may be specified by the State Commission, to meet
the fixed cost of the distribution licensee arising out of his obligation to supply.
Section 42(2) and its provisos, read with sub-sections (3) & (4) of Section
42, make it clear that a consumer, located within the area of supply of a
distribution licensee, is free to seek open access to procure electricity either
from a generating company, or any licensee other than the distribution
licensee within whose area of supply the said consumer falls. Open access,
which the distribution licensee is obligated to provide at the request of its
consumers, is only on payment of a surcharge which also includes the cross-
subsidy requirements of a distribution licensee. While a consumer is free to
procure electricity from elsewhere, and cannot be denied open access by the
concerned distribution licensee, the obligation placed on such a consumer,
who has sought such open access, is to pay surcharge, including cross
subsidy surcharge, to the distribution licensee in whose area of supply the
consumer is located, and from whom he no longer procures electricity. As this
obligation to pay cross subsidy surcharge is fastened by Section 42 only on a
consumer, and not on a distribution licensee, accepting the claim of the

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Railways to be a distribution licensee would enable them to avoid payment of
cross subsidy surcharge, which they would otherwise have been obligated to
pay in case they choose to procure power directly from a generator
Section 43 of the Electricity Act is the duty to supply on request and
Section 43(1) stipulates that, save as otherwise provided in this Act, every
distribution licensee shall, on an application by the owner or occupier of any
premises, give supply of electricity to such premises, within one month after
receipt of the application requiring such supply. Section 43(3) provides that, if
a distribution licensee fails to supply the electricity within the period specified
in Section 43(1), he shall be liable to a penalty which may extend to one
thousand rupees for each day of default. While the consumer has been
conferred the right to demand supply of electricity to its premises from the
distribution licensee, a corresponding obligation is cast on the distribution
licensee to supply electricity to such a consumer at the latter’s request. The
mere fact that one or some of its consumers seek open access, and thereby
cease to receive supply from them, does not discharge the distribution
licensee of its obligations to supply electricity to other “consumers” in its “area
of supply” in view of its universal supply obligation in terms of the aforesaid
provisions of the Electricity Act.
Section 50 obligates the State Commission to specify an electricity supply
code to provide for recovery of electricity charges, intervals for billing of
electricity charges, disconnection of supply of electricity for non-payment
thereof, restoration of supply of electricity; measures for preventing tampering,
distress or damage to electrical plant, or electrical line or meter, entry of
distribution licensee or any person acting on his behalf for disconnecting
supply and removing the meter; entry for replacing, altering or maintaining
electric lines or electrical plants or meter and such other matters. The afore-

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said provisions of Chapter VI of the Electricity Act are incapable of compliance
by the Railways under the provisions the Railways Act.
The obligation cast on a distribution licensee, by Section 43 to supply
electricity to the owner or occupier of any premises (consumer), would also
apply to a deemed distribution licensee. The submission urged on behalf of
the Indian Railways, however, is that this obligation is confined only to a
consumer within its area of supply, and it is not even the case of the
Respondents that any such consumer has been denied supply by Railways
though he had sought for it. The fallacy in this submission is that the area
falling within the boundaries of the Railways is sought to be projected as the
“area of supply” under Section 2(3) of the Electricity Act, which it is not. The
areas, falling within the boundaries under Section 18 of the Railways Act, form
part of the Railways itself. As the entities located within the said areas are
integrally connected with and function for the benefit of the Railways, they
cannot be equated to “consumers” falling within the “area of supply” of a
distribution licensee in terms of the Electricity Act.
It is not even contended before us that the power conferred on the
Railways, with respect to erection, operation, maintenance and repair of
electric traction equipment and power supply and distribution installations, has
been restricted or impaired by any of the provisions of the Electricity Act.
While no provision of the Electricity Act, in view of Section 173 thereof, can
impinge on such powers statutorily conferred on the Railways, that does not
mean that such powers can be extended to include the non-existent power to
distribute electricity, which a distribution/deemed distribution licensee is
empowered to do only in view of Section14 of the Electricity Act and its third
proviso.

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 Part VII of the Railways Act relates to Tariff. Section 61 thereunder
requires the Appropriate Commission, subject to the provisions of the
Electricity Act, to specify the terms and conditions for the determination of
tariff and, in doing so, to be guided by the aspects referred to in clauses (a) to
(i) thereunder. Section 62 relates to determination of tariff and, under sub-
section (1)(d) thereof, the Appropriate Commission shall determine the tariff,
in accordance with the provisions of the Electricity Act for retail sale of
electricity (ie sale of electricity by a distribution licensee to a consumer).
Section 62(2) confers power on the Appropriate Commission to require a
licensee to furnish separate details, as may be specified, in respect of
distribution. Section 64 prescribes the procedure for determination of tariff
under Section 62, and requires an application to be made by a licensee. It is
not in dispute that, in the case of Railways, no such exercise of determination
of tariff is undertaken by the Regulatory Commissions.
The submission of Mr. M.G. Ramachandran, Learned Senior Counsel,
that the provisions of tariff under Part VII of the Electricity Act have no
application to the Railways as a deemed distribution licensee in view of
Section 30 of the Railways Act, and in view of Section 173 of the Electricity
Act the provisions in Part VII, which are inconsistent with Section 30 of the
Railways Act, are inapplicable, shall be examined later in this order.

R. PARLIAMENT IS PRESUMED TO BE AWARE OF OTHER LAWS IN

EXISTENCE WHEN THE RAILWAYS ACT WAS ENACTED:
It is not even the case of the Railways that Section 2(31)(c) and Section
11(g) was either introduced or amended after the Electricity
Act, 2003 came into force. When the Railways Act was enacted in 1989, it
was the Indian Electricity Act 1910 and the Electricity Supply Act, 1948 which

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were then in force. Under these enactments, supply of electricity was a
licensed activity. When any law is enacted, the legislature is presumed to be
aware of all existing laws. It must be so presumed, even in absence of any
specific provision in the subject enactment, that Parliament was aware of all
statutes which had been enacted prior thereto. (KSL and Industries Ltd. v.
Arihant Threads Ltd., (2008) 9 SCC 763). Since Parliament is presumed to
be aware of the laws then in force, (which required a license to be obtained
for supply of electricity), when it undertook the exercise of enacting the
Railways Act, a specific provision would have made in the Railways Act,
exempting the Railways from obtaining a license for supply of electricity, if it
intended to confer on them the power to supply electricity. It is also evident
that, when the Railways Act including Sections 2(31)(c) and 11(g) thereof was
made in 1989, Parliament could not have intended to make any provision
therein to exempt Railways from the rigours of the Electricity Act which was
enacted 14 years thereafter in 2003.
The end point of the “distribution system” (as defined in Section 2(19) of
the Electricity Act), ie the system of wires and associated facilities, must be
the point of connection to the installation of a “consumer” ie the person who is
“supplied” with electricity (Section 2(15) of the Electricity Act). As “Supply” is
defined in Section 2(70) to mean sale of electricity, it is only a person to whom
electricity is sold who can be called a consumer. Further, “distribution” is not
mere maintenance or operation of the distribution installation (even if it be
held to be the system of wires and associated facilities), but also involves
“supply” of electricity, through such a system, to consumers in the area of
supply of a distribution licensee ie sale of electricity to consumers in the area
earmarked in the distribution license by the appropriate Commission. The
Electricity Act does not envisage “Distribution” dehors “Supply”. While

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electricity can be supplied by others also, a distribution license is granted to a
licensee not merely to maintain and operate a distribution system but in
addition to supply electricity, through such a system, to consumers in the area
of supply of such a licensee. The Electricity Act does not provide for grant of
license only to operate a distribution installation without the concomitant
obligation of supply (sale) of electricity to consumers.
The claim of the Railways to be supplying electricity to third parties, such
as book shops, canteens, vendors etc. in the railway stations and at other
places, shall be examined later in this order under Issue No.8.
S. CONCLUSION:
Issues 1(A) &(B) are answered holding that the activities of the Railways
as provided under Section 11(g) and (h) read with Section 2(31)(c) of the
Railways Act, 1989, and its activity of conveying electricity from its traction
sub-station/non-traction sub-stations/switch-yards to various points of
consumption including locomotives, do not constitute ‘distribution of electricity’
as, among others, there is no supply (ie sale of electricity for a price) by
Railways in terms of Section 2(70) of the Electricity Act.
VI. ISSUE 2:

Whether the ‘non-obstante clause’ in Section 11 of the Railways Act,

1989 and Section 173 of the Electricity Act, 2003, providing for non-
application of Electricity Act, 2003 to the extent of inconsistency with the
Railways Act, 1989 vest in Railways the right to undertake distribution and
use of electricity in the area of operation of Railways unhindered by the
provisions of the Electricity Act, 2003?

A. SUBMISSIONS ON BEHALF OF RAILWAYS:

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 Sri M. G. Ramachandran, Learned Senior Counsel appearing on behalf
of the Railways, would submit that Section 11 of the Railways Act, 1989
begins with a ‘non-obstante clause’ namely “Notwithstanding anything
contained in any other law…”; this non obstante clause is absolute in nature; it
does not stipulate the requirement of ‘anything to the contrary’ contained in
any other law; the non obstante clause is specific to the matters enumerated
in Section 11 which include electricity distribution aspects in sub clause (g),
and further to do all other acts necessary for making, maintaining, altering or
repairing and using the railway in sub clause (h); the implication and
overriding effect of the non obstante clause in Section 11 of the Railways Act,
1989, vis-à-vis Electricity Laws, has been specifically considered by the
Supreme Court in General Manager, Northern Railways represented by
Union of India -v- Chairman, Uttar Pradesh State Electricity Board and
Others, (2012) 3 SCC 329; while this case was under the electricity laws
existing prior to the coming into force of the Electricity Act, 2003 on
10.06.2003, by the time the matter was considered and decided on
09.02.2012, the 2003 Act had been enacted; the Supreme Court had also
considered the same in paras 15 to 17 of the said judgement; the ratio or the
principles laid down in this decision is clear and unambiguous; firstly, the said
decision cannot be restricted only to the laying of the transmission line as
claimed by the opposite side; the words used in Para 17 are “This will
certainly include construction of transmission lines” and not that it is only in
regard to transmission lines; the said decision has comprehensively dealt with
sourcing of electricity by Railways from a generating company, and not from
the distribution licensee in the adjoining area of supply; it relates to
transmission of electricity from the generating station to the Railway
periphery, and thereafter distribution to places of end use/consumption; in the

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said decision, the Supreme Court was considering the aspect of a
transmission line being constructed by Railways outside the area of operation
of the Railways, namely from the Dadri generating station of NTPC to the
traction sub-station of Railways at Ghaziabad, and the 220 KV lines along the
traction till Naini near Allahabad; in terms of the said judgement, the Railways
is entitled to source electricity directly from the generating company, and not
from the distribution licensee of the adjoining area, and construct its own
transmission line up to the Railways periphery without being affected by the
licence requirements under the Electricity laws; if so, it will be anomalous to
state that the Railways cannot distribute and use electricity in the area of its
operation without the grant of a licence under the provisions of the electricity
laws; as a natural consequence, the electricity, sourced from outside and
transmitted by Railways up to its area of operation, is necessarily for
distribution and use in the area of operation of the Railways; the ratio
decidendi of the decision of the Supreme Court is clear, namely, that the
Railways Act, 1989 authorises Railways to undertake all things in connection
with those specified in Section 11 of the Railways Act, 1989 without, in any
manner, being affected by the provisions of the Electricity Laws; in this regard,
the Supreme Court had, in Para 15, taken note of Sections 12 and 14 of the
Electricity Act, 2003; this decision is a law laid down by the Supreme Court
under Article 141 of the Constitution of India; the afore-said decision, holding
that transmission of electricity (which is in fact outside the area of operation of
the Railways) is governed by the provisions of a special enactment i.e., the
Railways Act, 1989 and not by the enactments governing electricity, (para 15,
should be applied with equal force, rather with higher force, in regard to the
distribution of electricity within the area of operations of the Railways).

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 Sri M. G. Ramachandran, Learned Senior Counsel appearing on behalf
of the Railways, would submit that the Division Bench of the Bombay High
Court, in Ganv Bhavancho Ekvott -v- South Western Railway, 2022 SCC
Online Bom 7184, has analysed the entire law on the non obstante clause
with reference to Section 11 of the Railways Act, 1989; in the said judgement,
the Bombay High Court held that, by virtue of the non-obstante clause in
Section 11 of the Railways Act, 1989, the Indian Railways cannot be required
to obtain environmental clearance under the Environment Protection Act,
1986, a fortiori, under the 2011 Costal Regulation Zone Notification, building
permissions from the village panchayat under the Panchayat Act or other
permissions under the other stated State legislation, and licences and fees,
for putting up hoardings by the concerned railways, is not required under the
Mumbai Municipal Corporation Act; the argument that Section 11 does not,
either expressly or by necessary implication, exempt a railway administration
from obtaining environmental clearance under the EP Act, a fortiori, under the
2011 CRZ Notification was rejected as not valid; the Bombay High Court has
based its decision on Section 11 of the Railways Act which confers wide
ranging powers with a non-obstante overriding clause; and under Section 11,
the Railways Act shall have its full operation, other laws should not be an
impediment for operation of the Railways Act, and the provisions of other laws
shall yield place to Railways Act; and these principles equally apply to the
provisions of the Electricity Act, 2003. while considering Section 11 of the
Railways Act, 1989.
Reliance is placed by the Learned Senior Counsel on the judgement of
the Bombay High Court in Union of India, Through General Manager,
Western Railway -v- Municipal Corporation of Greater Mumbai, (2018) 2
AIR Bom R 227; Goa Foundation & Another -v- The Konkan Railway

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Corporation, AIR 1992 Bom 471; Subhas Dutta -v- Union of India, (2001)
3 Cal LT 36; Geologist, District Geologist Office -v- Sunil Kumar, 2015 4
KLCK 0134 (Kerala); and Village Panchayat of Velsao – v. Ministry of
Railways, 2022 SCC OnLine Bom 3526.
With regards interpretation of the non obstante clause, reliance is placed
by the Learned Senior Counsel on (1) Interpretation of Statutes, Vepa P.
Sarathi, 4th Edition pages 578 to 582; (2) Chandavarkar Sita Ratna Rao -v-
Ashalatha S Guram, (1986) 4 SCC 447; (3) Vivek Narian Sharma -v- Union
of India, (2023) 3 SCC 1; and (4) A. Navinchandra Steels (P) Ltd. -v- SREI
Equipment Finance Ltd., (2021) 4 SCC 435.
On repugnancy, inconsistency and the extent to which the Railways Act
can be harmoniously construed with Section 173 of the Electricity Act, 2003,
Sri M.G. Ramachandran Learned Senior Counsel appearing on behalf of the
Railways, would submit that repugnancy is generally with regards
consideration of legislative competence under Article 254 and Schedule VII to
the Constitution; inconsistency is with respected to the provisions of two
different Acts, State or Central as the case may be, or between two different
provisions in the same Act; in case of repugnancy of a State Act to a Central
Act, the State is held to have no legislative competence; in the case of
inconsistency, the entire act is not considered to be invalid, some provisions
may be held not applicable to certain situations to the extent of the
inconsistency; however, the test to determine existence of repugnancy is not
exclusively when the two acts collude with each other, or one has to disobey
one in order to obey the other; even, in the absence of such collision, there
can be inconsistency, if the scheme of the Act, containing the non obstante
clause, is seen, and if the intention of the legislature/Parliament is to occupy
the entire field, in which case the provisions of the other Act should yield to

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allow full effect to the overriding Act; and, in this regard, reference may be
made to (1) State of Orissa -v- M.A. Tulloch & Co., (1964) 4 SCR 461; and
(2) Forum for People's Collective Efforts -v- State of W.B., (2021) 8 SCC
599.
Sri M.G. Ramachandran, Learned Senior Counsel appearing on behalf of
the Railways, would then submit that, besides the non obstante
clause in Section 11, the Railways Act, 1989 is also a special law with regard
to all matters of Railways, including sourcing of electricity, transmission,
distribution and use of electricity within the area of operation of the Railways.
In this regard reliance is placed on the following decisions: (1) State of
Orissa -v- M.A. Tulloch & Co., (1964) 4 SCR 461; (2) Forum for People's
Collective Efforts -v- State of W.B., (2021) 8 SCC 599; (3) Commercial
Tax Officer, Rajasthan -v- Binani Cements Ltd. and Another, (2014) 8
SCC 319; and (4) Parmar Samantsinh Umedsinh -v- State of Gujarat:
2021 SCC OnLine SC 138.
Learned Senior Counsel would further state that, while the Electricity Act,
2003 is a special law compared to commercial laws such as the Indian
Contract Act, 1872 and the Arbitration and Conciliation Act, 1996, the
Railways Act, 1989 has a higher status of a special law even with regard to
electricity in so far as operation of Railways, in its area of operation, is
concerned. Reference is made in this regard to (1) Gujarat Urja Vikas
Nigam Ltd. -v- Essar Power Ltd., (2008) 4 SCC 755; and (2) Commercial
Tax Officer, Rajasthan -v- Binani Cements Ltd. and Another, (2014) 8
SCC 319.
According to the Learned Senior Counsel, on different legal
considerations namely non obstante clause, overriding effect, the scheme and
objective of Railways Act, the Railways Act being a special Law, the

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inconsistency principles, etc, there can be no two views that Section 11 of the
Railways Act, 1989 should be given full effect, and the Electricity Act, 2003
should yield to the provisions of the Railways Act, 1989. Reliance is placed in
this regard on SKL Company -v- Chief Commercial Officer, Southern
Railways (2015) 16 SCC 509.
Learned Senior Counsel would submit that, applying the afore said
principles in the present case also, the provisions of the Electricity Act, 2003
with regards distribution and supply of electricity, including Sections dealing
with cross subsidy surcharge or additional surcharge, cannot be applied to
consumption or use of electricity either by the Railways or any other person in
the area of operation of the Railways, as it would hinder implementation of the
works and functioning of the Railways; various decisions of the Supreme
Court and the High Courts have consistently laid down that Railways would
neither be required to follow nor would they be affected by the conditions
specified in other laws, including environmental laws, municipal laws, etc, and
authorities under such laws cannot require Railways to comply with the same
as in the case of others.

B.SUBMISSIONS ON BEHALF OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that there is no
contradiction between the two statutes; the Railways Act can only
supersede the Electricity Act if any of the provisions of the two statutes are
mutually repugnant and contradictory; else, the two statutes should be
harmoniously construed; the term “inconsistent” means mutually repugnant
and contradictory; it must therefore be shown that the Railways cannot
perform its obligations and functions under both the Statutes
simultaneously, for the Railways Act to prevail over the Electricity Act; no

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such inconsistency has been shown, as Section 11 of the Railways Act and
the Electricity Act are applicable in different spheres, and relate to different
subjects; in Parmar Samantsinh Umedsinh v. State of Gujarat & Ors.
(2021 SCC OnLine SC 138) the Supreme Court held that things are
inconsistent when they cannot stand together at the same time, and one
law is inconsistent with another law, when the command or power or
provision in the law conflicts directly with the command or power or
provision in the other law.” (M. Karunanidhi v. Union of India:(1979) 3
SCC 431); no repugnancy exists between the Electricity Act and the
Railways Act and, therefore, Section 173 of the Electricity Act has no
applicability; the onus to show inconsistency is upon the Railways, which it
has completely failed to do, either before the SERCs or before this
Tribunal; the Electricity Act does not envisage a scenario wherein a
‘distribution licensee’ can cherry pick their own rights and obligations, as
has been sought to be interpreted on behalf of the Railways; the rights and
obligations of a ‘distribution licensee’ are to be strictly read in terms of the
provisions of the Electricity Act; not only is there no inconsistency between
the Railways Act and the Electricity Act, the two statutes are applicable in
completely different areas in so far as ‘distribution of electricity’ is
concerned; the Railways Act does not provide for ‘distribution of electricity’;
and the Electricity Act can alone be referred to and relied upon for the
purpose of distribution of electricity.

It is submitted, on behalf of the Respondents, that Railways have

claimed the status of a deemed licensee under the Electricity Act, and not
under the Railways Act, which is an admission that the Electricity Act is
applicable; for a claim of inconsistency between the two Acts, with respect

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to ‘distribution of electricity’, to be accepted, it must be shown that the
status of a deemed distribution licensee can be claimed under the Railways
Act; there is no dispute that the Railways Act contains no such provision;
even otherwise, Section 11 of Railways Act was introduced during the
regime of the 1910 Act; it could not have been contemplated, when the
Railways Act was enacted, that Section 11 thereof would include within its
ambit the power to distribute electricity, as supply of electricity was a
licenced activity under the 1910 Act; there is no overriding provision in the
Railways Act over other laws; Railways is only entitled to run locomotives
for public carriage of passengers or goods; and the unique activity of
conveying electricity for self-consumption by various locomotives of
Railways as consumers, that too at every point of the entire traction line,
cannot be equated to the point of connection from the delivery points of the
transmission lines or the generating station and the point of connection to
the installation of consumers, as provided in the definition of “distribution
system” under Section 2(19) of the Electricity Act.

It is submitted, on behalf of the Respondents, that reliance placed by

the Railways on the judgement of the Supreme Court, in General
Manager, Northern Railways v. Uttar Pradesh State Electricity Board:
(2012) 3 SCC 329; is erroneous in as much as it only deals with a
particular transmission line; the Central Electricity Regulatory Commission
has also relied on the said judgement in its Order in Petition No.
197/MP/2015 dated 05.11.2015; the issue before the Supreme Court, in
Northern Railways Judgment, was limited to the legality of construction of
the transmission lines by the Northern Railways to draw power from the
power plants of the National Thermal Power Corporation Limited (“NTPC”),

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and no longer from the lines of the Uttar Pradesh State Electricity Board
(“UPSEB”) through which the Northern Railways was drawing power
earlier; the Northern Railways Judgment was based on the 1910 Act,
wherein Section 27D provided for grant of transmission license by the
SERCs or the State Government as the case may be; in such
circumstances, the Supreme Court noted that, in the case of Railways, the
transmission of electricity is governed by the provisions of the Railways
Act; under the 1910 Act, certain powers were granted to the Governments,
which was also duly considered by the Supreme Court as both Northern
Railways and NTPC had obtained permission from their ministries; no such
power has been granted to any Government under the extant statutory
framework; the Supreme Court in fact noted that, even under the Electricity
Act, a direct sale of power by a generating company to a “consumer” is
specifically permitted under Section 10(2) of the Electricity Act; Para 19 of
the said judgement makes it clear that distribution of electricity, which is the
subject matter of the Appeals herein, was not being considered by the
Supreme Court in the Northern Railways Judgment; the Supreme Court
was not even considering the issue of license; it is apparent that, even in
the Northern Railways Judgment, the Railways were being considered as
a ‘consumer’ only, and not a licensee, which is evident from Para 19
thereof; the Northern Railways Judgment in fact supports the case of the
Respondents; reliance placed by the Railways, as well as the CERC, on
the said judgement is wholly misplaced; and it is settled law that a
judgment is an authority for what it decides, and not what follows from it.

C. ANALYSIS:

D. NON OBSTANTE CLAUSE: ITS SCOPE:

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 Section 11 of the Railways Act, 1989 begins with a non-obstante
clause and also contains the words ‘subject to’. A non-obstante clause is a
legislative device to give effect to the enacting part of the Section in case of
conflict over the provisions mentioned in the non-obstante clause. (State
(NCT of Delhi) v. Narender, (2014) 13 SCC 100; State of
Karnataka v. K.A. Kunchindammed : (2002) 9 SCC 90) A clause
beginning with the expression ‘notwithstanding anything contained in this
Act or in some particular provision in the Act or in some particular Act or in
any law for the time being in force’ is more often than not appended to a
Section in the beginning with a view to give the enacting part of the
Section, in case of conflict, an overriding effect over the provision of any
other law. It is equivalent to saying that, inspite of the provisions of the Act
or any other law as stated therein, the non-obstante clause, mentioned in
the enactment following it, will have its full operation or that the provisions
embraced in the non-obstante clause would not be an impediment for an
operation of the enactment. (Ganv Bhavancho Ekvott vs South Western
Railways : 2022 SCC OnLine Bom 7184; Chandavarkar Sita Ratna Rao
v. Ashalata S. Guram: (1986) 4 SCC 447 : AIR 1987 SC 117; South
India Corpn. (P) Ltd. v. Secretary, Board of Revenue, Trivandrum, AIR
1964 SC 207).

Normally the use of the phrase ‘notwithstanding anything contained in

any other law’ is equivalent to saying that the other law shall be no
impediment to the measure. Use of such an expression is another way of
saying that the provision, in which the non obstante clause occurs, would
usually prevail over the other law. (State of Bihar v. Bihar Rajya
M.S.E.S.K.K. Mahasangh, (2005) 9 SCC 129; Ganv Bhavancho Ekvott

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vs South Western Railways : 2022 SCC OnLine Bom 7184). It is usually
employed to give overriding effect to certain provisions over some contrary
provisions that may be found either in the same enactment or some other
enactment, that is to say, to avoid the operation and effect of all contrary
provisions. (Union of India v. G.M. Kokil, 1984 Supp SCC 196).

It is equivalent to saying that, inspite of the laws mentioned in the non-

obstante clause, the provision following it will have full operation, or the
laws embraced in the non-obstante clause will nt be an impediment for the
operation of the enactment or the provision in which the non obstante
clause occurs. (State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh,
(2005) 9 SCC 129; South India Corpn. (P) Ltd. v. Secy., Board of
Revenue, (1964) 4 SCR 280). Use of such an expression is another way of
saying that the provision, in which the non-obstante clause occurs, would
wholly prevail over the other provisions of the Act. Non-obstante clauses
are to be regarded as clauses which remove all obstructions which might
arise out of any of the other provisions of the Act in the way of the
operation of the principal enacting provision to which the non-obstante
clause is attached. (State of Bihar v. Bihar Rajya M.S.E.S.K.K.
Mahasangh, (2005) 9 SCC 129; South India Corpn. (P) Ltd. v. Secy.,
Board of Revenue, (1964) 4 SCR 280; Iridium India Telecom Ltd. v.
Motorola Inc., (2005) 2 SCC 145).

In view of the non obstante clause used therein, Section 11 of the

Railways Act would prevail over any other law for the time being in force,
and the other law would not be an impediment for the operation of Section
11. However, the power available to be exercised, by the railway

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administration under Section 11, is subject to the provisions of the Railways
Act.
E. “SUBJECT TO” ITS SCOPE:

The expression ‘notwithstanding’ is in contra-distinction to the phrase

‘subject to’, the latter conveying the idea of a provision yielding place to
another provision or other provisions to which it is made subject. (Ganv
Bhavancho Ekvott vs South Western Railways : 2022 SCC OnLine
Bom 7184; Chandavarkar Sita Ratna Rao v. Ashalata S. Guram:
(1986) 4 SCC 447 : AIR 1987 SC 117). By use of the words ‘subject to’
therein, the power available to be exercised under Section 11 is subject to
the other provisions of the Railways Act. Consequently, while exercising
the power under Section 11, the railway administration cannot act contrary
to any of the other provisions of the Railways Act. In short, while the
railway administration is entitled to exercise the powers conferred under
different clauses of Section 11 without being restricted by any other law for
the time being in force, such exercise of power under Section 11 cannot fall
foul of or run contrary to any other provision of the Railways Act.

F. JUDGEMENT RELATING TO SECTION 11 OF RAILWAYS ACT:

Bearing the afore-mentioned principles in mind, let us take note of the

judgements relied on behalf of the Railways on the interpretation of a non
obstante clause, and in support of their submission that, in view of the non-
obstante clause in Section 11, the provisions of clauses (g) and (h) of
Section 11 of the Railways Act would prevail notwithstanding anything
contained in the Electricity Act.

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 While the judgement, in A. Navinchandra Steels (P) Ltd. v. Srei
Equipment Finance Ltd., (2021) 4 SCC 435, did not arise under the
Railways Act, reliance was placed thereupon by the Railways to explain the
scope of a non-obstante clause. In the said judgement, the Supreme Court
held that, given the object of the IBC, it was clear that IBC is a special
statute dealing with revival of companies that are in the red; vis-à-vis the
Companies Act, which is a general statute dealing with companies,
including companies that are in the red, the IBC is not only a special statute
which must prevail in the event of conflict, but has a non obstante clause
contained in Section 238, which makes it even clearer that, in case of
conflict, the provisions of the IBC will prevail.

In Ganv Bhavancho Ekvott vs South Western Railways : 2022

SCC OnLine Bom 7184), the PIL was filed aggrieved by the South
Western Railways making large scale construction, for doubling of the
railway track in the State of Goa, without obtaining requisite permissions
under the Goa Panchayat Raj Act, 1994, the Goa Town And Country
Planning Act, the Goa Irrigation Act, 1973, the Goa, Daman & Diu Land
Revenue Code, 1968, and the Coastal Regulation Zone Notification, 2011
issued by the Ministry of Environment And Forests, Government of India.

Paraphrasing Section 11 of the Railways Act, and its relevant

clauses, the Bombay High Court held that the said provisions must be read
as mandating that, in spite of any provisions contained in any other law for
the time being in force except the provisions of the Railways Act and the
provisions of any law in relation to acquisition of land for public purpose or
for companies, a railway administration may, for the purpose of
constructing or maintaining a railway, (i) make or construct in or upon,

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across, under or over any lands such temporary or permanent inclined-
planes, bridges, tunnels, culverts, lines of railways, etc. [clause (a)]; (ii)
alter the course of any rivers, brooks, streams or other water courses, for
the purpose of constructing and maintaining tunnels, bridges, passages or
other works over or under them [clause (b)]; (iii) erect and construct such
houses, warehouses, offices and other buildings, etc., and other works and
conveniences as the railway administration thinks proper [clause (d)]; (iv)
alter, repair or discontinue such buildings, works and conveniences [clause
(e)]; and (v) do all other acts necessary for making, maintaining altering or
repairing and using the railway [clause (h)]; given these wide ranging
powers conferred by Parliament on a railway administration, and bearing in
mind the impact that the non-obstante clause, at the beginning of Section
11 of the Railways Act, had on other enactments, it could not be contended
that, notwithstanding Section 11 of the Railways Act conferring such wide
ranging powers with overriding effect, the railway authorities are required to
obtain building permissions from the village panchayat under the
Panchayat Act or other permissions under the other stated State
legislations; accepting such a contention would require the provisions
contained in Section 11 to be totally ignored or to render Section 11
completely ineffective; and the Panchayat Act must yield to Section 11 of
the Railways Act when a railway administration proceeds to execute the
work of construction or maintenance of a railway in accordance with the
provisions of the Railways Act, and the laws relating to land acquisition.

In Union of India represented through General Manager, Western

Railway vs Municipal Corporation of Greater Mumbai: 2017 SCC
OnLine Bom 9424 : (2018) 2 AIR Bom R 227, petitions were filed seeking

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an order restraining the Respondent - Municipal Corporation of Greater
Mumbai (“MCGM”) and its authorities from applying the provisions of
Sections 328 and 328A of the Mumbai Municipal Corporation Act, in
respect of hoardings belonging to the Union of India (Railways); and for a
declaration that the activities of Railways on the Railway properties,
including commercial activities permissible under the provisions of the
Railways Act, 1989, were not subject to the jurisdiction of the Municipal
Authorities under the provisions of the MMC Act.

After referring to Section 11 of the Railways Act which relates to the

power of the railway administrations to execute all necessary works, to
Section 184 which relates to taxation on railways by local authorities, and
Section 185 which relates to taxation on railways for advertisement, the
Division Bench of the Bombay High Court referred to Sections 328, 328 A
and 479 of the MMC Act, and observed that there was no dispute between
the parties that, in so far as advertisements within the railway station or
upon any wall or other property of the railway, except the one which are
fronting any street, no permission was required under Section 328A; the
dispute was with regard to advertisements situated on the property of
railways, and which had frontage against the street; Section 11 begins with
a non-obstante clause; under clause (a) of Section 11, the railway
administration is empowered to develop any railway land for commercial
use, and under clause (d) it is empowered to erect and construct such
houses, warehouses, offices and other buildings, and such yards, stations,
wharves, engines, machinery apparatus and other works and conveniences
as the railway administration thinks proper; hoardings erected by the
railways on its land would not require permission of the Corporation either

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under Section 328 or 328A of the MMC Act, and consequently no license
would be required under Section 479; and in view of Section 185 of the
Railways Act, 1989, which begins with a non-obstante clause, no
advertisement tax could be levied by any local authority unless the Central
Government issues a notification declaring the railway administration to be
liable to pay tax.

The Division Bench of the Bombay High Court held and declared that
(a) the provisions of Sections 328 and 328A of the Mumbai Municipal
Corporation Act would not be applicable to the hoardings erected by
Railways on the railway as defined in Clause (31) of Section 2 read with
section 197 of the Railways Act, 1989; and (b) the Railway Administration
or its agents would not be liable to pay any tax to the Mumbai Municipal
Corporation in respect of any advertisement made on any part of the
Railways, unless a notification to that effect is issued by the Central
Government under Section 185 of the Railways Act, 1989.

In Goa Foundation v. Konkan Railway Corporation, 1992 SCC

OnLine Bom 205 : (1994) 1 Mah LJ 21 : AIR 1992 Bom 471, the
petitioners had approached the Bombay High Court praying that the
Konkan Railway Corporation should be compelled to procure environment
clearance, for the alignment passing through the State of Goa, from the
Ministry of Environment and Forests, Government of India, and until such
clearance is secured all the work in respect of providing the railway line
should be withheld.

The Bombay High Court held that the Konkan Railway Corporation was
justified in contending that the provisions of the Environment Act had no
application in respect of works undertaken in exercise of the powers

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conferred under Section 11 of the Railways Act, 1989; Section 11, inter
alia, provides that notwithstanding anything contained in any other law, the
Railway Administration may, for the purposes of constructing or maintaining
a railway, make or construct in or upon, across, under or over any lands, or
any streets, hills, valleys, roads, streams, or other waters, rivers as it thinks
proper; the wide ambit of the provisions of Section 2(31), and the non-
obstante clause in Section 11, made it extremely clear that the provisions
of the Environment Act did not bind construction or maintenance of a
railway line; the Railways Act was a legislation enacted subsequent to the
Environment Act; and the Konkan Railway Corporation was right in
claiming that, for the purpose of providing a railway line, clearance was not
required even though the line passes over the railways, rivers, creeks, etc,
in view of the specific provisions of Section 11 of the Railways Act.

In Subhas Dutta v. Union of India, 2001 SCC OnLine Cal 178, a

Public Interest Litigation was filed before the Division Bench of the Calcutta
High Court to restrain the Respondents from extending the project of Metro
Rail through the river bed of Adi Ganga, and to recall and rescind extension
of the Metro Rail project for protection of the environment. After referring to
Section 11 of the Railways Act, 1989, and to clauses (a) to (h) thereof, the
Division Bench held that Section 11 starts with a non-obstante clause;
thereby the provisions of any other enactment will not come in the way of
the construction undertaken by the railways, be it on any line or any streets,
hills, valleys, roads, rivers, canals, brooks, streams or other waters and
drains; in view of the overriding provisions of this Act, all other provisions
stand superseded by virtue of this non-obstante clause; the Environment
(Protection) Act, 1986 is an earlier legislation than that of the Indian

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Railways Act, 1989; therefore the Indian Railways Act, 1989 will supersede
the Environment (Protection) Act, 1986; Section 24 of the Environment
(Protection) Act, 1986 also has a non-obstante clause; these two non-
obstante Clauses appear in two different enactments; but the Railways Act
is an Act subsequent to that of the Environment Act; in case of two non-
obstante clauses appearing in two different enactments, when the
subsequent enactment says that notwithstanding anything contained in any
law for the time being in force, it supersedes all the enactments prior to
coming into force of this enactment; a non-obstante Clause is normally
used as a legislative device to modify the ambit of the provisions of the
existing law and to have overriding effect; and therefore, in view of this
statutory provision, no effect can be given to the Environment Protection
Act.

After referring to the Notification issued under the Environment

(Protection) Rules, 1986, whereby the Central Government had directed
that expansion or modernization of any activity if pollution load is to exceed
the existing one or new project listed in Schedule I to the notification, shall
not be undertaken in any part of India unless it has been accorded
environmental clearance by the Central Government, the Division Bench of
the Calcutta High Court observed that Schedule-I appended to the
Notification did not include Railway Projects; the State Pollution Board had
also informed that they had issued an Order extending permission to the
Metro Railway Authorities for cutting of trees for the project as per the
recommendation of the Forest Department, Government of West Bengal;
so far as railway projects are concerned, there is no requirement of
environment clearance under the statutory provisions, and the Railways

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Act, 1989 has overriding effect; that did not mean that there should be
complete go by to environmental impact; and, though no direction could be
given in so far as the Project was concerned as there was no statutory bar,
however the Metro Railway Authorities had already appointed an expert
body to undertake assessment of the environmental impact.

The Division Bench referred with approval to Goa Foundation v. The

Konkan Railway Corporation : AIR 1992 Bombay 471 wherein a Division
Bench of the Bombay High Court, after considering the matter, declined to
exercise writ Jurisdiction over construction of the Railway Project. It also
noted that, in the Special Leave Petition filed there against, the Supreme
Court had, by Order dated 7.12.89, affirmed the judgement and had only
set aside the costs awarded by the Bombay High Court, and certain
remarks made in that Judgment.

The Division Bench of the Calcutta High Court concluded by holding

that, in view of these statutory provisions, it was not possible to interfere in
the Public Interest Litigation, but they hoped that the Railway
Administration would abide by the advice given by M/s. M.N. Dastur &
Company on their Study and Assessment of the Environmental Impact of
this Project.

In The Geologist, District Geologist Office vs Sunil Kumar :

2015 SCC ONLINE KER 13635, the Division Bench of the Kerala High
Court held that Section 11 of the Railways Act, 1989 enumerated the power
of the Railway administration to execute all necessary works; all the
petitioners, who had filed the Writ Petitions, claimed to be sub-contractors
from a Railway contractor, who had been granted contract to supply red
earth for the Railway line/doubling of the Railway line; Section 11

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empowered the Railway administrations to carry out any work as
enumerated in Section 11; the present was a case where the petitioners
were claiming the right to mine/extract red earth from the survey numbers
owned by private persons; no work as enumerated in Section 11 was being
done in the re-survey numbers involved in the Writ Petition; Section 11 was
wholly inapplicable; the key words under Section 11(a) were “make or
construct in or upon, across, under or over any lands, or any streets”;
Section 11 empowered the Railway administration, notwithstanding
anything contained in any other law for the time being in force, to do
various acts “for the purpose of constructing or maintaining a railway”; the
act, which is empowered by the above provision, is to make or construct in
or upon, under or over any lands; thus the act, which is envisaged under
Section 11(a), must be comprised in the words “make or construct”; the
word ‘make’ has been defined in P. Ramanatha Aiyar's Law Lexicon
3rd Edition in the following words: “TO MAKE”. In itself it involves a
conscious act on the part of the maker.” (per COLLINS, J., Dickins v. Gill,
(1896) 2 QB 310); “To make”, in the mechanical sense, does not signify to
create out of nothing, for that surpasses all human power. It does not often
mean the production of a new article out of materials entirely raw, but
generally consists in giving new shapes, new qualities, or new
combinations to matter which has already gone through some other
artificial process”; the word “make” includes also the power to amend, alter
or rescind; the plain meaning of the word ‘make’ does not include a mining
activity, i.e., the activity of excavation of red earth; the second word used in
Section 11(a) is ‘construct’; the word ‘construct’ has been defined in P.
Ramanatha Aiyar's Law Lexicon 3rd Edition as follows: “Construct”, with
its grammatical variations, in relation to a building, means to construct,

Page 100 of 387

reconstruct, erect, re-erect, extend or alter structurally a building;
‘Construction’ includes construction of building as well as alteration or
repairs; Construction of a road as contemplated under Section 11(a) has to
be understood as carrying out any work by the Railway administration on
the lines of the railways; the activity, which is being claimed by the
petitioners of extraction of red earth, cannot be said to be covered by
Section 11(a); a plain reading of Section 11 of the Railways Act, 1989
clearly indicates that no work is being carried out in the survey numbers
owned by private persons or by the Railways, nor in any of the contracts;
and, hence, Section 11 on its plain reading is not attracted in the present
case.

The Division Bench further held that, in Goa Foundation, the Railway
administrations was proceeding to carry out the work on land which was
acquired by the Railway; the said case was not a case of carrying out any
work in any private land, nor was the said case of carrying out any mining
operation in a private land for extraction of sand; the said case was clearly
distinguishable; the provisions of Section 14 of the Railways Act, 1989
indicated that, even for owners and occupiers of land adjoining the Railway,
“accommodation works” was contemplated by the Railway under Section
16, which are affected by any railway work; it is clear that any act cannot
contemplate carrying out any work in the land of any private owners without
any compensation or accommodation work; and, there being no such
contemplation of carrying out any work in the survey/re-survey numbers in
which the petitioners are claiming right of excavation of land, it is clear that
the provisions of Section 11 or any other provisions of the Railways Act,
1989 are not attracted in the present case.

Page 101 of 387

 In Village Panchayat of Velsao - Pale - Issorcim, Vs Ministry of
Railways: 2022 SCC ONLine Bom 3526, the Petitioner, a Village
Panchayat, objected to Respondent Nos. 1 to 3 undertaking works
concerning the railway track doubling project within the Panchayat
jurisdiction contending that permission from the Panchayat was necessary
before the railways could undertake any such works, particularly because
the Panchayats have been conferred constitutional status by the
73rd Amendment to the Constitution of India.

The Division Bench of the Bombay High Court observed that the issue
raised in the petition was covered against the Petitioner in Ganv
Bhavancho Ekvott v. South Western Railways; and even if it were to be
assumed that the District Planning Committees were constituted in terms of
the Panchayat Raj Act, 1994, any action of such planning authorities might
have to yield to the acts of the railways if permitted under Section 11 of
the Railways Act, 1989.

G. TO WHAT EXTENT ARE THE AFORE-SAID JUDGEMENTS

APPLICABLE TO THE PRESENT BATCH OF CASES?

In Ganv Bhavancho Ekvott vs South Western Railways : 2022 SCC

OnLine Bom 7184), the challenge, to the South Western Railways making
large scale construction for doubling of the railway track, was on the ground
that such construction was being made without obtaining requisite
permissions under the Panchayat Act, the Town And Country Planning
Act, the Irrigation Act, the Land Revenue Code, 1968, and the Coastal
Regulation Zone Notification, This challenge was rejected by the Bombay
High Court holding that the requirement of compliance with the provisions
of these Acts must yield to Section 11 of the Railways Act when a railway

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administration proceeds to execute the work of construction or
maintenance of a railway in accordance with the provisions of the Railways
Act. Doubling of the railway track, is construction of railway lines over land,
which specifically falls within the ambit of Section 11(a) of the Railways Act.

In Union of India represented through General Manager, Western

Railway vs Municipal Corporation of Greater Mumbai: 2017 SCC
OnLine Bom 9424 : (2018) 2 AIR Bom R 227, an order was sought to
restrain application of Sections 328 and 328A of the Mumbai Municipal
Corporation Act, in respect of hoardings belonging to the Railways. Section
184(1) of the Railways Act provides that the railway administration is not
liable to pay any tax in aid of the funds of a local authority unless the Govt
of India declares it to be liable. Likewise, under Section 185(1), the Railway
administration is not liable to pay any tax to any local authority in respect of
any advertisement made on any part of the Railway, unless the Govt of
India declares it to be liable. As Section 11 of the Railways Act is subject
to the other provisions of the Railways Act, including Section 184 and
Section 185 thereof, the Division Bench of the Bombay High Court held that
no permission was required under Section 328A in so far as
advertisements within the railway station or upon any wall or other property
of the Railway was concerned unless a notification to that effect was issued
by the Central Government.

In Goa Foundation v. Konkan Railway Corporation, 1992 SCC

OnLine Bom 205: (1994) 1 Mah LJ 21 : AIR 1992 Bom 471, the Bombay
High Court held that the Konkan Railway Corporation was justified in
claiming that, for the purpose of providing a railway line, environmental

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clearance was not required as the line passes over the railways, rivers,
creeks, etc. which is covered under Section 11(a) of the Railways Act.

In Subhas Dutta v. Union of India, 2001 SCC OnLine Cal 178 : (2001)
3 Cal LT 36, the relief sought was to restrain the Railways from extending
the project of Metro Rail through the river bed of Adi Ganga, for protection
of the environment. The Division Bench of the Calcutta High Court held
that, so far as railway projects are concerned, there is no requirement of
environment clearance under the statutory provisions, and the Railways
Act, 1989 has overriding effect. This again relates to construction of a
railway project falling under Section 11(a) of the Railways Act.

In The Geologist, District Geologist Office vs Sunil Kumar : 2015

SCC ONLINE KER 13635, all the petitioners claimed to be sub-contractors
of a Railway contractor, who had been granted contract to supply red earth
for the Railway line/doubling of the Railway line. They claimed a right to
mine/extract red earth from the survey numbers owned by private persons.
The Division Bench of the Kerala High Court held that the key words under
Section 11(a) were “make or construct in or upon, across, under or over
any lands, or any streets”; in Goa Foundation, the Railway administration
was proceeding to carry out the work on land which was acquired by the
Railway; no work, as enumerated in Section 11, was being done in the re-
survey numbers involved in the Writ Petition; and, hence, Section 11 was
not attracted in the present case.

In Village Panchayat of Velsao - Pale - Issorcim, Vs Ministry of

Railways: 2022 SCC ONLine Bom 3526, the Village Panchayat objected
to the Railways undertaking works concerning the railway track doubling
project without obtaining permission from the Panchayat. The Division

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Bench of the Bombay High Court observed that the issue raised in the
petition was covered against the Petitioner in Ganv Bhavancho
Ekvott v. South Western Railways; and any action of planning authorities
under the Panchayat Raj Act may have to yield to the acts of the railways if
permitted under Section 11 of the Railways Act, 1989.

The common thread, running through all the aforesaid

judgements, is that the activities undertaken by the Railways therein was in
terms of either Section 11 or some other specific provision of the Railways
Act. In the light of the law declared in the said judgements, it is only if the
Sections 2(31)(c) and Section 11(g) & (h) of the Railways Act are attracted,
and it is held that the power to erect, operate, maintain or repair a power
supply and distribution installation, in connection with the working of the
railways, would suffice for the Railways to be held to be a deemed
distribution licensee under the third proviso to Section 14 of the Electricity
Act, can the Railways then be held entitled to seek open access without
having to pay cross subsidy surcharge and additional surcharge under
Section 42 of the Electricity Act.

H. NON OBSTANTE CLAUSE MUST BE STRICLY CONSTRUED:

In must be borne in mind that, while interpreting a provision

containing a non-obstante clause, it should first be ascertained what the
enacting part of the Section provides, on a fair construction of the words
used according to their natural and ordinary meaning. (Aswini Kumar v.
Arabinda Bose*; A.V. Fernandez v. State of Kerala, 1957 SCR 837). The
court must then try to find out the extent to which the legislature had

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intended to give such a provision overriding effect. The non obstante
clause is no doubt a very potent clause intended to exclude every
consideration arising from another statute but for that reason alone, the
scope of that provision must be determined strictly. When the Section
containing the said clause does not refer to any particular provisions which
it intends to override but refers to the provisions of the statute (or other
statutes) generally, it is not permissible to hold that it excludes the whole
Act (or other laws) and stands all alone by itself. (Madhav Rao
Scindia v. Union of India: (1971) 1 SCC 85; A.G. Varadarajulu v. State
of T.N., (1998) 4 SCC 231).

Under the scheme of modern legislations, a non obstante clause

has a contextual and limited application. The impact of a “non obstante
clause” on the Act must be kept measured by the legislative policy and
should be limited to the extent it is intended by Parliament and not beyond
that. (ICICI Bank Ltd. v. SIDCO Leathers Ltd. [(2006) 10 SCC 452; JIK
Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255; Ganv
Bhavancho Ekvott vs South Western Railways: 2022 SCC OnLine
Bom 7184). Even if the non obstante nature of a provision is of wide
amplitude, its interpretation must be confined to the legislative policy. (ICICI
Bank Ltd. v. SIDCO Leathers Ltd., (2006) 10 SCC 452) A non
obstante clauses is not always to be regarded as repealing clauses nor as
clauses which expressly or completely supersede any other provision of the
law, but merely as clauses which remove all obstructions which might arise
out of the provisions of any other law in the way of the operation of the
principal enacting provision to which the non obstante clause is attached.
(State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh, (2005) 9 SCC

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129; Ganv Bhavancho Ekvott vs South Western Railways : 2022 SCC
OnLine Bom 7184).

Since the non-obstante clause in Section 11 is with respect to any

other law in force, but is subject to the provisions of the Railways Act, its
scope must be construed strictly. When so construed, Section 11(g) & (h)
would prevail over any other law in force only to the extent it so specifically
provides, and not beyond.

The non-obstante clause in Section 11 of the Railways Act should

be confined to the purposes referred to in clause (a) to (h) thereunder, to
achieve the object of the legislation. While constructing or maintaining a
railway, the railway administration cannot be heard to say that it enjoys
immunity from adhering to other legislations, be it plenary or subordinate,
which has no relation to the enacting part of Section 11. As the power
conferred by Section 11 is the power to undertake the activity of
constructing, keeping in good condition and to repair those things
mentioned in clauses (a) to (h) of Section 11, the non-obstante clause, in
Section 11 of the Railways Act, can neither be expanded beyond what
clauses (a) to (h) thereunder provide, nor can it be so read as to confer on
the railways the power to distribute electricity to persons other than the
railways.

I. JUDGEMENT OF SUPREME COURT IN “NORTHERN RAILWAY VS

UPSEB”:

As great stress is placed, on behalf of the Railways, on the

judgement of the Supreme Court, in General Manager, Northern
Railways represented by Union of India -v- Chairman, Uttar Pradesh

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State Electricity Board and Others, (2012) 3 SCC 329, it is useful to take
note of the law declared therein.

The dispute, in the said judgement, related to the legality of

construction of the transmission lines by Northern Railways, to draw power
from the power plants of NTPC and to stop using the transmission lines of
the Uttar Pradesh State Electricity Board through which they were drawing
power earlier. UPSEB was purchasing power from NTPC and supplying it to
the Northern Railways through its transmission lines. Finding the tariff
of UPSEB to be excessive, Railways decided to construct their own
transmission lines. They obtained approval of the Central Government, and
then entered into a power purchase agreement with NTPC.

When Railways started constructing the transmission lines from the

Power Plants of NTPC up to the sub-station of Railways at Dadri, District
Ghaziabad, U.P, the UPSEB issued a notice calling upon them to
immediately stop construction of the distribution/service lines, failing which
the said lines would be demolished. This notice was challenged by the
Railways before the Delhi High Court which allowed them to carry on their
work of construction. After the construction of transmission lines was
completed, the Railways started drawing power from the NTPC power
plants through those lines. That led UPSEB to file Writ Petition No. 3588 of
2001 in the Allahabad High Court to challenge the action of the Railways in
drawing electrical energy from NTPC through the Railway's own service
lines. At the request of the Railways, both these writ petitions were
transferred to the Supreme Court.
It was submitted, before the Supreme Court, that Sections 11(a) and
11(g) of the Railways Act, 1989 empowered Railways to carry out all such

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necessary works for the purposes of constructing or maintaining a railway;
NTPC had also the authority to sell power to the Railways in its capacity as
a generating company under Section 43-A of the Electricity (Supply) Act,
1948; as NTPC was a wholly-owned company of the Central Government,
It had to obtain permission from the Central Government, which it had;
Railways had also obtained necessary permission from the Government of
India and had, thereafter, entered into necessary agreements with NTPC;
and the authority of the Railways, to act as above, was left unhindered
under Section 173 of the Electricity Act, 2003 (which Act replaced the
Electricity (Supply) Act, 1948).
It was however contended, on behalf of the UPSEB, that the Central
government was not competent to grant permission to the Railways to buy
power from NTPC, or to construct transmission lines; and such activity
ought to have been sanctioned by the U.P. State Electricity
Commission/State Government under Section 27-D of the 1910 Act;
Sections 11(a) & (g) of the Railways Act, 1989 can be read to authorise the
Railways to have their electricity supply lines only for working and
maintenance of the Railways, and not for transmitting energy from
generating stations; if transmitting lines were to be constructed, a licence
was necessary to be obtained; and Section 27-D of the 1910 Act cannot be
ignored while reading Sections 11(a) & (g) of the Railways Act, 1989.
The Supreme Court held that Section 27-D of the Electricity Act, 1910
came into force on 31-12-1998; the agreements between the Railways and
NTPC was signed prior thereto in March, 1998; in terms of Section 27-D of
the Electricity Act, 1910 and Sections 12 and 14 of the Electricity Act, 2003,
no person other than those authorised or otherwise exempted by an
appropriate Government or the appropriate Commission shall be entitled to
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engage in the activities of transmission or distribution of electricity;
however, in the case of the Railways, transmission of electricity was
governed by the provisions of a special enactment i.e. the Railways Act,
1989, and not by the enactments governing electricity; Sections 11(a) and
(g) of the Railways Act, 1989 authorised Railways to construct necessary
transmission lines, dedicated for their own purpose; it was not possible to
read this Section in a restricted manner in which it was sought to be
conveyed; this was because the principal part of Section 11 authorised the
railway administration to execute all necessary works for the purpose of
constructing or maintaining railways; Section 11(a) authorised Railways to
make or construct in or upon, across, under or over any lands electric
supply lines; Section 11(g), which authorised the Railways to erect,
operate, maintain or repair any electric traction equipment, power supply
and distribution installations in connection with the working of the Railways,
clearly empowered them to erect any electric traction equipment, and
power supply and distribution installation which is in connection with the
work of the Railways; this would include construction of transmission lines;
Section 26-A(1) of the Electricity (Supply) Act, 1948 exempted the
generating company from the requirement of taking a licence under the
Electricity Act, 1910; the generating company had the necessary authority
to enter into a power purchase agreement under Section 43-A of the
Electricity (Supply) Act, 1948; NTPC had been permitted by the Central
Government to enter into an agreement; and both Railways and NTPC had
obtained permission, from the ministries concerned, prior to entering into
this agreement.
The Supreme Court further observed that, in the instant case,
Railways found the tariff of UPSEB to be excessive and, therefore, decided
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to construct their own transmission lines; this being so, the action on the
part of the Railways of constructing the transmission lines, and drawing
power from thermal power plants of NTPC, was perfectly legal; even under
Section 10(2) of the Electricity Act, 2003, a direct sale of power by a
generating company to a consumer is specifically permitted; and, in the
circumstances, the notice given by the UPSEB was totally uncalled for, and
was required to be quashed and set aside.
Section 27-D of the Electricity Act, 1910 related to the grant of
transmission licence by the State Government, and sub-section (1) thereof
stipulated that, until the State Commission is established, the State
Government and thereafter the State Commission may, subject to the
provisions of sub-section (4), grant a transmission licence to any person.
Section 26-A (1) of the Electricity Supply Act, 1948 stipulated that nothing
in the Indian Electricity Act, 1910 shall be deemed to require a generating
Company to take out a license under the 1910 Act, or to obtain sanction of
the State Government for the purpose of carrying on any of its activities.
As a result of Section 26-A (1), a generating company, in the afore-said
case - NTPC, was no longer required to obtain a license under the 1910
Act or to obtain sanction of the State Government for carrying on its
activities of generation of electricity.

Section 43-A of the 1948 Act related to the terms, conditions and tariff
for the sale of electricity by a generating company. Section 43-A(1)(c)
enabled a generating company to enter into a contract, for the sale of
electricity generated by it, with any other person with the consent of the
competent Government. Section 2(3-A) of the 1948 Act defined ‘competent
government’ to mean the Central Government in respect of a generating

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company wholly or partly owned by it. Consequently, as far as sale of
electricity by a generating company was concerned, NTPC was entitled to
enter into a contract, for the sale of electricity generated by it, with any
person (in the present case the Railways) with the consent of the Central
Government.

It is in such circumstances that the Supreme Court, in Northern

Railway vs. UPSEB, held that, for the purpose of sale of electricity
generated by it, NTPC could enter into a contract with the Indian Railways
with the approval of the Central Government; since the said Power
Purchase agreement was entered into in March 1998, before Section 27-D
was inserted into the Indian Electricity Act, 1910 on 31-12-1998, Section
27-D, which required a transmission license to be obtained, had no
application; and Sections 11(a) & (g) of the Railways Act empowered
Railways to erect any electric traction equipment, and power supply and
distribution installation which is in connection with the work of the Railways;
and this would include construction of transmission lines.

Since Section 11 of the Railways Act would prevail, notwithstanding

anything contained in any other law, the Supreme Court, in Northern
Railway vs. UPSEB, held that such a power to make or construct electric
supply lines, as also the power to erect, operate, maintain or repair any
electric traction equipment, would enable it to erect transmission lines for
supply of the electricity by the generating company (NTPC) to it, without
being forced to procure electricity at a far higher tariff from the U.P. State
Electricity Board.

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 Though, the case before it related to a period prior to the 2003 Act
coming into force, Section 10(2) of the Electricity Act, 2003 was noted by
the Supreme Court in the afore-said Judgment. Among the main features of
the Electricity Act, 2003 is to freely permit generation, which activity has
been de-licensed under the said Act. Section 10(2) thereof enables a
generating company to supply electricity to any licensee in accordance with
the 2003 Act and the rules and regulations made thereunder and, subject
to the Regulations made under Section 42(2), to supply electricity to any
consumer.

While the first limb of Section 10(2) enables it to supply electricity to

any licensee in accordance with the provisions of the 2003 Act, the second
limb enables the said generating company to supply electricity to any
consumer, subject to the Regulations made under Section 42(2) of the
2003 Act. It is evident, therefore, that the power conferred on the
generating company by Section 10(2), to supply electricity to any
consumer, is specifically made subject to the requirements of Section 42(2)
of the Electricity Act in terms of which different State Commissions have
framed regulations for providing open access to a consumer (other than a
distribution licensee), on payment by the said consumer of cross subsidy
surcharge to the distribution licensee within whose area of supply the
consumer falls.

While the provisions of Section 10(2) of the 2003 Act was no doubt
noted by the Supreme Court in Northern Railway vs. UPSEB, the dispute
therein related to erection, operation and maintenance of a transmission
line by the Railways during the period when the governing laws were the
Electricity Supply Act, 1948 and the Indian Electricity Act, 1910. Unlike the

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aforesaid judgement, what we are required to examine in this batch of
appeals is whether the Indian Railways can claim to be a deemed
distribution licensee under the third proviso to Section 14 of the 2003 Act or
whether it is merely a “consumer” which is entitled to procure electricity
directly from generators, by way of open access, on payment of cross
subsidy surcharge to the concerned licensees under Section 42 of the
Electricity Act.

J. WHEN IS A PRECEDENT BINDING?

It is only the principle found out upon a reading of a judgment as a

whole, in the light of the questions before the Court, that forms the ratio and
not any particular word or sentence. A judgment of the Court has to be read
in the context of questions which arose for consideration in the case in
which the judgment was delivered. The law which is binding would,
therefore, extend to all observations of points raised and decided by the
Court in a given case. (Director of Settlements, A.P. v. M.R. Apparao,
(2002) 4 SCC 638).

The submissions, urged on behalf of the railways, is that (1) the said
decision cannot be restricted only to the laying of the transmission line as
claimed by the opposite side; (2) the words used in Para 17 of the
judgement are “This will certainly include construction of transmission
lines”, and not that it is only in regard to transmission lines; (3) the said
decision dealt with sourcing of electricity by Railways from a generating
company, and not from the distribution licensee in the adjoining area of
supply; (4) it relates to transmission of electricity from the generating
station to Railways periphery, and thereafter distribution to places of end
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use/consumption; (6) in terms of the said judgement, the Railways is
entitled to source electricity directly from the generating company, without
being affected by the licence requirements under the Electricity laws; (7)
the electricity, sourced from outside and transmitted by Railways up to its
area of operation, is necessarily for distribution and use in the area of
operation of the Railways; and (8) the said judgement should also be
applied in regard to the distribution of electricity within the area of
operations of the Railways.

These conclusions which the Learned Senior Counsel appearing for

the Railways seeks to draw from the judgement of the Supreme Court, in
Northern Railway vs. UPSEB, and which he claims are consequences
arising therefrom, are not the conclusions which the Supreme Court had
arrived at in the said judgement, but what, according to the Learned Senior
Counsel, flows as a consequence of the law declared in the said
judgement. As what is of the essence in a decision is its ratio, and not
every observation found therein nor what logically follows from the various
observations made in the judgment, the aforesaid submissions need only to
be noted to be rejected.

It is also not a profitable task to extract a sentence here and there

from a judgment and to build up on it. (State of Orissa v. Sudhansu
Sekhar Misra; AIR 1968 SC 647). Judgments ought not to be read as
statutes. (Sri Konaseema Cooperative Central Bank Ltd. v. N.
Seetharama Raju, AIR 1990 AP 171; Kanwar Amninder Singh v. High
Court of Uttarakhand and another, 2018 SCC OnLine UTT 1026). A
stray sentence in a judgement cannot be read out of context. (GUVNL V.
GERC: (Order of APTEL in Appeal No. 371 of 2023 dated 09.11.2023).

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As that is what the Learned Senior Counsel seeks to do, from a reading of
the judgement of the Supreme Court in Northern Railway vs. UPSEB, the
aforesaid submissions of his, necessitate rejection also on this score.

K. DOES THE DOCTRINE OF REPUGNANCY APPLY?

On the submission, urged on behalf of the Railways, that, since the

Railways Act occupies the entire field on all aspects of the Railways, the
provisions of the Electricity Act should yield to allow full effect to the
Railways Act, it must be borne in mind that Article 254 of the Constitution
relates to inconsistency between laws made by Parliament and laws made
by the Legislature of the States. Under Article 254(1), if any provision of a
law made by the Legislature of a State is repugnant to any provision of a
law made by Parliament which Parliament is competent to enact, or to any
provision of an existing law with respect to one of the matters enumerated
in the Concurrent List, then, subject to the provisions of clause (2), the law
made by Parliament, whether passed before or after the law made by the
Legislature of such State, or, as the case may be, the existing law, shall
prevail and the law made by the Legislature of the State shall, to the extent
of the repugnancy, be void.
L. JUDGEMENTS RELIED ON BY LEARNED COUNSEL ON BOTH
SIDES:
We shall now examine the judgements, relied by Learned Senior
Counsel and Learned Counsel on both sides, to ascertain whether the
doctrine of repugnancy has any application to the facts of the present case.
In State of Orissa v. M.A. Tulloch & Co: AIR 1964 SC 1284, the
respondent worked a manganese mine in the State of Orissa under a lease
granted by that State under the provisions of the Mines and Minerals
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(Development and Regulation) Act, 1948. While the respondent was
working the mines, the State legislature of Orissa passed an Act called the
Orissa Mining Areas Development Fund Act, 1952 (for short “the Orissa
Act)” whereunder certain areas were constituted as “mining areas”; and,
under the powers conferred under that enactment, the State Government
was empowered to levy a fee on a percentage of the value of the mined ore
at the pit's mouth.
When a demand was raised, the respondent questioned the legality of
the demand before the High Court which held that the Orissa Act had been
rendered ineffective or suppressed by a Central enactment — The Mines
and Minerals (Regulation and Development) Act, 1957; on the coming into
force of the Central Act, the Orissa Act ceased to be operative by reason of
the withdrawal of legislative competence by force of the entry in the State
List being subject to the parliamentary declaration and the law enacted by
Parliament; and the Orissa Act should be deemed to be non-existent, and
there was lack of power to enforce and realise the demand for payment of
the fee.
Aggrieved thereby, the State filed an appeal, and the Supreme Court
held that, to the extent to which the Union Government had taken under “its
control” “the regulation and development of minerals”, so much was
withdrawn from the ambit of the power of the State legislature under Entry
23 of List-II, and the legislation of the State which had rested on the
existence of power under that entry would, to the extent of that “control”, be
superseded or be rendered ineffective, not merely because of repugnancy
between the provisions of the two enactments, but of a denudation or
deprivation of the State legislative power by the declaration which
Parliament was empowered to make and had made; the State would
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however lose legislative competence only to the “extent to which regulation
and development under the control of the Union has been declared by
Parliament to be expedient in the public interest”; the crucial enquiry was
regarding this “extent” for, beyond it, the legislative power of the State
remained unimpaired; as the legislation by the State was earlier in point of
time, the purpose, width and scope of the State Act and the area of its
operation was required to be examined first; and then the “extent” to which
the Central Act cut into it or trenched on it was required to be considered.

In Forum for People's Collective Efforts v. State of W.B., (2021) 8

SCC 599, the Supreme Court held that an exclusive power has been
entrusted to Parliament to legislate on matters enumerated in List I; on
matters which have been enumerated in List III, Parliament has the power
to make laws notwithstanding clause (3); the State Legislature has the
exclusive powers to make laws for the State or any part of it with respect to
matters in List II, but this power is subject to clauses (1) and (2);
Parliament, under Article 248, has been entrusted with the residuary
powers of legislation (subject to Article 246-A) to make any law with respect
to any matter which is not enumerated in the Concurrent or State Lists;
Article 254(1) embodies the concept of repugnancy on subjects within the
Concurrent List on which both the State Legislatures and Parliament are
entrusted with the power to enact laws; a law made by the legislature of a
State which is repugnant to parliamentary legislation on a matter
enumerated in the Concurrent List has to yield to a parliamentary law
whether enacted before or after the law made by the State Legislature; in
the event of repugnancy, the parliamentary legislation shall prevail and the
State law shall “to the extent of the repugnancy” be void; the consequence

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of a repugnancy between the State legislation with a law enacted by
Parliament within the ambit of List III can be cured if the State legislation
receives the assent of the President; and the grant of Presidential assent
under clause (2) of Article 254 will not preclude Parliament from enacting a
law on the subject-matter, as stipulated in the proviso to clause (2).
The Supreme Court further held that the doctrine of repugnancy
under Article 254(1) operates within the fold of the Concurrent List; Article
254(1) deals with a repugnancy between a law enacted by the State
Legislature with (i) a provision of a law made by Parliament which it is
competent to enact; or(ii) to any provision of an existing law; and (iii) with
respect to one of the matters enumerated in the Concurrent List; three
types of repugnancy are contemplated, the first envisages a situation of an
absolute or irreconcilable conflict or inconsistency between a provision
contained in a State legislative enactment with a parliamentary law with
reference to a matter in the Concurrent List; such a conflict brings both the
statutes into a state of direct collision; this may arise, for instance, where
the two statutes adopt norms or standards of behaviour or provide
consequences for breach which stand opposed in direct and immediate
terms, and the conflict arises because it is impossible to comply with one of
the two statutes without disobeying the other; the second situation involving
a conflict between State and Central legislations may arise in a situation
where Parliament has evinced an intent to occupy the whole field; the
notion of occupying a field emerges when a parliamentary legislation is so
complete and exhaustive as a Code as to preclude the existence of any
other legislation by the State; the State law in this context has to give way
to a parliamentary enactment not because of an actual conflict with the
absolute terms of a parliamentary law but because the nature of the
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legislation enacted by Parliament is such as to constitute a complete and
exhaustive Code on the subject; the third test of repugnancy is where the
law enacted by Parliament and by the State Legislature regulate the same
subject; in such a case, the repugnancy does not arise because of a
conflict between the fields covered by the two enactments, but because the
subject which is sought to be covered by the State legislation is identical to
and overlaps with the Central legislation on the subject; the distinction
between the first test on the one hand with the second and third tests on
the other lies in the fact that the first is grounded in an irreconcilable conflict
between the provisions of the two statutes each of which operates in the
Concurrent List; the conflict between the two statutes gives rise to a
repugnancy, the consequence of which is that the State legislation will be
void to the extent of the repugnancy; the expression “to the extent of the
repugnancy” postulates that those elements or portions of the State law
which run into conflict with the Central legislation shall be excised on the
ground that they are void; the second and third tests, on the other hand,
are not grounded in a conflict borne out of a comparative evaluation of the
text of the two provisions; where a law enacted by Parliament is an
exhaustive code, the second test may come into being; the exhaustive
nature of the parliamentary code is then an indicator of the exercise of the
State's power to legislate being repugnant on the same subject; the third
test of repugnancy may arise where both Parliament and the State
legislation cover the same subject-matter; allowing the exercise of power
over the same subject-matter would trigger the application of the concept of
repugnancy; this may implicate the doctrine of implied repeal in that the
State legislation cannot co-exist with a legislation enacted by Parliament;
but even here, if the legislation by the State covers distinct subject-matters,

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no repugnancy would exist; and, in deciding whether a case of repugnancy
arises on the application of the second and third tests, both the text and the
context of the parliamentary legislation should be borne in mind.
The Supreme Court also held that, in cases where the legislation
provides that the said Act shall be in addition to and not in derogation of
other laws, and the competing statutes are not of the same legislature, it
then becomes necessary to apply the concept of repugnancy; the primary
effort in the exercise of judicial review must be an endeavour to harmonise;
and repugnancy is not an option of first choice but something which can be
drawn where a clear case arises for determination.
While examining the questions (1) whether there was any inconsistency
between the Central notification on the one hand and the State notification
on the other, and (2) whether the inconsistency was irreconcilable or
intolerable, the Supreme Court, in Ram Chandra Mawa Lal v. State of
U.P., 1984 Supp SCC 28, stated the principle thus:
“The Centre and the State both cannot speak on the same channel and
create disharmony. If both speak, the voice of the Centre will drown the
voice of the State. The State has to remain “silent” or it will be “silenced”.
But the State has the right to “speak” and can “speak” (with unquestionable
authority) where the Centre is “silent, without introducing disharmony. If the
Centre sits only on a portion of the Chair, the State can sit on the rest of the
portion with arms thrown on the shoulders of each other. While the State
cannot sit on the lap or on the shoulders of the Centre, both can certainly
walk hand-in-hand, lending support to each other, in a friendly manner,
towards the same destination. If the Centre has built a wall, and has left a
gap from which intruders can infiltrate, the State can fill the gap in the wall,
and thus make its own contribution to the Common Cause. What is more,
each in theory and principle must be presumed to be conscious of the need
for accord and need for accommodating each other in the interest of
“National Harmony”.

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 “The Centre can object to the State speaking on the same channel, or
sitting on its shoulders, and perhaps, even override the State. But the
Centre and the State can certainly accommodate each other in a friendly
spirit in the overall National Interest when both of them are trying to
supplement each other. In the present case both notifications can safely be
construed as supplementary and friendly rather than inconsistent or hostile.
The Centre does not question the authority of the State, and, evidently, the
Centre does not object to the State speaking on the nuance on which the
Centre has maintained silence. There is therefore no real element of
inconsistency in the two notifications”

The Supreme Court further observed that, on principle, every apparent

inconsistency cannot be presumed to be hostile or intolerable. more so
when the Centre does not even raise a whisper of discord; one of the tests
for ascertaining whether the inconsistency is an irreconcilable or
intolerable, is to pose the question: Can the State law be obeyed or
respected without flouting or violating the Central law in letter and spirit?;
and if the answer is in the affirmative, the State law cannot be invalidated;
if both laws can be obeyed without disobeying any, there is no conflict; an
endeavour must be made to place a harmonious interpretation which would
avoid a collision between the two; Repugnancy arises under Article 254
when both the laws are fully inconsistent or are absolutely irreconcilable
and when it is impossible to obey one without disobeying the other;
repugnancy would arise when conflicting results are produced when both
the statutes covering the same field are applied to a given set of facts; but
the court has to make every attempt to reconcile the provisions of the
apparently conflicting laws and court would endeavour to give harmonious
construction; the proper test would be whether effect can be given to the
provisions of both the laws or whether both the laws can stand together.

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 On the principles governing repugnancy, the Supreme Court, in M.
Karunanidhi v. Union of India, (1979) 3 SCC 431, held that, where the
provisions of a Central Act and a State Act in the Concurrent List are fully
inconsistent and are absolutely irreconcilable, the Central Act will prevail
and the State Act will become void in view of the repugnancy; where,
however, a law passed by the State comes into collision with a law passed
by Parliament on an Entry in the Concurrent List, the State Act shall prevail
to the extent of the repugnancy and the provisions of the Central Act would
become void provided the State Act has been passed in accordance with
clause (2) of Article 254; where a law passed by the State Legislature,
while being substantially within the scope of the entries in the State List,
entrenches upon any of the entries in the Central List, the constitutionality
of the law may be upheld by invoking the doctrine of pith and substance if,
on an analysis of the provisions of the Act, it appears that, by and large, the
law falls within the four corners of the State List and entrenchment, if any,
is purely incidental or inconsequential; where, however, a law made by the
State Legislature on a subject covered by the Concurrent List is
inconsistent with and repugnant to a previous law made by Parliament,
then such a law can be protected by obtaining the assent of the President
under Article 254(2) of the Constitution; the result of obtaining the assent of
the President would be that, so far as the State Act is concerned, it will
prevail in the State and overrule the provisions of the Central Act in their
applicability to the State only; and such a state of affairs will exist only until
Parliament, at any time, makes a law adding to, or amending, varying or
repealing the law made by the State Legislature under the proviso to Article
254.

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 Repugnancy between two statutes may thus be ascertained on the
basis of the following three principles: (1) Whether there is direct conflict
between the two provisions; (2) Whether Parliament intended to lay down
an exhaustive code in respect of the subject-matter replacing the Act of the
State legislature; and (3) Whether the law made by Parliament and the law
made by the State legislature occupy the same field.”; the test of two
legislations containing contradictory provisions is not the only criterion of
repugnance; Repugnancy may arise between two enactments even though
obedience to each of them is possible without disobeying the other if a
competent legislature with a superior efficacy expressly or impliedly
evinces by its legislation an intention to cover the whole
field.(Thirumuruga Kirupananda Variyar Thavathiru Sundara Swamigal
Medical Educational & Charitable Trust v. State of T.N., (1996) 3 SCC
15; Deep Chand v. State of U.P: AIR 1959 SC 648).

M. DOES THIS DOCTRINE APPLY IN THE PRESENT CASE:

Repugnancy, under Article 254(1) of the Constitution, would arise
only where laws made by Parliament, and the laws made by the State
Legislature, are inconsistent with each other. In the present case, however,
both the Railways Act, 1989 and the Electricity Act, 2003 were enacted by
Parliament, the former under Entries 22 and 30 of List-I and the latter under
Entry 38 of List-III of Schedule VII to the Constitution of India.
Consequently, the doctrine of repugnancy, under Article 254(1) of the
Constitution, has no application to the present case. The contention that
Parliament, by enacting the Railways Act, 1989, intended to cover the
whole field and, consequently, the provisions of the Electricity Act, 2003
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must yield thereto, does not also merit acceptance since both these laws
were enacted by Parliament and, if Parliament intended the whole field to
be covered by the Railways Act, 1989, it would not have, subsequent
thereto, enacted the Electricity Act, 2003 or, in the alternative, would have
included the Railway Board, along with the departments of defence and
atomic energy, under Section 184 which stipulates that the provisions of
the Electricity Act shall not apply thereto.
N. ARE THE PROVISIONS OF THE ELECTRICITY ACT, RELATING TO
DISTRIBUTION OF ELECTRICITY, INCONSISTENT WITH THE
PROVISIONS OF THE RAILWAYS ACT?
While the repugnancy test may be inapplicable, what must however be
examined is whether the provisions of the Railways Act and Electricity Act
are inconsistent with each other, and whether the said provisions of the
Electricity Act should yield to the extent of such inconsistency if any.
Black’s law Dictionary defines “inconsistent” to mean lacking consistency;
not compatible with another fact or claim. (State of U.P. v. Daulat Ram
Gupta, (2002) 4 SCC 98). “Inconsistent”, according to Black's Legal
Dictionary, means “mutually repugnant or contradictory; contrary, the one
to the other so that both cannot stand, but the acceptance or establishment
of the one implies the abrogation or abandonment of the other”. One of the
meanings of the expression “inconsistent” is mutually repugnant or
contradictory. In Article 254, the Constitution itself has used the words
inconsistency and repugnancy interchangeably. Things are inconsistent
when they cannot stand together at the same time and one law is
inconsistent with another law, when the command or power or provision in
the law conflicts directly with the command or power or provision in the
other law. (Basti Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2
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SCC 88; Parmar Samantsinh Umedsinh vs State of Gujarat: 2021
SCCONLINE SC138). Things are said to be inconsistent when they are
contrary to one another. (Premchand Jain vs Regional Transport
Authority: 1967 Jab LJ 885).
In S. Satyapal Reddy v. Govt. of A.P., (1994) 4 SCC 391, the
Supreme Court held that where both the Central and the State rules
operate harmoniously and effect can be given to both the rules, the
question of inconsistency or repugnancy under Article 254 of the
Constitution does not arise. What has to be seen is whether mutual co-
existence between the Sections of the Electricity Act and the Sections of
the Railways Act is impossible. If they relate to the same subject-matter, to
the same situation, and both substantially overlap and are co-extensive and
at the same time so contrary and repugnant in their terms and impact that
one must perish wholly if the other were to prevail at all — then, only then,
are they inconsistent. It is in this sense that the two provisions should be
examined. (Basti Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 88;
Parmar Samantsinh Umedsinh vs State of Gujarat: 2021 SCCONLine
SC138). It must also be borne in mind that there is always a presumption
that the Legislature does not exceed its jurisdiction, and the Court should
make every attempt to reconcile the provisions of apparently conflicting
enactments. (Basti Sugar Mills Co. Ltd. v. State of Uttar
Pradesh, (1979) 2 SCC 88; Parmar Samantsinh Umedsinh vs State of
Gujarat: 2021 SCCONLINE SC138).
O. SECTIONS 173 TO 175 OF THE ELECTRICITY ACT: ITS SCOPE:

It is useful in this context to note what Sections 173 to 175 of the

Electricity Act provide. Section 173 relates to inconsistency in laws, and

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thereunder nothing contained in the Electricity Act or any rule or regulation
made thereunder or any instrument having effect by virtue of the Electricity
Act, rule or regulation, shall have effect in so far as it is inconsistent with
any other provisions of (i) the Consumer Protection Act, 1986 (ii) the
Atomic Energy Act, 1962, or (iii) the Railways Act, 1989. In case of
inconsistency between any of the provisions of the Railways Act and the
Electricity Act, the provisions of the Railways Act would prevail and the
provisions inconsistent therewith in the Electricity Act must yield in view of
what Section 173 stipulates.

Section 174 gives the Electricity Act overriding effect and thereunder,
save as otherwise provided in Section 168, the provisions of Electricity Act
shall have effect notwithstanding anything inconsistent therewith contained
in any other law for the time being in force, or in any instrument having
effect by virtue of any law other than the Electricity Act. While Section 11 of
the Railways Act gives it overriding effect over the provisions of any other
law for the time being in force, Section 174 gives the Electricity Act
overriding effect over anything inconsistent therewith contained in any other
law for the time being in force. It is unnecessary for us to examine the
consequences of competing non-obstante clauses in the two enactments,
since Section 173 specifically provides that the provisions of the Railways
Act would prevail in case of an inconsistency between any of its provisions
and the provisions of the Electricity Act.

Section 175 stipulates that the provisions of the Electricity Act are in
addition to and not in derogation of any other law for the time being in
force. (Sesa Sterlite Ltd. v. Orissa Electricity Regulatory Commission,
(2014) 8 SCC 444). Section 175 must be read along with Section 174 and

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not in isolation. The inconsistency, referred to in Section 174, may be
express or implied. Section 174 and Section 175 of the Electricity Act, 2003
can be read harmoniously by holding that when there is any express or
implied conflict, between the provisions of the Electricity Act, 2003 and any
other Act, then the provisions of the Electricity Act, 2003 will prevail, but
when there is no conflict, express or implied, both the Acts are to be read
together. (Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4
SCC 755).

Parliament may provide, (as in Section 175 of the Electricity Act), that
its legislation shall be in addition to and not in derogation of other laws
without elucidating specifically any other legislation; in such cases, where
the competent legislation has been enacted by the same legislature,
techniques such as a harmonious construction can be resorted to in order
to ensure that the operation of both the statutes can co-exist. (Forum for
People's Collective Efforts v. State of W.B., (2021) 8 SCC 599). As both
the Railways Act,1989 and the Electricity Act,2003 have been enacted by
Parliament, save inconsistency, both the afore-said Statutes can co-exist.

On a conjoint reading of Sections 173, 174 and 175 of the Electricity

Act, it is clear that, while the provisions of the Railways Act would prevail in
case of any inconsistency with respect to the provision of the Electricity Act,
in the absence of any such inconsistency, the provisions of both the
enactments would apply. As noted hereinabove, the non-obstante clause in
Section 11 of the Railways Act, 1989 must be confined only to what is
stipulated in clauses (a) to (h) thereunder. It is only if the power exercised
by the Railway administration, to execute necessary works for the purpose
of constructing or maintaining the Railway, specifically fall under any one of

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clauses (a) to (h) thereunder, would the non-obstante clause apply and,
consequently, exercise of power by the Railway administration to execute
such works would not suffer any impediment on account of a corresponding
obligation under any of the provisions of the Electricity Act. As “supply” of
electricity by a distribution licensee, to consumers within its area of supply,
does not fall within any of clauses (a) to (h) of Section 11, and falls
exclusively within the scope of the relevant provisions of the Electricity Act,
the submission that latter Act is inconsistent with the former, necessitates
rejection.

P. GENERALIA SPECIALIBUS NON DEROGANT:

With regards the submission that the Railways Act has a higher
status of a special law vis-à-vis the Electricity Act in so far as operation of
the Railways in its area is concerned, it is useful to note what the rule of
generalia specialibus non derogant stipulates.

When a general law and a special law dealing with some aspect dealt
with by the general law are in question, the rule adopted and applied is one
of harmonious construction whereby the general law, to the extent dealt
with by the special law, is impliedly repealed. This principle finds its origins
in the Latin maxim of generalia specialibus non derogant i.e. general law
yields to special law should they operate in the same field on the same
subject. (CTO v. Binani Cements Ltd., (2014) 8 SCC 319).

This principle has found vast application in cases of there being two
statutes: general or specific with the latter treating the common subject-
matter more specifically or minutely than the former. Corpus Juris
Secundum, 82 C.J.S. Statutes § 482 states that, when construing a general

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and a specific statute pertaining to the same topic, it is necessary to
consider the statutes as consistent with one another and such statutes
therefore should be harmonized, if possible, with the objective of giving
effect to a consistent legislative policy. On the other hand, where a general
statute and a specific statute relating to the same subject-matter cannot be
reconciled, the special or specific statute ordinarily will control. The
provision more specifically directed to the matter at issue prevails as an
exception to or qualification of the provision which is more general in
nature, provided that the specific or special statute clearly includes the
matter in controversy (CTO v. Binani Cements Ltd., (2014) 8 SCC 319).

This rule of construction resolves the conflict between the general

provision in one statute and the special provision in another. (J.K. Cotton
Spg. & Wvg. Mills Co. Ltd. v. State of U.P., AIR 1961 SC 1170; CTO v.
Binani Cements Ltd., (2014) 8 SCC 319). In case of conflict, the specific
provision prevails over the general provision and the general provision
applies only to such cases which are not covered by the special provision.
(J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. State of U.P., AIR 1961 SC
1170; CTO v. Binani Cements Ltd., (2014) 8 SCC 319).

The well-known rule, which has application, is that a subsequent

general Act does not affect a prior special Act by implication. In the third
edition of Maxwell, the principle of generalia specialibus non derogant i.e.
general provisions will not abrogate special provisions is stated thus” When
the legislature has given its attention to a separate subject and made
provision for it, the presumption is that a subsequent general enactment is
not intended to interfere with the special provision unless it manifests that
intention very clearly. Each enactment must be construed in that respect

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according to its own subject-matter and its own terms.’ (Craies on Statute
Law (6th Edn., 1963) pp. 376-77; LIC v. D.J. Bahadur [(1981) 1 SCC
315; CTO v. Binani Cements Ltd., (2014) 8 SCC 319).

In UPSEB v. Hari Shankar Jain: (1978) 4 SCC 16, the Supreme

Court concluded that, if Section 79(c) of the Electricity (Supply) Act
generally provides for the making of regulations providing for the conditions
of service of the employees of the Board, it can only be regarded as a
general provision which must yield to the special provisions of the Industrial
Employment (Standing Orders) Act in respect of matters covered by the
latter Act.

While determining the question whether a statute is general or

special, focus must be on the principal subject-matter coupled with a
particular perspective with reference to the intendment of the Act. With this
basic principle in mind, the provisions must be examined to find out
whether it is possible to construe harmoniously the two provisions. If it is
not possible then effort should be made to ascertain whether the legislature
had intended to accord a special treatment vis-à-vis the general entries and
a further endeavour should be made to find out whether the specific
provision excludes the applicability of the general. Once it is concluded that
the intention of the legislation is to exclude the general provision then the
rule “general provision should yield to special provision” is squarely
attracted. (Gobind Sugar Mills Ltd. v. State of Bihar: (1999) 7 SCC 76;
CTO v. Binani Cements Ltd., (2014) 8 SCC 319).

The rule of statutory construction that the specific governs the

general is not an absolute rule but is merely a strong indication of statutory
meaning that can be overcome by textual indications that point in the other

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direction. This rule is particularly applicable where the legislature has
enacted a comprehensive scheme and has deliberately targeted specific
problems with specific solutions. A subject-specific provision relating to a
specific and defined subject is regarded as an exception to, and would
prevail over a general provision relating to a broad subject. ( CTO v. Binani
Cements Ltd., (2014) 8 SCC 319).

In view of Section 173 of the Electricity Act, we shall proceed on the

premise, that the Railways Act, 1989 is a prior special law and the
Electricity Act, 2003 is a subsequent general law. As noted hereinabove,
when construing a general and a specific statute, it is necessary to
consider the statutes as consistent with one another and for such statutes
to be harmonized, if possible, with the objective of giving effect to a
consistent legislative policy. Each enactment must be construed in that
respect according to its own subject-matter and its own terms. As we are
satisfied that, save erection, maintenance, operation and repair of “electric
traction equipment” and “power supply and distribution installation”, both
the Railways Act and the Electricity Act operate in different and distinct
fields, atleast in so far as distribution of electricity is concerned, there is no
reason why they cannot co-exist or be harmoniously construed.

The submissions, urged on behalf of the Railways, regarding the

Parliamentary Standing Committee Report shall be examined later in this
Order under Issue Nos.6, 7, and 11.

Q. CONCLUSION:

Issue No. 2 is answered holding that, since the provisions of the

Electricity Act are not inconsistent with the provisions of the Railways Act,

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1989, with respect to distribution of electricity by a distribution licensee,
neither the ‘non-obstante clause’ in Section 11 of the Railways Act, 1989
nor Section 173 of the Electricity Act, 2003, vest in the Railways the right to
undertake distribution of electricity as a distribution licensee in terms of the
provisions of the Electricity Act, 2003.

VII. ISSUE 3:

Whether the Railways Act, 1989 is a complete code and a special law
occupying the entire field in regard to working and operation of Railways in
its area of operation, in excluding the powers and jurisdiction of the
Regulatory Commissions and Bodies under the Electricity Act, 2003, on
matters regarding tariff, standard of performance, payment of
compensatory surcharges under Section 42 of the Electricity Act, 2003 to
the extent they relate to distribution, supply, use etc. of electricity in the
area of operation of Railways?

A. SUBMISSIONS ON BEHALF OF THE RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that the Railways Act, 1989 is a
complete code with regard to matters dealt with in the Railways Act; such
an effect has been specifically recognized and held even with regard to
environment and other matters dealt with under Issue 2 above; the
Railways Act, 1989 is a self-contained code, and comprehensively covers
all aspects including the issue of rate circulars by the Central Government;
the expression “in connection with or for the purposes of” used in Sections
11 and 2(31) of the Railways Act, 1989, dealing with the scope of the
powers, denotes wider amplitude of the activities so long as there is nexus

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to the main activity; and, in the present case, it is the nexus to the working
of the Railways. Reliance is placed in this regard on Royal Talkies,
Hyderabad -v- Employees State Insurance Corporation, (1978) 4 SCC
204; and Renusagar Power Limited -v- General Electric Company,
(1984) 4 SCC 679.

Learned Senior Counsel would further submit that, in addition, it is

also necessary to give full effect to Section 11(h) of the Railways Act, 1989
which speaks of to ‘do all other acts necessary for making, maintaining,
altering or repairing and using the railway’; Sections 30, 31 etc. of the
Railways Act, 1989 empowers the Railways to fix not only the rates for
carriage of passengers and goods as defined in Section 2(35) of the
Railways Act, 1989 but also, and in addition thereto, any other charges;
Section 30 of the Railways Act, 1989, read with the other applicable
provisions of the Railways Act, empowers the Central Government
(Railways) to determine, from time to time, the rates for the transportation
of passengers and goods, as well as any other charges, incidental to or
connected with, such carriage; the power to impose any other charges is
not restricted to the term ‘rate’ as defined in Section 2(35) as held by the
Supreme Court and the High Courts in (1) S. S. Light Railway Co. Ltd. -v-
Upper Doab Sugar Mills Ltd., (1960) 2 SCR 926; (2) Union of India -v-
Motilal Padampat Sugar Mills Co. (P) Ltd., (1969) 1 SCC 320; (3) Union
of India -v- Gangeshwar Ltd., 1995 Supp (1) SCC 554 ; (4) NBK Trade
Linker Pvt. Ltd. -v- Railway Board, Ministry of Railways, 2013 SCC
OnLine All 13599; and (5) Ultra Tech Cement Limited -v- The Union of
India 2014 (4) KHC 190; consumption/end use of electricity in the area of
operation of Railways, by itself or by vendors, contractors or others, are not

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in any manner undertaken by the supply of electricity through the
distribution system of any other person namely, other than by the Railways;
the distribution licensee of the adjoining area cannot lay down the electric
supply line or distribution system for affecting supply either to the Railways
or others at the different end use/consumption points in the area of
operation of the Railways; for example, a distribution licensee of the
adjoining area cannot say that it will extend its electric supply line in the
form of over-head line along the traction to allow the locomotive to draw
power or to provide electric supply at the signaling points or railway yards
or railway sidings or to the vendors in the Station or any other service
providers or contractors in the area of the operation of the Railways; the
provision of electricity at each point of consumption, in the area of
operation of the Railways, can only made by the Railways, and not by the
distribution licensee of the adjoining area; there cannot also be two parallel
licensees in the area of operation of the Railways; in other words, the area
of operation of the Railways, and more particularly the different places
where electricity is delivered for end use/consumption, cannot be said to be
a part of the area of supply of the distribution licensee adjoining the area of
operation of the Railways; and the distribution licensee of the adjoining
area supplies electricity, if so required by the Railways, at the periphery
and not beyond.

Learned Senior Counsel would submit that, in this context, Railways,

being authorised to undertake distribution of electricity under the Railways
Act, 1989, cannot be burdened with obligations, applicable to ‘consumers’
under Section 42(2) or Section 42(4) read with Sections 38(2)(d)(ii),
Section 39(2)(d)(ii) and 40(c)(ii) of the Electricity Act, 2003; these

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provisions, which apply only to consumers, cannot be made applicable to
Railways, when Railways source electricity from third parties for self-
consumption or makes available electricity to others within its area of
operation; consumption, with regard to which cross subsidy surcharge or
additional surcharge can be claimed by the distribution licensee, is where
the end use or consumption is within the area of his license, and not when
it is outside the area of his license such as in the area of operation of the
Railways which, in the present case, is governed by the Special Law; in the
premise, the appropriate State Commission cannot have any jurisdiction
with regards operation of the Railways’ within its area of operation, namely
from the traction sub-station or non-traction sub-station or switchyard to
different consumption or end use points; the provisions of the Electricity
Act, 2003 has, necessarily, to yield to the provisions of the Railways Act,
1989 in so far as electricity usage by the Railways is concerned;
accordingly, the tariff aspects, standards of performance, payment of
compensatory surcharge, the conditions of operating the license within the
area of operation of Railways, cannot be subjected to the jurisdiction of the
appropriate Commission under the Electricity Act, 2003; similarly, the
obligation of the Railways, as a distribution licensee to supply
electricity/universal supply obligations under Sections 42(1) and 43(1) of
the Electricity Act, 2003 within its area of operation, is essentially controlled
by the Railways Act, 1989 which is a superior Act and has overriding effect
and not by the Electricity Act, 2003; however, if Railways seek open access
to the grid system, outside the area of operation of the Railways, it is
required to, and shall be governed by the orders and Regulations of the
appropriate Commission; these include scheduling and despatch, DSM
Regulations, inter-connectivity standards to be maintained etc; and the

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Railways did not object to the license conditions, to be notified under
Section 16 proviso, to a Deemed Licensee under Section 14- Third Proviso
on such matters as referred to hereinabove, other than those related to the
area of operations of the Railways.

Summarising his submissions under Issue Nos.1 to 3, Learned

Senior Counsel would submit that each of the power/authority of the
Railways, enumerated in Section 11 of the Railways Act, 1989, should be
allowed to be implemented in an absolute manner, unhindered or
unaffected or otherwise burdened by any provision of any other law in
regard to conveyance of electricity, use of electricity, etc within the area of
operation of the Railways; and, as a sequitur, such interference by orders
passed under the Electricity Act, 2003, imposing cross subsidy surcharge
or additional surcharge for consumption within the area of operation of
Railways, cannot also be allowed.

Learned Senior Counsel would state that the clear position, emerging
on consideration of the interpretation of Section 11 of the Railways Act,
1989 as per the law laid down by the Supreme Court and the High Courts,
and the principles of construction of statutes are (1) as per the scheme,
objective, nature and purpose of the Railways Act, 1989, Section 11 thereof
is a superior and special law. It should be given wider application, and not
be read in a restricted manner; (2) the activities of Railways, with regards
electricity for the purposes of or in connection with the Railways or its
working including transmission, distribution, use and consumption of
electricity, are primarily governed by the provisions of the Railways Act,
1989; its authorisation is provided in Section 11 of the said Act, and not by
the Electricity Act, 2003; (3) the non obstante clause in Section 11 has

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been construed and applied as removing all impediments and obstructions
provided in other laws, the other laws to yield to the application of Section
11 of the Railways Act, 1989 to its full effect, and as mandating
enforcement of the powers provided therein inspite of any provision
contained in any other law; (4) Section 11 of the Railways Act, 1989 cannot
be construed as requiring Railways to additionally obtain licenses,
permissions, approvals, sanctions etc. or otherwise with regards payment
of fees, charges etc under other laws, including the Electricity Act, 2003, for
undertaking activities duly authorised under the said Section, and the
provisions of any other law cannot come in the way of the activities
authorised under Section 11 of the Railways Act, 1989; (5) any action of
the authorities under other laws must yield to the acts of Railways if
permitted under Section 11 of the Railways Act, 1989; and (6) the Railways
Act, 1989 intends to cover and occupy the entire field of Railway activities
including electrification, transmission, distribution, end use, consumption
and also provision of electricity to others in the area of operation of the
Railways.

B. SUBMISSIONS OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the source of

power to enact the Railways Act is referable to the Union List of Schedule
VII of the Constitution of India especially Entry 22 (Railways) and Entry 30
(Carriage of Passenger and Goods by Railways); the jurisdiction under
Section 11 of the Railways Act is only in respect of carrying passengers
and goods, and not any other activity including distribution of electricity,
which is found under Entry 38 of the concurrent list; the provisions of the
Electricity Act, in matters of determination of tariff for retail sale of

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electricity, payment of surcharge under Section 42 etc, cannot therefore be
said to be inconsistent with Section 11(g) of the Railways Act; these
provisions are applicable even in areas of operation of the Railways; the
Railways Act excludes the provisions of the Land Acquisition Act, 1894
(Section 20-N of the Railways Act), provisions of the Local Acts for
Transportation by Road or Waterways, provisions of the Local Acts for
taxation on Railways for advertisements; further, Section 131 of the
Railways Act is not applicable in areas occupied by the Mines Act,
Factories Act etc; no such exclusion is made for the provisions of
Telegraph Act or the 1910 Act, or the Electricity Act, 2003, despite
numerous amendments being brought to the Railways Act post 2003;
Section 6 of the Indian Telegraph Act enters the domain of the Railways
Act, though Railways have been given authority under Section 11(f) to
undertake activities provided for under the Telegraph Act; similarly, the
provisions of the Electricity Act can enter the domain of the Railways Act,
and the above referred provisions of the Electricity Act, 2003 can be made
applicable to the Railways even in their premises, though the Railways
have been given authority under Section 11(g) to undertake activities of
public carriage of passenger and goods using electric traction; similarly, no
provision in the Railways Act relates to determination of tariff for alleged
distribution of electricity; thus, tariff must be determined strictly in terms of
the Electricity Act; such determination of tariff falls strictly within the domain
of the SERCs under Part VII of the Electricity Act; it is an admitted position
that no SERC has determined the tariff applicable for the alleged
consumers of the Railways; in Haryana, Regulations have been framed for
grant of open access ie the HERC (Terms and Conditions for grant of
Connectivity and open access for intra-state transmission and distribution

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system) Regulations, 2012 wherein an applicant is defined to mean a
licensee or a consumer (Regulation 3(2)), and open access consumer is
defined to mean a licensee or a consumer (Regulation 3 (22)); and the
HERC (Terms and Conditions of License for Deemed Licensee)
Regulations, 2020 stipulates, under Regulation 13, that, in case deemed
licensees utilise the entire quantum of electricity for its own consumption, it
shall then be liable to pay all charges including cross subsidy surcharge
(“CSS”) and additional surcharge (Regulation 13).

It is submitted on behalf of the Respondents that, alternatively, the

Railways Act cannot be said to be a complete code in respect of the
working of the Railways, as: (a) the Railways Act does not define ‘Area of
Supply’ of the Railways; (b) while Section 11 of the Railways Act authorises
the Railways to undertake certain activities, including erecting, operating,
and maintaining electric traction equipment, power supply and distribution
installation, for the purpose of constructing and maintaining a railway, it
does not provide for the manner in which the Railways is required to take
supply of electricity for the said purposes; it is not the case of the Railways
that it is generating its own electricity for works mentioned under Section 11
of the Railways Act, and is thus necessarily taking electricity from external
sources, i.e. distribution licensees; the Railways Act does not extend to the
said distribution licensees, which are supplying electricity to the Railways,
and which are governed by the Electricity Act; therefore, it is only the acts
mentioned under Section 11 which are governed by Section 11 of the
Railways Act, and not the act of the Railways in taking supply of electricity;
such supply is therefore governed by the provisions of the Electricity Act
only; (b) Section 11 of the Railways Act gives it an overriding effect over

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other laws only to the extent of any inconsistency if present; while the
facility of open access is granted under the provisions of the Electricity Act,
there is no corresponding provision under the Railways Act providing for
any such facility; Railways has not disputed that open access is governed
by the provisions of the Electricity Act; even if the Railways Act is
considered a special legislation in terms of Section 173 of the Electricity
Act, in so far as Open Access is considered, the Railways fall squarely
under the provisions of the Electricity Act; (c) while the Electricity Act, under
Section 184, provides that it shall not apply to certain Ministries and
Departments as may be notified by the Central Government, the Railways
is not a part of the said Ministries or Departments; in fact, no notification
was produced by the Railways in this regard either before the Maharashtra
Electricity Regulatory Commission (“MERC”) or before this Tribunal; thus,
while taking supply of electricity through open access, the Railways is
squarely governed by the provisions of the Electricity Act, and not the
Railways Act; and therefore, as a logical sequitur, if open access is availed
under the Electricity Act, then the necessary consequences of open access
under the Electricity Act are applicable upon the Railways.

C.ANALYSIS:

Before examining the rival submissions under this head it is useful to

take note of the provisions of the Railways Act and the Electricity Act to the
extent relevant.

D. RELEVANT STATUTORY PROVISIONS:

Chapter VI of the Railways Act relates to fixation of rates. Section 30

relates to the power to fix rates and, under sub-section (1) thereof, the

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Central Government may, from time to time by general or special order, fix,
for the carriage of passengers and goods, rates for the whole or any part of
the railway and different rates may be fixed for different classes of goods
and specify, in such order, the conditions subject to which such rates shall
apply. Section 2(2) defines “carriage” to mean the carriage of passengers
or goods by a railway administration. Section 2(19) defines “goods” to
include (i) containers, pallets or similar articles of transport used to
consolidate goods; and (ii) animals. Section 2(29) defines “passenger” to
mean a person travelling with a valid pass or ticket. Section 2(35) of the
Railways Act defines “rate” to include any fare, freight or any other charge
for the carriage of any passenger or goods.

Section 31 confers powers on the Central Government to (a) classify

or reclassify any commodity for the purpose of determining the rates to be
charged for the carriage of such commodities; and (b) increase or reduce
the class rates and other charges. Section 2(5) defines “class rates” to
mean the rate fixed for a class of commodity in the classification. Section
2(4) defines “classification” to mean the classification of commodities made
under Section 31 for the purpose of determining the rates to be charged for
carriage of such commodities. Section 2(7) defines “commodity” to mean a
specific item of goods.

Section 32 stipulates that, notwithstanding anything contained in

Chapter VI, a railway administration may, in respect of the carriage of any
commodity and subject to such conditions as may be specified, (a) quote a
station to station rate; (b) increase or reduce or cancel, after due notice in
the manner determined by the Central Government, a station to station
rate, not being a station to station rate introduced in compliance with an

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order made by the Tribunal; (c) withdraw, alter or amend the conditions
attached to a station to station rate other than conditions introduced in
compliance with an order made by the Tribunal; and (d) charge any lump
sum rate. Section 2 (38) defines "station to station rate" to mean a special
reduced rate applicable to a specific commodity booked between specified
stations.

Chapter VII relates to the Railway Claims Tribunal. Section 33(1)

thereunder stipulates that there shall be a Tribunal called the Railways
Claims Tribunal for the purpose of discharging the functions specified in the
Act. Section 36 stipulates that any complaint that a railway administration
(a) is contravening the provisions of Section 70; or (b) is charging for the
carriage of any commodity between two stations a rate which is
unreasonable; or (c) is levying any other charge which is unreasonable,
may be made to the Tribunal, and the Tribunal shall hear and decide any
such complaint in accordance with the provisions of this Chapter. Section
44 stipulates that, in the case of any complaint made under clause (b) or
clause (c) of Section 36, the Tribunal may (i) fix such rate or charge as it
considers reasonable from any date as it may deem proper, not being a
date earlier to the date of the filing of the complaint; (ii) direct a refund of
amount, if any, as being the excess of the rate or charge fixed by the
Tribunal under clause (i). Section 70 stipulates that a railway administration
shall not make or give any undue or unreasonable preference or advantage
to, or in favour of, any particular person or any particular description of
traffic in the carriage of goods.

Section 183(1) provides that a railway administration may, for the

purpose of facilitating the carriage of passengers or goods or to provide

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integrated service for such carriage, provide any other mode of transport.
Section 183(2) stipulates that, notwithstanding anything contained in any
other law for the time being in force, the provisions of this Act shall apply to
the carriage of passengers or goods by the mode of transport referred to in
Section 183(1). Section 185 relates to taxation on railways for
advertisement. Section 185(1) stipulates that, notwithstanding anything to
the contrary contained in any other law, a railway administration shall not
be liable to pay any tax to any local authority in respect of any
advertisement made on any part of the railway unless the Central
Government, by notification, declares the railway administration to be liable
to pay the tax specified in such notification.

Section 45(1) of the Electricity Act, 2003 stipulates that the price to be
charged by a distribution licensee for the supply of electricity by him, in
pursuance of Section 43, shall be in accordance with such tariff fixed from
time to time and the conditions of his license. Section 45(2)(a) stipulates
that the charges for electricity supply by a distribution licensee shall be
fixed in accordance with the methods and the principles as may be
specified by the concerned State Commission. Section 45(3) stipulates
that the charges for electricity supplied by a distribution licensee may
include (a) a fixed charge in addition to the charge for the actual electricity
supplied, and (b) a rent or other charges in respect of any electric meter or
electrical plant provided by the distribution licensee.

E. IS THE RAILWAYS ACT A COMPLETE CODE?

On the question whether the Railways Act is a complete code

covering all aspects of the Railways including fixation of electricity rates for

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Railways, it is clear that the railways seek conferment of the status of a
deemed distribution licensee, and for grant of open access as a deemed
distribution licensee, only in terms of the Electricity Act, 2003. It is not their
case that even the provisions of the Electricity Act, relating thereto, are
inapplicable to them. On the other hand, they admit that, when they seek
open access to the grid, they are governed by the orders and regulations of
the appropriate commission including with respect to scheduling and
dispatch, DSM Regulations, inter-connectivity standards to be maintained,
license conditions to be notified under the proviso to Section 16 of the
Electricity Act, etc. Since it is not even their case that the Electricity Act
has no application, or that all these matters are governed only by the
Railways Act, their contention that the Railways Act is a complete code, to
which the Electricity Act should yield, does not merit acceptance.

It is also not in dispute that Railways does not discharge any of the
duties and functions of a distribution licensee as stipulated under Part VI of
the Electricity Act. A deemed distribution licensee is required not only to
operate and maintain a distribution system (system of wires and associated
facilities), it is also obligated to supply power to its consumers through such
a distribution system. The Electricity Act does not provide for the grant of a
distribution license to a person who only maintains a distribution system
without the concomitant obligation to supply electricity to consumers
through it. As the Electricity Act is independent of the provisions of the
Railways Act, and both enactments can be harmoniously read with each
other, the question of inconsistency between these two enactments does
not arise.

F. SECTION 11(h) OF THE RAILWAYS ACT: ITS SCOPE:

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 We find it difficult to agree with the contention, urged on behalf of the
Railways, that fixation of electricity rates for Railways, falls within the ambit
of Section 11(h) of the Railways Act. Section 11(h) confers on the
Railways the power to do all other acts necessary for making, maintaining,
altering or repairing and using the Railway. with regards matters specifically
dealt with in the Railways Act, 1989, more so matters falling within the
ambit of Section 11 in view of the non obstante clause therein. The fact,
however, remains that use of the words “all other acts” in clause (h) of
Section 11 makes it clear, that the acts referred to therein are other than
those referred to in clauses (a) to (g) of Section 11. Section 11(h) is a
residuary provision, and the power there-under to do all other acts as are
necessary for making, maintaining, altering or repairing or using the railway
can only relate to acts incidental to clauses (a) to (g) of Section 11, and not
to bring within its ambit matters alien thereto, and matters which do not
even form part of the Railways Act. The words “acts necessary for making,
maintaining, altering or repairing or using the railway”, used in Section
11(h), does not bring within its fold supply of electricity to consumers in its
area of supply by a distribution licensee, the conditions relating to which
are to be determined by the appropriate commissions under the Electricity
Act.

While railways would undoubtedly have the power to erect “electric

traction equipment” and “power supply & distribution installation”, and to
maintain and operate them to the exclusion of all others, the said provisions
do not confer on the Railway Administration the power to sell electricity,
through such an installation, to others. Such a power can only be claimed
by the railways, if it is held to be a deemed distribution licensee which

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status can only be claimed under the third proviso to Section 14 of the
Electricity Act, and not under the Railways Act.

Railways would fall within the area of supply of a distribution licensee

only for the purpose of supply of electricity, as the power conferred on a
distribution licensee, under the Electricity Act, is only to supply electricity to
the installation of the consumer, in the present case - the railways. Once
electricity is so supplied by the distribution licensee at the Railway traction
substation/non-traction substation/switchyard, its redistribution thereafter to
various points of consumption, by the Railways as a consumer of such a
distribution licensee, falls within its exclusive domain in view of Sections
11(d), 11(h) and 18 of the Railways Act, and can only be undertaken by the
Railways, and no other. No distribution licensee can claim the right to enter
into such area of the railways (as a consumer) in view of Section 11(d),
11(h) and Section 18 of the Railways Act, since unrestricted entry of others
into this area is prohibited. On its receipt from the distribution licensee at
the traction substation/non-traction sub-station/switchyard, redistribution of
electricity, within the area covered in terms of Section 18 of the Railways
Act, can only be undertaken by the Railways. However, such exercise of
redistribution of electricity by the railways is as a consumer, and not as a
deemed distribution licensee.

The extent of applicability of the non-obstante clause, under Section

11 of the Railways Act, has already been considered earlier in this order,
and does not bear repetition. The Railway electric traction equipment, and
the Railway power supply and distribution installation, can only be erected,
operated, maintained and repaired by the Railways, and no distribution
licensee can claim any right to do so in the light of the non-obstante clause

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in Section 11. The area covered by Section 18 of the Railways Act is the
area falling within the exclusive jurisdiction of the Railways, but as a
consumer of electricity under the Electricity Act, and not as a deemed
distribution licensee. Unlike in the case of other consumers, (within its area
of supply as determined by the appropriate Commission under the
Electricity Act), a distribution licensee cannot interfere with the power
conferred on the Railways under Section 11(g) and (h) to erect, maintain,
operate, repair etc its electric traction equipment and its power supply and
distribution installation. The jurisdiction conferred on a distribution licensee
is confined only to supply power to the railways as its consumer, and
nothing more.

While the area of supply of a distribution licensee is, ordinarily, the

area in which it establishes the distribution system and supplies electricity
through such a system, in so far as Railways are concerned, a distribution
licensee is only entitled to supply electricity at the traction substation/non-
traction substations/switchyards of the Railways, and not to operate,
maintain or repair any electric traction equipment or power supply and
distribution installation within the area of the Railways covered by Section
18 of the Electricity Act. Each Railway Locomotive is not an independent
consumer by itself, It is the concerned Railways which is the consumer of
the concerned distribution licensee, and it is on them that a bill is raised for
the electricity supplied to them. The distribution licensee has the obligation
to supply electricity, to the Railways as its consumer, in view of Section
43(1) of the Electricity Act. On any such request made by the Railways, it
is impermissible for the concerned distribution licensee to refuse to supply
electricity to them.

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G. STATEMENT OF OBJECTS AND REASONS:

With regards the submission that the Central Government/Railways

have the power to determine electricity charges within its area of
operations, to the exclusion of the appropriate Commissions under the
Electricity Act, it is relevant to note that that the Statement of Objects and
Reasons for introduction of a bill can be usefully referred to for the limited
purpose of ascertaining the conditions prevailing at the time the bill was
introduced, and the purpose for which the provision was made.
(Kavalappara Kottarathil Kochuni v. States of Madras and Kerala: AIR
1960 SC 1080). The statement of objects and reasons can be legitimately
used for ascertaining the object which the legislature had in mind.
(Sanghvi Jeevraj Ghewar Chand v. Secy., Madras Chillies, Grains and
Kirana Merchants Workers Union, : AIR 1969 SC 530).The Objects and
Reasons of the Act may be taken into consideration in interpreting the
provisions of the statute in case of doubt. (Doypack Systems (P) Ltd. v.
Union of India, (1988) 2 SCC 299).

Reference to the Statement of objects and reasons, for introduction of

the Railway Bill, is necessary to understand the purpose for which the
Railways Act was enacted, and the object sought to be achieved thereby.
The Statement of Objects and Reasons, for introduction of the Railways
Bill, states that the Bill was to provide, among others, (i) for constitution of
the railway zones, abolition of existing zones, and appointment of General
Managers as heads of these railways administrations; (ii) power had been
given to the Central Government to fix the rates for the carriage of
passengers and goods by the railways; (iii) statutory recognition of the
railway receipt as a negotiable instrument; (iv) provision for limiting the

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monetary liability of railway administrations in respect of payment of
compensation for loss, damage, etc. of goods; and (v) the offences
included in the Act had been rationalized and a few offences had also been
included therein. Among the objects sought to be achieved by enacting the
Railways Act was conferment of power on the Central Government to fix
the rates for carriage of passengers and goods by the railways.

Para 4 of the Statement of Objects and Reasons, for introduction of

the bill relating to the Electricity Act, 2003, details the main feature of the
Bill which, among others, are for the State Electricity Regulatory
Commissions to permit open access in distribution in phases with surcharge
for—(a) current level of cross subsidy to be gradually phased out along with
cross subsidies and (b) obligation to supply.

While among the objects, of enacting the Railways Act, was to confer
power on the Central Government to fix the rates for carriage of passengers
and goods by the railways, such a power does not include fixation of
electricity tariff, as the power to determine retail supply tariff, to be charged
on its consumers by a distribution licensee, falls exclusively within the
jurisdiction of the appropriate Commission under Part VII of the Electricity
Act.

H. FIXATION OF RATES UNDER THE RAILWAYS ACT: ITS SCOPE:

Chapter VI of the Railways Act bears the heading “Fixation of Rates”.

While Section 30(1) confers power on the Central Government to fix rates
for the carriage of passengers and goods for the whole or any part of the
railway, what Section 30(2) enables the Government to do is to pass orders
fixing rates for all other charges incidental to or connected with the carriage

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of passengers and goods including demurrage and wharfage, as also the
conditions subject to which the rates will apply. Section 2(2) defines
“carriage” to mean the carriage of passengers or goods by a railway
administration. Section 2(11) defines "demurrage" to mean the charge
levied for the detention of any rolling stock after the expiry of free time, if
any, allowed for such detention. Section 2(19) defines “goods” to include (i)
containers, pallets or similar articles of transport used to consolidate goods;
and (ii) animals. Section 2(29) defines “passenger” to mean a person
travelling with a valid pass or ticket. Section 2(35) of the Railways Act
defines “rate” to include any fare, freight or any other charge for the
carriage of any passenger or goods. Section 2(37) defines "rolling stock" to
include locomotives, lenders, carriages, wagons, rail-cars, containers,
trucks, trolleys and vehicles of all kinds moving on rails. Section 2(41)
defines “wharfage” to mean the charge levied on goods for not removing
them from the railway after expiry of the free time prescribed for such
removal.

The power conferred on the Central Government under Section 30(1)

is to fix the fare, freight or any charge on the carriage of passengers or
goods, for the whole or any part of the railway, by a railway administration.
While Section 30(2) confers on the Central Government the power to fix
any other charges also, it is only rates with respect to charges which are
incidental to or connected with the carriage of passengers and goods,
including demurrage and wharfage, which the Central Government is
empowered to fix rates for, and not others.

The next question which arises for consideration is what the words
“incidental to or connected with” mean? .

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I. JUDGEMENTS RELIED ON BEHALF OF THE RAILWAYS ON THE
MEANING OF “INCIDENTAL TO”:

Before considering what the words “incidental to” and “connected with”
used in Section 30(2) of the Railways Act mean, we shall note of the
judgements relied on behalf of the Railways in this regard.

In Royal Talkies v. ESI Corpn., (1978) 4 SCC 204, the Supreme

Court held that the expression “in connection with the work of an
establishment”, used in Section 2(9) of the ESI Act, roped in a wide variety
of workmen who may not be employed in the establishment but may be
engaged only in connection with the work of the establishment; some
nexus must exist between the establishment and the work of the employee,
but it may be a loose connection; a canteen service, a toilet service, a car
park or a cycle stand, a booth for sale of catchy film literature on actors etc
had connection with the cinema theatre; on the other hand, a bookstall
where scientific works or tools were sold or a stall where religious
propaganda was done, may not have anything to do with the cinema
establishment and may, therefore, be excluded on the score that the
employees do not do any work in connection with the establishment, that is
the theatre; and keeping a cycle stand and running a canteen were
incidental or adjuncts to the primary purpose of the theatre.

In Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4

SCC 679, the Supreme Court held that expressions such as “arising out
of” or “in respect of” or “in connection with” or “in relation to” or “in
consequence of” or “concerning” or “relating to” the contract were of the

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 widest amplitude and content, and included even questions as to the
existence, validity and effect (scope) of the arbitration agreement.

The law declared in Renusagar Power Co. Ltd. is that the words “in
connection with” are of wide amplitude. The expression “in connection with
the work of an establishment” used in Section 2(9) of the ESI Act, (a
beneficial legislation where the provisions of the enactment necessitates a
liberal construction), arose for consideration in Royal Talkies.

J. “INCIDENTAL TO” and “CONNECTED WITH” : MEANING:

As noted earlier in this order, the word “connected” means intimately

connected or connected in a manner so as to be unable to act
independently; these words are also used in the sense that they are really
“incidental to”; and the connection contemplated must be real and
proximate, and not far-fetched.

Black’s Law Dictionary defines “Incidental” to mean: “dependant

upon, subordinate to, arising out of, or otherwise connected with
(something else, of greater importance) or consequential part (of something
else)”. The word “incidental”, according to Webster's New World
Dictionary, means “happening or likely to happen as a result of or in
connection with something more important; being an incident; casual;
hence, secondary or minor, but usually associated”; It means something
which is a result of or in connection with another. (Delhi Cloth & General
Mills Co. Ltd. v. Workmen, (1967) 1 SCR 882: AIR 1967 SC 469).

According to Stroud's Judicial dictionary, a thing is said to be

incidental to another when it pertains to the principal thing. According to the
ordinary dictionary meaning, it signifies a subordinate action.
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 (Hukumchand Jute Mills Ltd. v. Labour Appellate Tribunal, 1957 SCC
OnLine Cal 102; LIC of India v. Retired LIC Officers Assn., (2008) 3
SCC 321). The expression “incidental” means necessary in certain contexts
which does not mean a matter of casual nature only. (Shroff and
Co. v. Municipal Corpn. of Greater Bombay, 1989 Supp (1) SCC 347). A
thing is incidental to another if it merely appertains to something else as
primary. It should not be extraneous or contrary to the purpose of the thing
it is incidental to. (State of T.N. v. Binny Ltd., 1980 Supp SCC 686)

The word ‘incidental’ does not imply any casual or fortuitous

connection. In a legal sense, as applied to powers, it means a power which
is subsidiary to that which has been expressed, and of an instrumental
nature in relation thereto, which is both necessary and proper for the
carrying into execution of the main power which has been expressly
conferred. (Dunichand and Co. v. Narain Das and Co. [(1947) 17 Comp
Cas 195 (FB); LIC of India v. Retired LIC Officers Assn., (2008) 3 SCC
321).

As reliance is placed on behalf of the Railways on certain

judgements, on the nature of charges which fall within the ambit of Section
30(2) of the Railways Act, it is useful to consider if, and to what extent,
these judgements have any bearing on the case on hand.

K. JUDGEMENTS RELIED ON BEHALF OF THE RAILWAYS ON THE

SCOPE OF SECTION 30(2) OF THE ELECTRICITY ACT:

In Union of India v. Gangeshwar Ltd., 1995 Supp (1) SCC 554,

the appeal before the Supreme Court was directed against the judgment of
the Railway Rates Tribunal on a complaint made by the respondents that

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the maintenance charges, that were being levied for the private railway
siding provided by the railways for the sugar mill of the Respondent were
unreasonable. The maintenance charges for the said private siding were
regulated by agreements.

Agreeing with the contention that the finding recorded by the Tribunal,
that the charges that were levied were unreasonable, was not sustainable,
the Supreme Court expressed its inability to uphold the order passed by the
Tribunal reducing the amount of maintenance charges from the date of the
complaint, and remitted the matter to the Tribunal for fresh determination.

Imposition of penal demurrage/wharfage charges, by way of Rates

Circular Nos. 74 of 2005 and 21 of 2007, was subjected to challenge before
the Allahabad High Court, in NBK Trade Linker Pvt. Ltd. v. Railway
Board, Ministry of Railways, 2013 SCC OnLine All 13599, on the ground
that it was beyond the jurisdiction of the Railway Board, and was ultra
vires the Railways Act, 1989, there being no specific provision thereunder
for levy of penalty for demurrage/wharfage charges; and the Railway Board
could not prescribe any penal demurrage/wharfage by fixing rates of
demurrage/wharfage charges.

Section 30 of the Railways Act, 1989 authorised the Railway Board

to notify rates of demurrage and wharfage from time to time, and to revise
the same. Rates Circular No. 74 of 2005 dated 19/12/2005 was issued by
the Railway Board on the subject “free time and rates of demurrage,
wharfage and stacking charges”. Paragraph 3.3 of the said Circular
provided that, in case excessive congestion takes place at any
terminal/steel plant, the demurrage rates could be increased even at

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progressively increasing rate subject to a maximum of six times of the
prevalent rate.

It is in this context that the Allahabad High Court held that Section
30(2) of the 1989 Act itself contemplates that “the conditions subject to
which such rates shall apply” could also be laid down by the Central
Government while fixing the rates; there could be different rates subject to
different conditions; Para 3.3 of the Rates Circular No. 74 of 2005 was in
two parts; the first part stipulated that, in case excessive congestion took
place at any terminal/steel plant, the demurrage rates could be increased
even at a progressively increasing rate subject to a maximum of six times
the prevalent rate; the second part, which began with the word “this penal
demurrage rates”, referred to the progressively increasing rate subject to a
maximum of six times the prevalent rate; when a statute empowers an
authority to fix rates, the power has to be interpreted in a wide manner so
as to meet different situations which may arise; the definition of the word
“rate”, in Section 2(35) of the Act, was a wide definition; the definition was
an inclusive definition which had to be interpreted in a wide manner; while
fixing rates, a scale can be fixed containing different rates applicable on
fulfilment of different conditions; rates providing for progressive increase,
subject to a maximum of six times the prevalent rate, was within the scope
of Section 30(2); the penal charges, under paragraph 3.3 of the Rates
Circular, was leviable where excessive congestion takes place at any
terminal (Railway Station); the penal rates as contemplated under
paragraph 3.3 was nothing but a progressively increasing rate subject to a
maximum of six times the prevalent rate; merely because the said rates
had been termed as penal rates, they could not be held to go beyond the

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scope of Section 30(2); the scale of rates, prescribed by the Railway Board
under Section 30(2), may also contain a rate which can be termed as penal
rates; the object and purpose of prescribing progressively increasing rate
was to release the rolling stock within the stipulated time to save economic
loss to the railways; such prescription acted as a deterrent to the consignee
to immediately unload their goods from their rolling stock or to remove their
goods from wharfage; and the immediate removal of goods from rolling
stocks and wharfage became more necessary and imminent when the
terminal was congested, and could not be said to be unreasonable.

In Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v. Upper

Doab Sugar Mills Ltd : AIR 1960 SC 695, the question which arose for
consideration was whether the Railway Rates Tribunal had jurisdiction to
investigate the reasonableness of the increase, in total charges payable in
respect of goods traffic carried by a railway, on the basis of terminals fixed
by the Central Government. The main contention, raised on behalf of the
railway company, was that as, in increasing the charges, the Railway
Administration had merely applied standardized terminal charges, no
complaint lay in respect of the same to the Railway Tribunal.

It is in this context that the Supreme Court held that there was
nothing to prevent the railway company and the consignor from entering
into an agreement as to what should be accepted as weight without actual
weighment; once such a fixation is agreed upon, the amount calculated on
that figure, at the rate fixed by the Government, must be deemed to be the
amount properly payable in accordance with the rate fixed by the
Government; there was a clear distinction between the rate and terminal
charge; two classes of charges were included in the definition of

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“Terminals”; the first was “charges in respect of stations, sidings, wharves,
depots, warehouses, cranes and other similar matters”; the second was
“charges in respect of any services rendered thereat”; whether or not any
services had been rendered at the stations, sidings, wharves, depots,
warehouses, cranes and other similar matters, the other class of terminals
in respect of these stations, sidings, wharves, depots, warehouses, cranes
and similar other matters remained; when the legislature authorised the
Central Government to fix terminals, the intention must have been that the
terminals leviable would not depend on how many of these things would be
used; the sensible way was to make a charge leviable for the mere
provision of these things, irrespective of whether any use was made
thereof; that was the reason why such wide words “in respect of” were
used; and, irrespective of the fact of the actual user by any particular
consignor of the stations, sidings and other things, “terminal charges” were
leviable by reason of the mere fact that these things had been provided by
the Railway Administration.

Following the judgement of the Allahabad High Court, in NBK Trade

Linker Pvt. Ltd. v. Railway Board, Ministry of Railways, 2013 SCC
OnLine All 13599, the Division Bench of the Kerala High Court, in Ultra
Tech Cement Limited Little Mount v. Union of India, 2014 SCC OnLine
Ker 16571, observed that the power to fix penal rates, i.e., progressively
increasing rate upto a maximum 6 times of the prevalent rate had been
upheld by the Division Bench of the Allahabad High Court in Nbk Trade
Linker Pvt. Ltd; the prescription of such rates as a deterrent was with the
object and purpose which could not be said to be unreasonable; the objects
and purpose for fixing rates for demurrage charges is justified in the context

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of a Railway Station where also there is necessity for removal of goods with
utmost expedition; Section 30(2) of the 1989 Act uses the phrase “fix the
rates of any other charges incidental to or connected with such carriage
including demurrage and wharfage”; in addition to fixing rates for
demurrage and wharfage, the Central Government is fully empowered to fix
the rates of “any other charges incidental to or connected with”; penal
rates, connected with demurrage charges, can be statutorily fixed; the mere
fact that the progressively increasing demurrage charges, to a maximum of
six times, are also referred to as penal charges does not make the charge
beyond the authority of Section 30 of the 1989 Act or as unreasonable; the
CCM, COM and DRM, as authorised under paragraph 3.3 of the Circular,
were the only statutory authorities indicated in the rate circular who were to
implement the rate circular as per the conditions therein; the power given to
these authorities was a statutory power to be exercised on conditions as
enumerated in the rate circular, and was not sub-delegation of any of
legislative power of the Central Government under Section 30 of the 1989
Act.

In SKL Co. v. Southern Railways, (2015) 16 SCC 509, the

respondent-railways issued notice inviting sealed tenders from traders and
other interested parties for leasing of the front second class luggage rake of
4 or 8 tonnes and ventilated parcel van of 18 tonne capacity on the broad
gauge on payment of lump sum rate for loading of parcels by certain trains
for a period of two years. The respondents had noticed that in some trains,
most of the time, the available luggage capacity was not being fully utilised
resulting in loss of revenue; it was decided by the Government of India, as
a matter of policy, to lease the luggage space to traders and other

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interested persons after inviting tenders from them. The appellants filed a
Writ Petition challenging the impugned notice, and to restrain the
respondent Railways from charging tariff other than that specified in
Coaching Tariff No. 24 Part III.

It was contended, among others, placing reliance on the maxim

delegatus non potest delegare, that, under Sections 30 to 32 of the
Railways Act, the power to fix the tariff rate is conferred only on the Central
Government and the respondent Railways; and, by further delegating their
authority, they violate the established legal principle that a delegatee
cannot sub-delegate.

The Supreme Court held that the appeal could be disposed of, by
directing the respondent-railways to fix the outer or upper limit of rates
chargeable by contractors for different trains; the respondent-railways were
bound to follow and implement the ethos and parameters set by the
Railways Act; the intendment behind a statute can be diluted by
Parliament, but not by a sub-delegate, as has been reiterated in Avinder
Singh v. State of Punjab, (1979) 1 SCC 137 wherein it was held that the
legislature cannot efface itself; it cannot delegate the plenary or essential
legislative function; and even if there is delegation, the delegate must
function under its supervision otherwise “if the delegate is free to switch
policy it may be usurpation of legislative power itself”; the Railway tariff
should be realistic; and the respondents were entitled to auction the space
for a particular period, provided the auction contractor adhered to the
prescribed tariff. The appeal was disposed of directing the respondents to
ensure that the successful tenderer did not charge carriage prices in

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 excess of those prescribed by the respondents in Coaching Tariff No. 24
Part III.

In Union of India v. Gangeshwar Ltd., 1995 Supp (1) SCC 554, the
dispute related to the maintenance charges levied for the private railway
sidings provided by the Railways which were regulated by agreements.
Imposition of penal demurrage/wharfage charges, by way of Rates
circulars, was in issue before the Allahabad High Court in NBK Trade
Linker Pvt. Ltd. v. Railway Board, Ministry of Railways, 2013 SCC
OnLine All 13599. In Shahdara (Delhi) Saharanpur Light Railway Co.
Ltd. v. Upper Doab Sugar Mills Ltd : AIR 1960 SC 695, the
reasonableness of the increase, in total charges payable in respect of
goods traffic carried by a railway, on the basis of terminals fixed by the
Central Government, was in issue. In Ultra Tech Cement Limited Little
Mount v. Union of India, 2014 SCC OnLine Ker 16571, (like in Nbk
Trade Linker Pvt. Ltd), the power to fix penal rates, i.e., progressively
increasing rate up to a maximum 6 times of the prevalent rate, was in
issue. In SKL Co. v. Southern Railways, the issue was whether the power
conferred on the Central Government and the Railways, under Sections 30
to 32 of the Railways Act to fix the tariff rate, could be further delegated.

All these cases related to charges payable for transportation

(carriage) of goods by the Railways, or charges connected with or
incidental thereto. Unlike in the present case, none of the afore-said
judgements related to charges falling outside the ambit of the Railways Act.

L. ELECTRICITY TARIFF DOES NOT FALL WITHIN THE AMBIT OF

SECTION 30(2) OF THE RAILWAYS ACT:

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 Section 30(2) of the Railways Act does not empower the Central
Government to fix rates for any other charges un-connected with, or
completely independent of, the carriage of passengers and for
transportation of goods. Section 2(35) of the Railways Act defines rate to
include any fare, freight or any other charge for the carriage of any
passenger or goods. The words ‘demurrage’ and ‘wharfage’, used in
Section 30(2), show that the charges, which can be imposed under Section
30(2) by the Central Government, include charges levied for detention of
rolling stock after the period for such detention by the railways, and on
goods not removed from the railways after expiry of the time stipulated for
such removal. It is evident therefore that what is contemplated by Section
30(2), are charges which are connected with the transportation (carriage) of
passengers and goods by the railways, and not matters independent
thereof, such as electricity tariff, which a distribution licensee is permitted,
by the appropriate commission under the Electricity Act, 2003, to charge its
consumers.

Accepting the submission, urged on behalf of the Railways, that

Section 30(2) confers power on the Central Government to also fix
electricity tariff which a Railway Administration is entitled to charge, would
result in startling and absurd consequences. Section 36 of the Railways Act
enables a complaint to be made before the Railway Rates Tribunal against
the Railway Administration levying unreasonable charges. What is
excluded from the jurisdiction of the Railway Tribunal, by Section 37 of the
Railways Act, are (i) classification or re-classification of any commodity, (b)
fixation of wharfage and demurrage charges; (c) fixation of fares levied for
the carriage of passengers and freight; and (d) fixation of a lump sum rate.

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 If the submission urged on behalf of the railways, that Section 30(2)
enables the Central Government to fix electricity tariff, were to be accepted,
then, since such matters would evidently not fall within the ambit of Section
37, a complaint can be filed under Section 36(1)(c) before the Railway
Rates Tribunal contending that the levy of such a charge is unreasonable.
In short, electricity tariff which the appropriate commission is entitled to
determine, and against which an appeal would lie to this Tribunal, must,
with respect to the Railways alone, be determined by the Central
Government, the unreasonableness of which can be the subject matter of a
complaint only before the Railway Rates Tribunal. Such a warped
construction of Section 30(2) of the Railways Act does not merit
acceptance.

M. OPEN ACCESS UNDER THE ELECTRICITY ACT:

What is claimed by the Railways, in this batch of appeals, is the

status of a deemed distribution licensee under the third proviso to Section
14 of the Electricity Act which would enable them to seek open access to
the transmission systems, under Section 38(2)(d)(i), 39(2)(d)(i) and Section
40(c)(i), as a “licensee”. On the other hand, if it is held not to be a licensee,
then its entitlement to seek open access would only be as a “consumer”
under clauses (ii) of Section 38(2)(d), 39(2)(d) and 40(c), in which event
such open access would only be required to be provided on payment of
surcharge on the transmission charges ie additional surcharge/cross-
subsidy surcharge.

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 While the provision for open access, under different Sections of the
Electricity Act, no doubt enables power to be supplied by others, such as
generators etc, also through the said distribution system, that does not
absolve the distribution licensee of its obligation to supply electricity to its
consumers. Section 14 of the Electricity Act does not provide for grant of
license to a person who only maintains a distribution installation (ie a
system of wires and associated facilities) without using the said system to
supply electricity to consumers within the area of supply as determined by
the appropriate commission.

As noted hereinabove, the Railways Act was enacted by Parliament

under Entries 20 and 32 of List 1 of Schedule VII to the Constitution of
India. Entry 30 specifically relates to carriage of passengers and goods by
the Railways. On the other hand, the Electricity Act, 2003 was enacted by
Parliament under Entry 38 of List III of Schedule VII to the Constitution of
India. As the Railways Act was enacted long prior to the Electricity
Regulatory Commissions Act, 1998 and the Electricity Act, 2003, It is
difficult to accept the submission that the power conferred on the
appropriate Commissions, to determine tariff, stands excluded only in
respect of the Railways, or that such a power is incidental to fixing rates for
the carriage of passengers and goods by the Railways. It is clear therefore
that Chapter VI of the Railways Act, relating to fixation of rates, has no
application with respect to determination of electricity tariff, which power
falls exclusively within the domain of the regulatory Commissions under
Part VII of the Electricity Act, 2003 i.e. under Sections 61, 62 and 64
thereof. There is no provision in the Railways Act stipulating to the contrary,
and the power conferred under Section 11(g) of the Railways Act, to erect,

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operate, maintain and repair the “electric traction equipment” or “the power
supply and distribution installation”, does not bring within its ambit supply of
electricity, either for the purpose of such erection, operation, maintenance
and repair or through such an installation to consumers.

As noted hereinabove, Section 184 of the Electricity Act make the

said Act inapplicable to the Ministry or Department of the Central
Government dealing with Defence, Atomic Energy or such other similar
Ministries or Departments or undertakings or Boards or institutions under
the control of such Ministries or Departments as may be notified by the
Central Government. Since Railways does not fall within the Ministry of
Defence or a department related to Atomic Energy, it is only on a
notification, being issued by the Central Government under Section 184,
could it be possibly held that the provisions of the Electricity Act, 2003 are
inapplicable to the Indian Railways. No such notification has been issued
by the Central Government.

N.CONCLUSION:

Issue No.3 is answered holding that the Railways Act, 1989 neither
covers the entire field with respect to the Railways within its area, nor does
it exclude the powers and jurisdiction of the Regulatory Commissions under
the Electricity Act, 2003, on matters regarding tariff, payment of
compensatory surcharge under Section 42 of the Electricity Act, 2003 etc,
and for distribution and supply of electricity to the Railways for its use.

VIII. ISSUE 4:

Whether the Railways is a Deemed Distribution Licensee under the third

proviso to Section 14 of the Electricity Act, 2003 by virtue of it being an
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Appropriate Government and undertaking distribution of electricity within its
area of operation as provided under Section 11(g) and (h) read with
Section 2(31) of the Railways Act, 1989?

A. SUBMISSION ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that the third proviso to Section 14 of
the Electricity Act, 2003 provides a deemed licensee status (for
transmission, distribution and trading) to the Appropriate Government ‘in
case an Appropriate Government transmits electricity or distributes
electricity or undertakes trading in electricity, whether before or after the
commencement of this Act’; Section 2(5) defines the term Appropriate
Government as meaning the Central Government, amongst others,
Railways’; the Railways, being a department of the Central Government, is
eligible to be considered as a deemed licensee including for distribution of
electricity, if Railways is undertaking transmission or distribution of
electricity or otherwise intends to do so; the submissions, under Issue No.
1, clearly establish that the Railways undertake distribution of electricity in
its area of operation, and therefore satisfies the requirements specified
under the third proviso to Section 14 that ‘in case an Appropriate
Government transmits electricity or distributes electricity or undertakes
trading in electricity, whether before or after the commencement of this
Act’; since the ‘Appropriate Government’ is deemed to be a Distribution
Licensee, Indian Railways has acquired the status of a deemed distribution
licensee under Section 14 of the Electricity Act, 2003, ipso facto by virtue of
the plenary Act/statutory provision, without any need for any declaration
under the Electricity Act, 2003; as mentioned hereinabove, Railways has

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been undertaking transmission and/or distribution of electricity, and intends
to continue to expand the same with aggressive electrification program of
its activities; such a position, in the case of Railways, existed by operation
of law on the date of the coming into force of the Electricity Act, 2003 on
10.06.2003, without any declaration or recognition to be made by any
authority, much less the regulatory commissions or any other act, thing or
deed to be done by any other authority; however, as an internal control, it is
entirely for the Central Government, under its Rules of Business, to decide
as to which department be allowed to implement such status, and the same
is an issue of indoor management; and it is like the Board of Directors of a
company deciding on exercising a right which already exists.

Learned Senior Counsel would submit that the Central Government’s

decision dated 06.05.2014, in the case of Railways, as also the decision
dated 26.07.2004 in the case of Military Engineering Services (MES) are
under such rules of indoor management, and not an act done by the
Central Government de hors the provisions of the Electricity Act, 2003; the
Railways, having activities of distribution of electricity including distribution
system up to the point of end use/consumption, squarely complies with the
conditions relating to a Distribution Licensee, namely, to operate and
maintain a distribution system; this is besides the transmission licensees’
activities, also being undertaken by the Railways; accordingly, the
conditions provided in the 3rd proviso to Section 14 of the Electricity Act,
2003 stands satisfied in the case of Railways. for the Railways to enforce
its status as a deemed licensee statutorily provided for, without the
necessity of any declaration, confirmation, grant or approval by any
authority or agency under the Electricity Act, 2003.

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B. SUBMISSIONS URGED ON BEHALF OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the Railways does

not undertake ‘distribution of electricity’; Section 14 of the Electricity Act
provides for ‘Grant of Licence’, inter alia, to distribute electricity as a
distribution licensee in any area as may be specified in the licence; it is the
forefront requirement, of Section 14 of the Electricity Act, that electricity
should be distributed as a distribution licensee, i.e., in compliance of all
requirements of being a Distribution Licensee; the following aspects are
stipulated under the third proviso to Section 14 of the Electricity Act (a) the
entity must be an Appropriate Government; (b) the entity must transmit
electricity or distribute electricity or undertake trading in electricity; (c) the
above activity could have commenced either before or after the
commencement of the Electricity Act, but must continue on the date on
which such status is being sought; Railways have contended that the
activities described under Section 11(g) constitute ‘distribution of
electricity’; it is important to test whether the following essential criteria are
being met by the Railways under Section 11(g): (a) whether Railways has
been authorised to operate and maintain a distribution system?; (b)
whether Railways has been authorised to supply electricity to consumers in
its area of supply?; this condition pre-supposes existence of ‘consumers’,
‘area of supply’ and sale of electricity; Railways does not fulfil any of the
above criteria; Railways neither maintains nor operates a ‘distribution
system’, nor does the Railways have any ‘consumer’ or ‘area of supply’ for
sale of electricity to qualify as supply of electricity; and the Railways do not
have a distribution system within the meaning of the Electricity Act as

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‘power supply and distribution installation’, provided under Section 11(g)
and 2(31) of the Railways Act, is not akin to a distribution system.

It is submitted, on behalf of the respondents, that the Railways do not

have an ‘area of supply’; their contention is that Section 11(a) of the
Railways Act provides for ‘area of operation’ of the Railways, which is akin
to ‘area of supply’, which is a defined term under the Electricity Act; Section
11(a) merely states that the existence of such structures, as given
thereunder, will not prevent the Railways from constructing or maintaining a
Railway; ‘Area of supply’, on the other hand, is a geographically defined
area which is specifically determined and not assumed; the distribution
licensee does not determine its ‘area of supply’ by itself; ‘Area of supply’ is
determined by the SERC along with the licence conditions of the licensee;
for instance, the ‘area of supply’ of TP Central Odisha Distribution Limited
is provided under Condition No. 2 of Part I of the Licence Conditions which
provides that “the Area of operation of licensed activity of the Licensee
shall comprise the Electricity Distribution Circles of Bhubaneswar-I,
Bhubaneswar-II, Cuttack, Dhenkanal and Paradeep existing as on date,
excluding any cantonment, aerodrome, fortress, arsenal, dockyard or camp
or any building or place in occupation of the Central Government for
defence purposes”; this definition shows that the alleged ‘area of operation’
of the Appellant is not excluded from the ‘area of supply’ of TPCODL;
furthermore, Condition 3.3(e) of the Licence Conditions defines area of
distribution or area of supply to mean “the area of Distribution stated in
Condition No.2 of these within which the distribution licensee is authorised
to establish, operate and maintain the Distribution System and supply
electricity”; and therefore, as per the above two conditions, TPCODL has

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the right to supply electricity to the alleged ‘area of operation’ of the
Railways located in the ‘area of supply’ of TPCODL, whereas no such right
has been granted to the Railways either under the Railways Act or the
Electricity Act.

It is submitted, on behalf of the respondents, that the Railways does

not have consumers; the sale of electricity is an essential component of
‘supply’ of electricity, which, inter alia, is a necessary ingredient of
distribution of electricity as per the scheme of the Electricity Act; one of the
important aspects, of being a distribution licensee as contemplated under
the Electricity Act, is to supply electricity to a consumer by virtue of a
‘distribution system’; the term ‘supply’ has been defined under Section
2(70) of the Electricity Act which, in relation to electricity, means the sale of
electricity to a licensee or consumer; supply of electricity would only be
completed when there is a sale of electricity to a third party (i.e., a licensee
or a consumer); one of the requisites of the ‘supply’ of electricity is that it
must be sold to the other party; ‘sale’ of electricity to a third party is
essential for discharging the activity of ‘supply’ of electricity; it is requisite
that there should be a seller (distribution licensee herein), buyer (consumer
herein) and price (tariff herein) for the sale of electricity; mere movement, of
power from one point to another, cannot be construed as sale of electricity,
as has been contended; the Railways has, in fact, admitted that it does not
supply electricity to any third-party consumers; contrary to the submissions
made by them before this Tribunal, the Railways have repeatedly admitted
before the OERC that they do not supply electricity to the public unlike
distribution licensees such as TPCODL; they also admitted that the
procured power is consumed by them in connection with the working of the

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Railways; this shows that no ‘sale’ takes place from the Railways to any
consumer to qualify such activity as ‘supply’ under the Electricity Act; the
act of re-distribution of power, inside the railway premises to bookshops,
canteens, vendors, etc, cannot be construed as distribution of electricity to
a third party, for the reason that it is being provided as a service by the
Railways, in the railway premises, for the purposes of Railways or in
connection with the working of the Railways, as contemplated in Section
2(31) of the Railways Act; Railways supply electricity to the aforementioned
entities in view of a jural relationship as the above entities are carrying out
important functions of the Railways for the purpose of and in connection
with the Railways; electricity to such establishments situated on the
Platform, for the purpose of and in connection with the Railways, is in fact
an act of re-distribution by the Railways, after obtaining bulk supply from a
distribution company, or a generating company, as the case may be;
Railways obtain electricity in bulk, which is then internally branched out by
them for their own purposes; the activity of branching out of electricity,
within the premises of the Railways for its own consumption, can be done
internally by the Railways; and the mere act of installation of equipment
does not amount to sale of electricity under the Electricity Act.

It is submitted, on behalf of the respondents, that the contention urged

on behalf of the Railways, that the phrase “in connection with the working
of the railway” given under Section 11(g) of the Railways Act, has a wide
meaning and it covers multiple activities which also includes the services of
restrooms, bookshops, canteens, restaurants, etc, is not tenable;
consumption of electricity, for carrying out such activity, is nothing but self-
consumption by the Railways, and does not amount to sale of electricity;

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the second component of sale, being ‘price/ consideration’, is also absent
in the case of Railways, as the consideration for supply of electricity is the
tariff payable by the ‘consumer’; determination of tariff falls strictly within
the domain of the SERC under Part VII of the Electricity Act; it is an
admitted position that no SERC has determined the tariff applicable for the
alleged consumers of the Railways; what is charged by the Railways is
merely a service fee from its alleged consumers, which is over and above
the price at which the Railways obtain bulk supply of electricity from a
generating company or a distribution company, as the case maybe; as long
as Railways is not discharging any duties, assigned to a distribution
licensee under the law, Railways is not eligible for any rights accruing to
such licensees.

It is submitted, on behalf of the respondents, that reliance placed by

the Railways on the letter dated 06.05.2014 issued by the Ministry of Power
is misplaced and incorrect in law; under the extant statutory framework, the
government does not have the power to grant exemption from procuring
license; it is only the relevant SERC which has the power to grant license
(Section 14 of the Electricity Act) or grant exemption (Section 13 of the
Electricity Act) under the Electricity Act; the letter dated 06.05.2014 is, ex
facie, inconsistent and contrary to Sections 12, 13, 14 and 15 of the
Electricity Act; even otherwise, the letter dated 06.05.2014 is merely
clarificatory in nature, and should be read with other applicable provisions
of the Electricity Act and policies made thereunder; and, further, it is settled
position of law that clarification by ministries do not have binding effect
(Bengal Iron Corporation & Anr. v. Commercial Officer and Ors :(1994)
Supp (1) SCC 310; Kamal Kumar Dutta v. Ruby General Hospital Ltd :

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(2006) 7 SCC 613; and Sanjeev Coke Mfg. Co. v. Bharat Coking Coal
Ltd: (1983) 1 SCC 147.

Drawing a parallel with the Damodar Valley Corporation Act, 1948, it is

submitted, on behalf of the Respondents, that similar to an SEZ, in sharp
contrast to express deeming qua Damodar Valley Corporation (“DVC”) in
the fourth proviso to Section 14, no such indication is provided in so far as
the Railways is concerned; the Railways Act is subsequent to the Damodar
Valley Corporation Act, 1948 (“DVC Act”); had it been the legislative intent
of the Electricity Act, to confer upon the Railways the status of a deemed
licensee, a similar deeming provision would have been included for the
Railways as well; looking at the issue from another angle, the scheme of
the Railways Act and the DVC Act may be juxtaposed; whilst multiple
Sections of the DVC Act provide clear and explicit indications that the DVC
is entitled to, or is otherwise required to, undertake distribution activities,
there is no such indication in the Railways Act; the relevant Sections of the
DVC Act, 1948 in this regard are Sections 4(1)(e), 12 and 20; and
accordingly, whilst the deeming of the DVC is demonstrably justified, no
such justification exists qua the Railways.

On the Legislative intent behind the third proviso to Section 14, (State
of Travancore –Cochin and Ors. v. Shanmugha Vilas Cashewnut
Factory Quilon: AIR 1953 SC 333), it is submitted, on behalf of the
Respondents, that the legal fiction created under the provisos to Section 14
recognize the statutory existence of a distribution licensee at the time of
coming into the force of the Electricity Act or thereafter with respect to such
an entity and not beyond; the legislative intent behind the 3rd proviso is
necessarily to be seen from the context of such Appropriate Governments

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which have, in fact, been in the business of distribution of electricity; in
India, there exist several State Governments which, through their Energy
Departments, have been involved in the business of distribution of
electricity within their States, and are the only utilities performing such
functions; some of these are referred to in the table; since the aforesaid
State Governments, through their respective Energy Departments, have
been undertaking the functions of distribution of electricity within their
States, the same were necessarily required to be given the status of a
licensee (similar to DVC), and therefore such State Governments, by virtue
of the 3rd proviso to Section 14, were granted the status of a deemed
licensee under the Electricity Act; importantly, all the entities under the
provisos to Section 14 have the characteristic of a distribution licensee in
as much as all entities are involved in the business of distribution of
electricity, and have a defined area of supply; while recognizing the nature
of operations of the DVC, and the State Governments involved in the
business of distribution of electricity, the legislation provides for their status
as a deemed licensee; being fully aware of the nature of the operations of
the Railways, the Electricity Act consciously omits to provide for such a
status to the Railways; the same falls under the well-recognized principle of
onession unius est exclusion alterius for statutory interpretation (i.e.,
expression of one thing excludes others); even otherwise, a legal fiction
cannot go beyond the purpose for which it has been created; Section 11(g)
of the Railways Act cannot be read in isolation, and its interpretation must
depend on the text and the context. (Reserve Bank of India v. Peerless
General Finance and Investment Co. Ltd and Anr: (1987) 1 SCC 424;
Poppatlal Shah, Partner Of Messrs Indo malayan Trading Company v.
State Of Madras, Represented By The Deputy Commercial Tax Officer,

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Sowcarpet: AIR 1953 SC 274; Union of India v. Elphinstone Spinning
and weaving Co. Ltd. & Ors: (2001) 4 SCC 139); it is a cardinal rule of
interpretation that statutes must be read as a whole in its context; when the
question arises as to the meaning of a certain provision in a statute, it is not
only legitimate but proper to read that provision in its context; the context
here means the statutes as a whole, the general scope of the statutes and
the mischief that it was intended to remedy; the mischief that the Railways
Act intended to remedy are found in its Statements of objects and reasons;
and the purpose and object of Section 11 of the Railways Act has been
elaborated in several precedents, some of which are (a) Goa foundation
v. Konkan Railways (AIR 1992 Bom 471); (b) Ganv Bhavancho Ekvott
A society registered under the Societies Registration Act v. South
Western Railways: 2022 SCC Online Bom 7184).

On the applicable rules of Interpretation, it is submitted on behalf of the

Respondents, that the same word may be used in different statutes giving
different meanings; mere use of the word ‘distribution’, in the Railways Act,
will not result in a right being conferred on the Railways to act as a
distribution licensee; it is well settled that, in construing a word in an Act,
caution must be exercised in adopting a meaning ascribed to that word in
other statutes (Commissioner of Sales Tax, Madhya Pradesh Indore v.
Jaswant Singh Charan Singh: AIR 1967 SC 1454); facts may be deemed
and therefrom legal consequences would flow; legal consequences cannot
be deemed; a legal consequence cannot be deemed nor, therefrom, can
the events that should have preceded it (Delhi Cloth & General Mills Co.
Ltd. and Anr. v. State of Rajasthan and Ors: (1996) 2 SCC 449); and, in

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this light, the Railways should fulfil the conditions precedent to become a
‘deemed distribution licensee’ as stipulated under the Electricity Act.

C. ANALYSIS:

Part IV of the Electricity Act, 2003 relates to licensing, and Section

12(b) thereunder stipulates that no person shall distribution electricity
unless he is authorized to do so by a license issued under Section 14, or is
exempt under Section 13. It is not even the case of the Railways that they
have been exempted from obtaining a license for distribution of electricity
and, consequently, reference to what Section 13 stipulates is un-
necessary.

Section 14 relates to the grant of license. Section 14(b) enables the

appropriate Commission, on an application made to it under Section 15, to
grant a license to any person to distribute electricity as a distribution
licensee. Both the expressions used in Section 14(b), ie “to distribute
electricity” and “as a distribution licensee”, are significant. The license
granted under Section 14(b) not only makes the grantee a distribution
licensee, but also authorizes it, by way of a license, to distribute electricity.
Under the third proviso to Section 14, in case an Appropriate Government
distributes electricity, whether before or after the commencement of the
Act, such Government shall be deemed to be a licensee under the Act, but
shall not be required to obtain a license under the Act.

D. OPINION OF THE APPROPRIATE GOVT THAT IT IS A DEEMED

DISTRIBUTION LICENSEE IS NOT CONCLUSIVE:

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 While the submission of Mr. M. G. Ramachandran, learned Senior
Counsel, that a declaration by the Appropriate Commission, that the
appropriate Government (in the present case, the Central Govt of which the
Indian Railways forms part of) is a deemed distribution licensee, is not a
pre-requisite for application of the third proviso, cannot be said to be
without merit, that does not mean that the presumption of an Appropriate
Government, that it is a deemed distribution licensee in terms of the third
proviso to Section 14, is conclusive. It is always open to the concerned
Regulatory Commission, when the claim of the concerned Appropriate
Government to be a deemed distribution licensee under the third proviso to
Section 14 is put in issue, to decide this question.

E. LEGAL FICTION CREATED BY THE THIRD PROVISO TO SECTION

14: ITS SCOPE:

By use of the word “deemed”, in the third proviso to Section 14,

Parliament has created a legal fiction. Black’s Law Dictionary defines
“Legal Fiction” as an assumption that something is true even though it may
be untrue, made especially in judicial reasoning to alter how a legal rule
operates, specifically a device by which a legal rule is diverted from its
original purpose to accomplish indirectly some other object.

When a statute enacts that something shall be deemed to have been

done, which in fact and in truth was not done, the court is entitled and
bound to ascertain for what purposes and between what persons the
statutory fiction is to be resorted to. After ascertaining the purpose, full
effect must be given to the statutory fiction and it should be carried to its
logical conclusion, and to that end it would be proper and even necessary

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to assume all those facts on which alone the fiction can operate, (Levy, Re,
ex p Walton. Hill v. East and West India Dock Co: 1884 (9) AC
448; Shanmugha Vilas Cashewnut Factory: AIR 1953 SC
333; American Home Products Corpn: (1986) 1 SCC
465; Vallabhapuram Ravi: (1984) 4 SCC 410: AIR 1985 SC 870; S.
Appukuttan: (1988) 2 SCC 372 = AIR 1988 SC 587; Parayankandiyal
Eravath Kanapravan Kalliani Amma: (1996) 4 SCC 76; and Ali
M.K. v. State of Kerala: (2003) 11 SCC 632; DIT v. Schlumberger Asia
Services Ltd., 2019 SCC OnLine Utt 274), for if you are bidden to treat an
imaginary state of affairs as real you must surely, unless prohibited from
doing so, also imagine as real the consequence and incidents which, if the
putative state of affairs had in fact existed, must inevitably have flowed
from or accompanied it and, having done so, you must not cause or permit
your imagination to boggle when it comes to the inevitable corollaries of
that state of affairs. (East End Dwellings Co. Ltd. v. Finsbury Borough
Council: 1951 (2) ALL ER 587 (HL); DIT v. Schlumberger Asia Services
Ltd., 2019 SCC OnLine Utt 274). When the law creates a legal fiction,
such fiction should be carried to its logical end. (Builders' Assn. of India:
(1989) 2 SCC 645 = AIR 1989 SC 1371; DIT v. Schlumberger Asia
Services Ltd., 2019 SCC OnLine Utt 274). A legal fiction pre-supposes
the correctness of the state of facts on which it is based and all the
consequences which flow from that state of facts have to be worked out to
their logical extent. (Bengal Immunity Co. v. State of Bihar, AIR 1955 SC
661).

In interpreting a provision creating a legal fiction, the Court is to

ascertain for what purpose the fiction is created, and after ascertaining this,

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the Court is to assume all those facts and consequences which are
incidental or inevitable corollaries to the giving effect to the fiction.
(Mancheri Puthusseri Ahmed: (1996) 6 SCC 185; CIT v. Shakuntala:
AIR 1966 SC 719; CIT v. Moon Mills Ltd: AIR 1966 SC 870; Sadan K.
Bormal: (2004) 5 SUPREME 29; DIT v. Schlumberger Asia Services
Ltd., 2019 SCC OnLine Utt 274). When the law creates a legal fiction,
such fiction should be carried to its logical end. (State of Andhra Pradesh
v. Bharat Sanchar Nigam Limited, 2011 SCC OnLine AP 107). In
interpreting a provision creating a legal fiction, the Court is required to
ascertain for what purpose the fiction is created, and after ascertaining this,
the Court is to assume all those facts and consequences which are
incidental or inevitable corollaries to the giving effect to the fiction.
(Mancheri Puthusseri Ahmed v. Kuthiravattam Estate Receiver, (1996)
6 SCC 185; CIT v. Shakuntala, AIR 1966 SC 719; CIT v. Moon Mills Ltd.,
AIR 1966 SC 870; State of West Bengal v. Sadan K. Bonnal, 2004 (5)
Supreme 29; Tirupati Udyog Ltd. v. Union of India, 2010 SCC OnLine
AP 591).

P Ramanatha Aiyar’s Advanced Law Lexicon states that a legal

fiction should be strictly confined to the area in which it operates. The legal
fiction must be limited to the purposes indicated by the context, and cannot
be given a larger effect. A legal fiction is created only for some definite
purpose. The fiction is to be limited to the purpose for which it was created,
and should not be extended beyond that legitimate field. A legal fiction pre-
supposes the existence of the state of facts which may not exist, and then
works out the consequences which flow from that state of facts. Such
consequences have to be worked out only to their logical extent having due

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regard to the purpose for which the legal fiction has been created.
Stretching the consequences beyond what logically follows, amounts to an
illegitimate extension of the purpose of the legal fiction. (Bengal Immunity
Company Limited v. State of Bihar, [1955] 6 STC 446 (SC); AIR 1955
SC 661, K. Prabhakaran v. P. Jayarajan, (2005) 1 SCC 754). A deeming
provision cannot be pushed too far so as to result in an anomalous or
absurd situation. (Maruti Udyog Ltd. v. Ram Lai, (2005) 2 SCC 638). The
fiction enacted by the Legislature must be restricted by the plain terms of
the statute (Commissioner of Income-tax v. Shakuntala: AIR 1966 SC
719; Mancheri Puthusseri Ahmed v. Kuthiravattam Estate Receiver,
(1996) 6 SCC 185), and should not to be extended beyond the purpose for
which, or the language of the Section by which, it is created. (State of
Maharashtra v. Laljit Rajshi Shdh, (2000) 2 SCC 699, Mancheri
Puthusseri Ahmed, (1996) 6 SCC 185, State of W.B. v. Sadan K.
Bormal, (2004) 6 SCC 59). A legal fiction cannot be extended by the court
on analogy or by addition or deletion of words not contemplated by the
Legislature. (Mancheri Puthusseri Ahmed, (1996) 6 SCC 185) (State of
Andhra Pradesh v. Seven Hills Constructions, 2011 SCC OnLine AP
064). If the legal fiction is for a specified purpose, one cannot travel beyond
the scope of that purpose. (Bengal Immunity Co. v. State of Bihar, AIR
1955 SC 661). The fiction is not to be extended beyond the purpose for
which it is created, or beyond the language of the Section by which it is
created. It cannot also be extended by importing another fiction. (Mancheri
Puthusseri Ahmed v. Kuthiravattam Estate Receiver, (1996) 6 SCC
185; CIT v. Shakuntala, AIR 1966 SC 719; CIT v. Moon Mills Ltd., AIR
1966 SC 870; State of West Bengal v. Sadan K. Bonnal, 2004 (5)

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Supreme 29; Tirupati Udyog Ltd. v. Union of India, 2010 SCC OnLine
AP 591).

For the legal fiction to be attracted, and for the Appropriate

Government to be deemed to be a distribution licensee without being
required to obtain a license, the test prescribed therefor must be satisfied.
The Electricity Act does not place a deemed distribution licensee on a
higher pedestal than a distribution licensee. Except for the requirement of
obtaining a license, a deemed distribution licensee is akin to a distribution
licensee, and is likewise governed by all the provisions of the Electricity
Act, except in the case of inconsistency falling within the ambit of Section
173 thereof. For the legal fiction in the third proviso to Section 14 to apply,
the Railways must, like any other distribution licensee under the Electricity
Act, be actually distributing electricity.

F. APPROPRIATE GOVERNMENTS ENGAGED IN DISTRIBUTION OF

ELECTRICITY:

The Respondents have, in their written submissions, furnished a table

in support of their contention that several State Governments, through their
respective energy departments, are involved in exclusive distribution of
electricity within their States; it is only such State Governments which have
been granted the status of a deemed licensee by virtue of the 3rd proviso to
Section 14 of the Electricity Act; and the table refers to some of them.

State Department Functions

Arunachal Department of Power, Generation, Transmission,
Pradesh Arunachal Pradesh, Distribution, State Load
Government of Arunachal Despatch Centre (SLDC)

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 Pradesh
Goa Electricity Department of Transmission and
Goa Distribution
Jammu and Jammu & Kashmir Power Transmission and
Kashmir Development Department Distribution
Manipur Electricity Department, Generation, Transmission
Government of Manipur and Distribution

Mizoram Electricity Department, Generation, Transmission,

Government of Mizoram Distribution and SLDC
Nagaland Electricity Department, Generation, Transmission,
Government of Nagaland Distribution and SLDC
Sikkim Energy & Power Generation, Transmission,
Department Distribution and SLDC

The appropriate Governments, referred to in the aforesaid table,

would undoubtedly fall within the ambit of the third proviso to Section 14, as
they have actually been distributing electricity both before and after the
commencement of the Electricity Act. It is to enable the aforesaid State
Governments, through their respective departments of Energy, to continue
distributing electricity as a deemed licensee, without the corresponding
obligation of obtaining a license under Section 14 of the Electricity Act, that
the third proviso to Section 14 of the Electricity Act appears to have been
inserted.

In view of Section 2(5)(a)(ii) of the Electricity Act, the Appropriate

Government, in relation to the Railways, is the Central Government and, in
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case Railways is also held to be distributing electricity either before or after
commencement of the Electricity Act, it must be deemed to be a distribution
licensee under the said Act. In this context, it is useful to refer to the Order
of the CERC in Petition No. 197/MP/2015 dated 05.11.2015, and the letter
of the Ministry of Power, Government of India dated 06.05.2014, since
reliance is placed thereupon, on behalf of the Railways, to contend that
they certify that Railways is a deemed distribution licensee under the third
proviso to Section 14 of the Electricity Act.

G. ORDER OF CERC IN PETITION NO. 197/MP/2015 DATED

05.11.2015:

Appeal No.276 of 2015 is preferred against the Order passed by the

Central Regulatory Commission (“CERC” for short) in “Indian Railways vs
Power Grid Corporation of India and others” (Order in Petition No.
197/MP/2015 dated 05.11.2015. The first three issues which arose for
consideration before the CERC were: (1) Whether the petition was
maintainable before the Commission? (2) Whether the petitioner’s claim as
an authorized entity under the provisions of the Railways Act to undertake
distribution of electricity in connection with the working of the railways can
be sustained in law. If so, whether the petitioner is entitled for grant of
connectivity and open access as a distribution licensee in connection with
the working of the railways? and (3) Whether the petitioner can be treated
as a deemed licensee under the Electricity Act?

On issue No.1, the CERC observed that, since the issue had arisen in
the context of grant of connectivity to Indian Railways for the purpose of

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availing inter-State Open Access, the petition, filed before it, was
maintainable.

On issue No.2, the CERC opined that, in view of Section 173 of the
Electricity Act, it had to be seen whether the provisions of the Electricity Act
are inconsistent with the provisions of the Railways Act in so far as
distribution business is concerned; to the extent of inconsistency, Railways
Act will prevail and in case of consistency, provisions of both Acts will
prevail; Section 11(g) of the Railways Act authorized the Railway
Administration “to erect, operate, maintain or repair any electric traction
equipment, power supply and distribution installation in connection with the
working of the railway”; the words “power supply and distribution
installation” have not been defined in the Railways Act; however, these
words need to be understood in the light of the purpose which they seek to
serve i.e. in connection with the working of the railways; considering these
words in the context of the definition of railways, it appears that the Railway
Administration is entrusted with the works to lay down the distribution
network for supply of power to various railway installations; from the
judgement in Union of India through General Manager Northern
Railway Vs Chairman UPSEB & Others (judgement of the Supreme
Court in Transfer Case No. 37 and 38 of 2001 dated 9.2.2012), it was
clear that Indian Railways were governed by the provisions of the Railways
Act for constructing transmission lines and distribution installations for the
purpose of supply of power to the railways without having to take any
licence from the appropriate Commission for transmission or distribution of
electricity; in other words, the Indian Railways can be treated as an
authorized entity under the Railways Act for carrying out transmission and

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distribution activities for ensuring supply of power in connection with the
working of the railways; that being the case, the requirement of MSETCL
for declaration regarding the area of operation, other terms and conditions
of licence and Standard of Performance as required in case of a
distribution licensee under the Electricity Act, will not be applicable in case
of Railways; since the TSS of Railways are already connected with
MSETCL network for drawing power, the petitioner was entitled for grant of
inter-State Open Access through the MSETCL network for the purpose of
supply of power in connection with the working of the railways; MSETCL
had submitted that, presently, the petitioner was connected to the grid as a
consumer of MSEDCL and was seeking connectivity as a distribution
licensee; as per Regulation 3.2 of the Maharashtra Electricity Regulatory
Commission (Transmission Open Access Regulations), 2014, connectivity
with the grid is a pre-condition for grant of open access; therefore, the
petitioner was required to apply and had rightly applied to MERC, in Case
No. 194 of 2014, to take on record the deemed distribution licensee status
of the Indian Railways for issuing specific conditions of the licence; the
ruling given by MERC in order dated 11.4.2012 in Case No. 157 of 2011
(M/s Serene Properties Private Ltd) has been relied upon regarding the
requirement of issue of specific conditions for distribution licensees; in the
light of the special status of Indian Railways under the Railways Act, as
interpreted by the Supreme Court in UOI through General Manager
Indian Railways Vs UPSEB, the ruling of MERC, in the case of M/s
Serene Properties Private Limited, will not be applicable in case of the
Indian Railways; and, since the Indian Railways is an authorized entity to
distribute and supply electricity in connection with the working of the
Railways under the Railways Act, the petitioner shall be entitled for grant of

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Open Access in connection with the working of the Railways as per the
provisions applicable to a distribution licensee.

On Issue No.3, the CERC observed that the third proviso to Section 14
permits the Central Government or State Governments to undertake any of
the licensed activities of transmission, distribution and trading whether
before or after the commencement of the Act without having to take a
licence; the Ministry of Power, vide letter dated 6.5.2014, has issued the
following clarification regarding the status of a deemed licensee;
WBSEDCL and MSETCL had objected that this clarification was not a
judicial pronouncement, and therefore cannot be accepted as conclusive
proof of the deemed status of Indian Railways, and MSETCL had
advised the petitioner to get an order from the appropriate Commission in
this regard; a plain reading of the third proviso to Section 14 does not
reveal that a judicial pronouncement is required for determining the status
of the appropriate Government as a licensee under the said provision; in
exercise of the powers under clause (3) of Article 77 of the Constitution of
India, the Hon’ble President of India had made the Government of India
(Allocation of Business) Rules, 1961; Rule 2 of the AoB Rules provides
that the business of the Government of India shall be transacted in the
Ministries, Departments, Secretariats and Offices specified in the First
Schedule to these rules; administration of the Electricity Act, 2003 is the
responsibility of the Ministry of Power; being the nodal Ministry, Ministry of
Power had examined the proposal of the Ministry of Railways with regard to
its deemed status as a licensee under the Electricity Act in consultation
with the Ministry of Law and Justice which has been vested with the power
to render “advice to Ministries on legal matters including interpretation of

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the Constitution and the laws”; moreover, the clarification had been issued
with the approval of the Hon’ble Minister of Power (Independent Charge);
therefore, the clarification issued by the Ministry of Power with regard to
the deemed licensee status of the Indian Railways meets the requirement
of Law; and there was no requirement for a declaration to that effect to be
issued by an Appropriate Commission.

After noting, the submission of WBSETCL, that Indian Railways, in

order to be considered as a deemed licensee under the Electricity Act,
must first comply with the requirements of Section 14 read with Section 15
of the Electricity Act, the CERC observed that the Appropriate
Government is not required to take a licence in terms of the third proviso
to Section 14 of the Act in order to transmit or distribute or undertake
trading in electricity; the provisions of Section 15, Sections 17 to 24 will
not be applicable in case of deemed licensees under the third proviso to
Section 14 of the Act; however, the proviso to Section 16 requires the
Appropriate Commission to specify the general or specific conditions to be
applicable to deemed licensees covered under first, second, third, fourth
and fifth provisos to Section 14 of the Electricity Act; therefore, the Central
Commission and State Commissions are required to specify the general
or specific conditions of licence applicable to deemed licensees; as and
when Indian Railways decides to undertake transmission, distribution or
trading in electricity as a deemed licensee under the third proviso to
Section 14 of the Electricity Act, they will be required to approach the
respective State Commission for specifying the general or specific
conditions of licence, if the concerned State Commission has not already
specified the terms and conditions of licence under the proviso to Section

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16 of the Act; the petitioner is a deemed licensee under third proviso to
Section 14 of the Electricity Act; and there was no requirement for
declaration to that effect by the Appropriate Commission.

H. MINISTRY OF POWER LETTER REGARDING DEEMED LICENSEE

STATUS OF INDIAN RAILWAYS:

As reliance has been placed, in the aforesaid order of the CERC, on

the contents of the letter of the Ministry of Power dated 06.05.2014, it is
useful to note its contents. In its letter No-25/19/2004-R&R dated
06.05.2014, addressed to the Secretaries of the State
Commissions/JERCs, and the Secretaries in charge of Energy/Power
Deptt. Of States/UTs, the Ministry of Power, Govt of India, issued
clarification on the subject-Railways as deemed licensee under the
Electricity Act, 2003.

After referring to the Ministry of Railways (Railway Board) letters

dated 13 March, 2014 and 27th March, 2014 seeking clarification for
deemed licensee status to the Indian Railways, the Ministry of Power
stated that the issue of granting deemed licensee status to Railways, under
the Electricity Act. 2003, had been examined by the Ministry in consultation
with the Dept. of Legal Affairs, Ministry of Law and Justice; it was clarified
that Railways was a deemed licensee under the third proviso to Section 14
of the Electricity Act, 2003; and this clarification may be read with other
applicable provisions of the Electricity Act, 2003 and policies made
thereunder.

The letter dated 06.05.2014, issued by the Ministry of Power, is

neither a directive under Section 107 of the Electricity Act nor does it state

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that it has been issued under the said provision. The said letter, in fact,
makes no reference to any provision of the Electricity Act in terms of which
such a letter was issued. It would hardly make any difference even if it were
to be presumed that the source of power to issue such a letter is traceable
to Section 107 of the Electricity Act, since such directions are also not
binding on the Central Commission.

Before examining the scope of Section 107 of the Electricity Act, it is

necessary to take note of the judgements relied on behalf of the
Respondents on the effect of such letters/circulars/guidelines.

I.JUDGEMENTS RELIED ON BEHALF OF THE RESPONDENTS:

Relying on Sanjeev Coke Mfg. Co. v. Bharat Coking Coal

Ltd. [(1983) 1 SCC 147, the Supreme Court, in Bengal Iron Corpn. v.
CTO, 1994 Supp (1) SCC 310, held that clarifications/circulars issued by
the Central Government and/or State Government represented merely their
understanding of the statutory provisions; they are not binding upon the
courts; there can be no estoppel against the statute; the understanding of
the Government was nothing more than its understanding and opinion; it
was doubtful whether such clarifications and circulars bound the quasi-
judicial functioning of the authorities under the Act; while acting in a quasi-
judicial capacity, they were bound by law and not by any administrative
instructions, opinions, clarifications or circulars; law is what was declared
by the Supreme Court and the High Court; and Parliament/Legislature
never speak or explain what does a provision enacted by it means.
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 In Kamal Kumar Dutta v. Ruby General Hospital Ltd., (2006) 7
SCC 613, the Supreme Court held that the letter from the then Law Minister
could not override the statutory provision; when the statute is clear,
whatever be the statement made by the Law Minister on the floor of the
House, cannot change the words and intendment which is borne out from
the words; the letter of the Law Minister cannot be read to interpret the
provisions of a Section in an enactment; the intendment of the legislature
should be given its natural meaning and cannot be subject to any
statement made by the Law Minister in any communication; the words
speak for themselves; and it did not require any further interpretation by
any statement made in any manner.

J. DIRECTIVES UNDER SECTION 107 ARE NOT BINDING:

Section 107 of the Electricity Act relates to directions by the Central

Government and under sub-section (1) thereof, in the discharge of its
functions, the Central Commission shall be guided by such directions in
matters of policy involving public interest as the Central Government may
give to it in writing. Section 107(2) provides that, if any question arises as to
whether any such direction relates to a matter of policy involving public
interest, the decision of the Central Government thereon shall be final.
Section 108 of the Electricity Act is in pari-materia with Section 107 of the
said Act, except that Section 108 relates to ‘Direction by the State
Government to the State Commission’, and Section 107 relates to
‘Direction by the Central Government to the Central Commission’.

Section 78A of the Electricity Supply Act, 1948, was worded similarly to
that of Section 107 and 108 of the Electricity Act,2003, and provided that

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the “the Board shall be guided by such directions on questions of policy as
may be given to it by the State Government”. In Real Food Products Ltd.
v. A.P. SEB, (1995) 3 SCC 295, the Supreme Court held that the view
expressed by the State Government on a question of policy is in the nature
of a direction to be followed by the Board in the area of the policy to which
it relates; in the context of the function of the Board of fixing the tariffs in
accordance with Section 49 read with Section 59 and other provisions of
the Electricity Supply Act,1948, the Board is to be guided by any such
direction of the State Government; the direction of the State Government
was to fix a concessional tariff for agricultural pump-sets at a flat rate per
H.P which relate to a question of policy which the Board must follow;
however, in indicating the specific rate in a given case, the action of the
State Government may be in excess of the power of giving a direction on
the question of policy, which the Board, if its conclusion be different, may
not be obliged to be bound by; but where the Board considers even the rate
suggested by the State Government, and finds it to be acceptable in the
discharge of its function of fixing the tariffs, the ultimate decision of the
Board would not be vitiated merely because it has accepted the opinion of
the State Government even about the specific rate; in such a case, the
Board accepts the suggested rate because that appears to be appropriate
on its own view; and, if the view expressed by the State Government in its
direction exceeds the area of policy, the Board may not be bound by it
unless it takes the same view on merits itself.

This judgement in Real Food Products Ltd, rendered in the context of

the Electricity Supply Act, 1948, may not be applicable in the context of
Sections 107/108 of the Electricity Act, 2003, by which Act the 1948 Act

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was repealed. In this context it is useful to note that the Statement of
objects and reasons for introducing the Electricity Bill, 2001 records, among
others, that, over a period of time, the performance of State Electricity
Boards had deteriorated substantially on account of various factors; for
instance, though power to fix tariffs vested with the State Electricity Boards,
they had generally been unable to take decisions on tariffs in a professional
and independent manner, and tariff determination in practise had been
done by the State Governments; cross-subsidies had reached
unsustainable levels; to address this issue, and to provide for distancing of
government from determination of tariffs, the Electricity Regulatory
Commissions Act was enacted in 1998; and it created the Central
Electricity Regulatory Commission and had an enabling provision through
which the State Governments could create a State Electricity Regulatory
Commission.

The said Statement of objects and reasons further records that, with the
policy of encouraging private sector participation, generation, transmission
and distribution and the objective of distancing the regulatory
responsibilities from the Government to the regulatory commissions, the
need for harmonising and rationalsing the provisions in the Indian
Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity
Regulatory Commissions Act, 1998 in a new self-contained comprehensive
legislation arose; accordingly, it became necessary to enact a new
legislation for regulating the electricity supply industry in the country which
would replace the existing laws, preserve its core features other than those
relating to the mandatory existence of the State Electricity Boards and the

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responsibilities of the State Governments and the State Electricity Boards
with respect to regulating licensees.

The law declared by the Supreme Court, in Real Food Products Ltd., is
that, in discharging its functions of fixing the tariffs, the State Electricity
Board is to be guided by the direction of the State Government. As noted
hereinabove, the aforesaid judgement was passed interpreting the scope of
Section 78-A of the Electricity (Supply) Act, 1948. It is with a view to
provide for distancing of the government, from determination of tariffs, that
the Electricity Regulatory Commissions Act,1998 was enacted, and the
Central Electricity Regulatory Commission was created thereby. The
enabling provisions under the 1998 Act are now mandatory provisions
under the Electricity Act, 2003 with Part X thereof obligating the constitution
of State Electricity Regulatory Commissions. Detailed provisions have also
been made in Part IX of the 2003 Act regarding tariff, and the power to
determine tariff now vests exclusively with the appropriate Regulatory
Commissions. The judgement of the Supreme Court, in Real Food
Products Ltd, rendered in the context of Section 78-A of the Electricity Act,
1948 would have no application since Regulatory Commissions- both
Central and State- have been constituted, with a view to distance tariff
determination by these Commissions from the Government, under the
subsequent enactments ie the Electricity Regulatory Commissions
Act,1998 and the Electricity Act, 2003. The law laid down in the said
judgement may no longer apply in the changed context.

While the Central Commission, constituted under Part X of the

Electricity Act, 2003, is required to be guided by the directions issued under
Section 107 of the Electricity Act, 2003, in the matters of public interest, the

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said directions of the Central Government, are not binding on them.
(Fatehgarh Bhadla Transmission Co. Ltd. v. CERC: 2023 SCC OnLine
APTEL 16). In Tamil Nadu Electricity Consumers' Association v. Tamil
Nadu Electricity Regulatory Commission (Order in Appeal No. 92 of
2013 & IA No. 151 of 2013 dated 21.01.2014), this Tribunal was called
upon to consider whether the directions issued under Section 108 were
binding on the State Commission. Relying on the judgment of the Supreme
Court in APTRANSCO v. Sai Renewable Energy Pvt. Ltd., (2011) 11
SCC 34, and the judgment of this Tribunal, in Polyplex (Order in Appeal
No. 41, 42 and 43 of 2010 dated 31.01.2011), this Tribunal held that the
following inferences could be made : (1) the Commissions are independent
statutory authorities and are not bound by any policy or direction which
hamper its statutory functions; (2) the term ‘shall be guided’ is not
mandatory, and its character would depend upon a case to case basis; the
State Commission, in discharge of its functions under the Act, has to be
guided by the directions of the State Government, but the same are not
mandatory; and the State Commission being an independent statutory
authority is not bound by any policy directions which hampers its statutory
functions.

This Tribunal then summarized its findings as under: (i) the State
Commission in discharge of its functions under the Electricity Act, 2003 has
to be guided by the directions of the State Government u/s 108 of the 2003
Act, but the same are not mandatory and binding. The State Commission
being an independent statutory authority is not bound by any policy
directions which hamper its statutory functions (ii) the State Commission
has to be guided by the directions of the State Government u/s 108 of the

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Act only in the discharge of the functions assigned to it under the 2003 Act;
and such directions have to be implemented only under the functions and
powers assigned to the State Commission under the 2003 Act.

In Steel City Furnace Association v. Punjab State Electricity

Regulatory Commission (Order in APPEAL No. 189 of 2022, 369 of
2022 and 4 of 2021 dated 31.10.2022), this Tribunal observed that the
directions of the State Government, under Section 108 of the Electricity
Act, would not bind the State Commission; the law only said that the State
Commission ‘shall be guided’ by such directions as may be issued by the
State Government in matters of public interest’; the provision contained in
Section 108 could be contrasted with Section 11 of the Electricity Act, 2003
wherein an appropriate government is vested with the power ‘in
extraordinary circumstances’ to specify that the generating companies shall
operate and maintain their generating stations ‘in accordance with the
directions’ of the government; the expression “extraordinary circumstances”
was defined by the explanation to mean such circumstances as may arise
out of threat to the security of the State, public order or a natural calamity
or “such other circumstances arising in the public interest”; given the
language employed in Section 11, there could be no debate that the
generating companies were bound to act ‘in accordance with’ the directions
of the government issued to deal with the situation arising out of such
extraordinary circumstances, the caution being - as provided by sub-
section (2) - for such measures also to be adopted as would “offset the
adverse financial impact of the directions” for the generating companies;
and, in contrast, Section 108 of the Electricity Act only expected the State
Commission to “be guided by” the directions of the State Government.

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 For the CERC to be guided by the directions issued under Section
107(1) of the 2003 Act, such directions should have been issued by the
Central Govt, in writing, on a policy matter involving public interest. Firstly,
not every direction issued by the Central Govt would fall within the ambit of
Section 107(1). The directions in writing must relate to a matter of policy.
Again not all matters of policy, but only those policy directives which involve
public interest fall within the ambit of the said provision. Further Section
107(1) only requires the CERC, in the discharge of its functions, to be
guided by such directives. The words “guided by” means to be “assisted by
in reaching a conclusion”. The directives of the Central Govt, under Section
107(1), can only be of assistance to the CERC in taking a decision and,
while the CERC should take such directives into consideration while
discharging its functions, it is not bound by such guidance. (Fatehgarh
Bhadla Transmission Co. Ltd. v. CERC: 2023 SCCOnLine APTEL 16).

While the respective Commissions are no doubt obligated to take into

consideration the directives issued under Section 107 and 108, as they are
entitled to great weight, the said directives are not binding on the respective
Commissions which may, for just and valid reasons, take a view different
therefrom.

It is relevant to note that the letter dated 06.05.2014, issued by the

Ministry of Power, does not record reasons as to how it was concluded that
Railways was a deemed licensee under Section 14 of the Electricity Act.
The said letter does not even state whether the deemed licensee status,
that the Railways was supposed to enjoy, was either as a transmission
licensee or as a distribution licensee or both. In any event the Central
Commission (even assuming it could have exercised jurisdiction on this

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issue), ought to have considered whether Railways was in fact distributing
electricity, either before or after the commencement of the Electricity Act,
for it to be deemed to be a distribution licensee under the 3rd proviso to
Section 14 of the Electricity Act. The CERC has merely followed what the
Ministry of Power has stated in its letter dated 06.05.2014, after holding
that such a power was conferred on the Ministry of Power.

The rules of business, under Article 77(3) of the Constitution, are

made for the convenient transaction of the business of the government,
and allocation among the Ministries of the business of the Government of
India. What we are required to examine, in this batch of appeals, is not the
allocation of business among different Ministries of the Central
Government, but whether or not Railways is a deemed distribution licensee
in terms of the third proviso to Section 14 of the Electricity Act. Both the
Central/State Commissions, as well as this Tribunal, are creations of the
Electricity Act and are required to exercise jurisdiction strictly in terms
thereof. Any directives, dehors the provisions of the said Act, does not bind
the Appropriate Commission. Since the CERC has not recorded any
independent conclusion, as to whether or not Railways was in fact
distributing electricity either before or after the commencement of the
Electricity Act, 2003, this Tribunal is required to consider this aspect for it is
only if the Railways is held to satisfy this requirement, would they then be a
deemed distribution licensee in terms of the 3rd proviso to Section 14 of the
Electricity Act.

K. THE QUESTION WHETHER MES IS A DEEMED DISTRIBUTION

LICENSEE DOES NOT NECESSITATE EXAMINATION IN THIS BATCH
OF APPEALS:

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 As reliance is also placed on behalf of the Railways on the letter of
the Ministry of Power dated 26.07.2004, it is necessary to note its contents.
On the subject of Military Engineering Services, (a Subordinate
Organisation under the Ministry of Defence), being a deemed licensee
under the Electricity Act, 2003, the Ministry of Power, Government of India,
by its letter dated 26.07.2004, informed the Secretaries of the State
Commissions, the Secretaries in charge of Energy/Power Deptt. of States
that the Electricity Act, 2003 had been enacted and brought into force and
10th June, 2003; since the enactment of the Act, requests were received
from various stakeholders for issuing necessary clarifications on certain
issues; one of such issues related to recognition of Military Engineering
Services, a subordinate organisation of the Ministry of Defence, as a
deemed licensee under the Electricity Act, 2003; issue of MES as a
deemed licensee under the Act has been considered in consultation with
the Ministry of Law; and accordingly it is clarified that MES, which is a
subordinate organisation of the Ministry of Defence entrusted with and
consequently engaging in supply of electric power, met the requirement as
provided in the third proviso to section 14 of the Electricity Act, 2003, of an
Appropriate Government engaging in distribution of electricity; and as such
qualified to be a deemed licensee under the said provision of the Act.

It would be wholly inappropriate for us to express any opinion on the

scope and purport of the aforesaid letter, or regarding its applicability, since
Military Engineering Services is not a party to this batch of appeals; and no
finding ought to be recorded, or any conclusion arrived at, behind their
back. Suffice it, therefore, to make it clear that we have not examined
whether or not the Military Engineering Services is a deemed distribution

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licensee under the third proviso to Section 14 of the Electricity Act, more so
as the said issue is wholly extraneous to the adjudication of this batch of
appeals.

As reliance is placed, on behalf of the Respondents, on the

observations of the OERC in Case No.55/2016 Dated 25.02.2020 in
support of their submissions, it is useful to note the contents of the said
Order.

L.ORDER OF OERC IN “OPTCL v. EAST COAST RAILWAY AND

OTHERS” (ORDER IN CASE NO.55/2016 DATED 25.02.2020)

Appeal No. 114 of 2020 is filed against the Order passed by the Orissa
Electricity Regulatory Commission (“OERC” for short) in “OPTCL vs East
Coast Railway & others” (Order in case No. 55/2016 dated 07.08.2018). In
the Order under appeal, the OERC held that Railways can transmit
electricity through traction wires which is more than 250 watts and 100 volts
in rating without obtaining a transmission licence or related licence
conditions; in fact Railways have been carrying on these transmission
activities without a licence even after enactment of Electricity Act, 2003
which requires a licence for carrying on such activity for others; in that
context, Railways is a deemed transmission licensee under proviso three of
Section 14 of the Electricity Act; since Railways are a transmission licensee
by operation of law, they are not required to obtain licence from the
Commission; since the Commission has not granted any licence to the
Railways, it cannot impose on them any condition under Section 16 of the
Electricity Act to operate that licence; and distribution activities are clearly
distinct from transmission activities.

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 After referring to the definitions of a "transmission licensee” under
Section 2(73), "transmit" under Section 2(74), "distribution licensee" under
Section 2(17), and “distribution system” under Section 2(19), the OERC
observed that there was no definition available in the Railways Act
regarding transmission and distribution activities; it was only available in
the Electricity Act, 2003 which is a special Act in the electricity sector; as
per Section 175 of the Electricity Act, 2003, the provisions of this Act are in
addition to and not in derogation of any other law for the time being in
force; therefore, from the harmonious reading of Section 11 of the Railways
Act which deals with construction and maintenance of work of Railways,
and the definition of activities, mentioned as ‘transmission’ and
‘distribution’, in the Electricity Act it was crystal clear that Railways was
engaged in transmission activity in addition to self- consumption of
electricity; railways had admitted in their Petition that they were not
distributing electricity to the public; therefore, no licence condition was
required for them; the contention of Railways that transmission activities
can be stretched to distribution activity was misplaced; if at all Railway is
recognised as a deemed distribution licensee under the Electricity Act,
2003, several other provisions in the Electricity Act which relate to
distribution licensee such as Sections 2, 12, 13, 14, 15, 16, 17, 42, 50, 61
to 65 etc. shall be inoperative, create a chaotic situation in the sector, and
render deemed distribution licensee status meaningless; it would also not
be sustainable under the Electricity Act under which they seek such
declaration; these provisions are not in contradiction to any provision in the
Railways Act, and therefore, valid under Section 175 of the Electricity Act;
Licence concept in the electricity sector is as old as Indian Electricity Act,
1910; Section 3(1) of the Indian Electricity Act, 1910 dealt with the matter

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of grant of licence; licence under Indian Electricity Act, 1910 covered both
supply and transmission activity; when the Railways Act, 1989 was
enacted, the Indian Electricity Act, 1910 was in force; inspite of that, the
Railway Act allowed Railways only to transmit energy which is also
confirmed by the Supreme Court considering the nature of handling of
energy by Railways; the Railways Act, 1989 does not allow Railways to
supply electricity; and the report of Parliamentary Standing Committee on
Energy (2002) 31st Report on the Electricity Bill, 2001 clarifies the intention
of the Legislature.

After extracting paras 6.42 and 20.32 of the report of the Committee,
the OERC observed that, from the said observation in the Parliamentary
Standing Committee Report, it was clear that Parliament never accepted
Railway’s Stand as a deemed distribution licensee, rather they have
recognised Railways as a deemed licensee as far as transmission of
electricity is concerned; conferment of the Deemed distribution licensee
status, without licence condition under Section 16 of the Electricity Act, was
not tenable; a licence must contain rights and obligation of a licensee such
as the area of operation, nature of consumers, distribution or transmission
voltage etc, otherwise the licence shall be incomplete, and shall stand
inoperative; the contention of Railways that they should be granted licence
without licence condition could not be accepted, because it would remain in
designation only without having any traction to be implemented; regarding
transmission licence, the Railways Act had superior applicability; as such
they have been carrying out that business without a licence or licence
conditions in view of their superior position by virtue of the Railways Act,
1989 and Section 54 of the Electricity Act; there was no mention of the

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Railways carrying out distribution activity in the Railways Act, 1989; and
they were only authorised to erect, operate, maintain or repair the network
and the installation in connection with the working of the Railways.

After referring to Section 11(g) of the Railway Act, the OERC

observed that, if Railways were interested in distribution activity, they must
seek exemption from obtaining licence from the State Regulatory
Commission under relevant Regulations; further, on the issue of exemption
of obtaining distribution licence by any Government Department for
carrying out distribution activity, there was another provision in the
Electricity Act under Section 184 which empowered the Central
Government to notify the Ministry or Department of the Central
Government, similar in nature with that of the Department dealing with
Defence and Atomic Energy, to whom the provisions of the Electricity Act
shall not apply; at the time of enactment, the Electricity Act had granted
such exemption to the Department of Defence and Atomic Energy and not
to Railways; no such notification had been made by the Central
Government in respect of Railways under this provision till date; this was
because this Section dealt with complete exemption from the Act as was
the case with the Ministry of Defence and Atomic Energy and not for
Railways which seeks partial exemption from the Act for licence only, and
accordingly has been suitably dealt with under Section 54 of the Electricity
Act, 2003; Section 54 of the Electricity Act, 2003, considering the
provisions of Railways Act, 1989 which has superior applicability, has
empowered Railways to transmit and use electricity without obtaining a
transmission licence; and whatever Ministry of Power has done is a

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clarification only on the third proviso of Section 14 of the Act to be read with
other provisions of the Electricity Act as per such clarification.

The OERC concluded holding that they were not agreeable to declare
Railways as a ‘deemed distribution licensee’ either under the provisions of
the Railways Act, 1989 or under the Electricity Act, 2003; the Ministry of
Power had declared Railways a ‘Deemed Licensee’ not a ‘Deemed
Distribution Licensee’; they were ‘deemed licensee’ for the purpose of
transmission licence, and not for distribution licence; they could carry on
transmission activity without obtaining a transmission licence in addition to
consuming power like a normal consumer due to their special and superior
status under the Railways Act, 1989 in contrast to the provisions of the
Electricity Act, 2003; and, as a consumer under the Electricity Act, 2003
they had full right to avail open access under the relevant Regulation made
under the Electricity Act, 2003.

As observed in the concluding part of this Order, we have dismissed

the appeal preferred by the Indian Railways against the order of the OERC.
However, as we examined all the issues raised in this batch of appeals
independently, we refrain from analysing the contents of the said order.

M.RAILWAYS CAN CLAIM OPEN ACCESS ONLY AS A CONSUMER:

The words “distribution licensee” is defined under Section 2(17) of

the 2003 Act to mean a licensee authorized to operate and maintain a
distribution system for supplying electricity to the consumers in his area of
supply. Each of the words “licensee”, “distribution system”, “consumers”,
and “area of supply” used in Section 2(17) are again expressions defined
under the 2003 Act. Section 2(39) defines “licensee” to mean a person

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who has been granted a license under Section 14. We shall, for the
purpose of this batch of appeals, proceed on the premise that such a
licensee would also include a deemed licensee under the third proviso to
Section 14.

A distribution system, as noted hereinabove, is the system of wires

and associated facilities, which is connected at one end to the end point of
the transmission line or the generation station connection, and is connected
at the other end to the point of connection to the installation of the
consumer. A distribution installation, which does not end at the point of
connection of the installation of the consumer, would not fall within the
definition of a “distribution system” under Section 2(19). The expression
“area of supply” is defined in Section 2(3) of the 2003 Act to mean the area
within which a distribution licensee is authorized by his license to supply
electricity.

The contention urged on behalf of the Indian Railways is that supply

of electricity is not a licensed activity under the 2003 Act, and the various
sub-clauses of Section 2(31) of the Railways Act would constitute the area
of supply wherein Railways are entitled to supply electricity through its
distribution installation.

Section 2(17) of the 2003 Act defines “distribution licensee” to mean

one who is authorized (including deemed authorization) to – (1) operate
and (2) maintain such a distribution system which would supply electricity
to the area of supply of such a licensee/distribution licensee, Section 2(15)
defines ‘consumer’ to mean any person who is supplied with electricity for
his own use by a licensee or the Government or by any other person

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engaged in the business of supplying electricity to the public under the
2003 Act or any other law for the time being in force, and to include a
person whose premises is, for the time being, connected for the purpose of
receiving electricity with the works of a licensee, the Government or such
other person, as the case may be, and Section 2(49) of the 2003 Act
defines a “person” to include any company or body corporate or association
or body of individuals, whether incorporated or not, or an artificial juridical
person.

A “consumer” under Section 2(15) is one who is supplied electricity

for his own use, among others, by the Government. Section 2(70) defines
“supply”, in relation to electricity, to mean the sale of electricity to a licensee
or consumer. While the recipient of supply of electricity, to fall within the
definition of a “consumer” under Section 2(15) should be one who is
receiving electricity for his own use, he must also be a person to whom a
deemed licensee sells electricity. “Sale” of goods, (which would include
‘electricity’) involves two distinct persons or entities, ie the seller and the
buyer, besides payment of consideration (price) for such sale by the buyer
to the seller. Railways cannot be both a “distribution licensee” and a
“consumer” at the same time, since one cannot sell goods to oneself.

Unlike the State Governments referred to in the afore-extracted table,

which have been distributing electricity both before and after the
commencement of the Electricity Act, Railways neither carries on any
activity of sale of electricity to third party consumers, nor discharges the
obligations of a distribution licensee under Part VI of the Electricity Act.
Railways does not also satisfy the requirements of being a “distribution
licensee” as it does not maintain a “distribution system” to “supply”

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electricity to “consumers” within his “area of supply” as defined in Section
2(3) of the Electricity Act. Consequently, Railways cannot claim the status
of a deemed distribution licensee under the third proviso to Section 14 of
the 2003 Act, or to be treated as such, for the purposes of obtaining open
access under clause (i) of Sections 38(2)(d), 39(2)(d) and 40(c) of the
Electricity Act. Their entitlement, for open access, is only as a “consumer”
in terms of clause (ii) of the afore-said provisions.

N. FOURTH PROVISO TO SECTION 14 OF THE ELECTRICITY ACT: ITS

SIGNIFICANCE IN THE CONTEXT OF THE THIRD PROVISO:

Similar to the third proviso to Section 14 of the Electricity Act, which

relates to cases where the Appropriate Government distributes electricity,
before or after the commencement of the Act, the fourth proviso to Section
14 of the Electricity Act stipulates that the Damodar Valley Corporation,
established under sub-section (1) of Section 3 of the Damodar Valley
Corporation Act, 1948, shall be deemed to be a licensee under the
Electricity Act, but shall not be required to obtain a license under the
Electricity Act, and the provisions of the Damodar Valley Corporation Act,
1948, in so far as they are not inconsistent with the provisions of the
Electricity Act, shall continue to apply to that Corporation.

The Damodar Valley Corporation Act, 1948 is an Act to provide for

the establishment and regulation of a Corporation for the development of
the Damodar Valley. Section 2(1) of the said Act defines “Corporation” to
mean the Damodar Valley Corporation. Section 2(2) defines “Damodar
Valley” to include all the basins of the Damodar River and its tributaries.
Section 3(1) provides that, with effect from such date as the Central

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Government may, by notification in the official Gazette, appoint in this
behalf, there shall be established a Corporation by the name of the
Damodar Valley Corporation. Section 3(2) stipulates that the said
Corporation shall be a body corporate having perpetual succession and a
common seal, and shall by the said name sue and be sued.

The functions of the Corporation, under Section 12(b) of the DVC Act,
includes promotion and operation of schemes for the generation,
transmission and distribution of electrical energy, both hydro-electric and
thermal. Section 18 (ii) enables the Corporation to sell electrical energy to
any consumer in the Damodar Valley but no such sale shall, except with
the permission of the State Government concerned, be made to any
consumer requiring supply at a pressure of less than 30,000 volts. Section
18(iii) enables the Corporation, with the permission of the Provincial
Government concerned, to extend its transmission system to any area
beyond the Damodar Valley and sell electrical energy in such areas.

Section 20 relates to the charges for supply of electrical energy and,

there-under, the Corporation shall fix the schedule of charges for the supply
of electrical energy, including the rates for bulk supply and retail
distribution, and specify the manner of recovery of such charges. The
proviso thereto enables the Corporation, in any contract for bulk supply of
electrical energy, to impose such terms and conditions, including a retail
rate schedule, as it may deem necessary or desirable to encourage the use
of electrical energy. Section 60(2)(c) enables the Corporation, by way of
Regulations, to specify, among others, the manner in which charges for
electrical energy shall be recovered.

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 As Section 18(ii) of the DVC Act enables the Corporation to sell
electrical energy to any consumer in the Damodar Valley, Section 18 (iii)
enables the Corporation, with the permission of the Provincial Government
concerned, to extend its transmission system to any area beyond the
Damodar Valley and sell electrical energy in such area, and Section 20
confers power on the Corporation to fix the schedule of charges for the
supply of electrical energy, including the rates for bulk supply and retail
distribution and to specify the manner of recovery of such charges, the
fourth proviso to Section 14 of the Electricity Act specifically names the
Damodar Valley Corporation to be a deemed licensee under the Electricity
Act without being required to obtain a license under Section 14(b) thereof.

Unlike the fourth proviso which specifically names the Damodar

Valley Corporation, the third proviso to Section 14 of the Electricity Act
does not name any particular State Government or department of the
Central Government. Yet another distinction is that, while the third proviso
requires only an appropriate Government, which has been distributing
electricity before or after commencement of the Electricity Act, to be
deemed to be a distribution licensee without being required to obtain a
license, there is no such stipulation in the fourth proviso in as much as the
provisions of the DVC Act make it amply clear that the Damodar Valley
Corporation has been distributing (selling) electricity to its consumers in
terms of the provisions of the said Act.

The distinction between the third and fourth provisos to Section 14 is

that the former applies only to an Appropriate Government which is
distributing electricity either before or after the commencement of the
Electricity Act, and requires such Governments to be deemed to be a

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 distribution licensee under the Electricity Act without being required to
obtain a license. On the other hand, the fourth proviso does not specifically
provide that the DVC should be distributing electricity before or after the
commencement of the Electricity Act, evidently because the DVC Act,
unlike the Railways Act, confers power on the Damodar Valley Corporation
to distribute (supply) electricity to its consumers. It is evident that sale of
electricity by the said Corporation has been equated to distribution of
electricity, and it is only because they sell electricity to their consumers
have they been deemed to be a distribution licensee. The deemed licensee
status has not been conferred on the said Corporation only for maintaining
a distribution installation, but because they also sell electricity to their
consumers.

O. CONCLUSION:

We answer Issue No. 4 holding that while the Railways, as part of the
Central Government, is also the appropriate government, it is not a
Deemed Distribution Licensee under the third proviso to Section 14 of the
Electricity Act, 2003 as it does not undertake distribution of electricity (ie its
sale to consumers) in terms of the provisions of the Electricity Act.

IX. ISSUE 5:

A. Whether the electric traction equipment, power supply and distribution

installation referred to in Section 11(g) and Section 2(31)(c) of the Railways
Act, 1989 constitute ‘Distribution System’ within the scope of Section 2(19)
of the Electricity Act, 2003?

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B. Whether the establishment of a ‘distribution installation’ contemplated
under the Railways Act, 1989 qualifies as the establishment of a
‘distribution system’ for the purpose of supplying electricity to a consumer,
under the Electricity Act, 2003?

A. SUBMISSIONS ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that the Railways, carrying on
activities of distribution of electricity including the distribution system from
the traction sub-station and non-traction sub-station at the periphery up to
the point of end use/consumption, complies with the conditions related to a
Distribution Licensee, namely, to operate and maintain a distribution
system; this is besides the transmission licensee’s activities, also being
undertaken by Railways; distribution of electricity, in the context of its being
a licensed activity under Sections 12, 14 and 15 etc, of the Electricity Act,
2003, needs to be considered as licensed activities independent of the
aspect of supply of electricity; this has been one of the significant changes
brought about by the Electricity Act, 2003; distribution is a licensed activity
under the above provisions; supply, which was a licensed activity under the
earlier electricity laws, has ceased to be a licensed activity; the activities
undertaken by Railways constitutes distribution of electricity within the area
of operation of the Railways, and further in connection with or for the
purposes of the Railways as defined in Section 2(31) of the Railways Act,
1989; and the distinguishing features of the three terms, namely,

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‘distribute’, ‘supply’, and ‘transmission’ has been succinctly pointed out in
the Halsbury’s Law of England, 5th edition, dealing with the definitions
under English Acts with respect to Electricity as under: (1) “'distribute', in
relation to electricity, means distribute by means of a `distribution system'
(that is to say, a system2 which consists (wholly or mainly) of low voltage
lines3 and electrical plant4 and is used for conveying electricity to any
premises or to any other distribution system); (2) 'supply', in relation to
electricity, means its supply to premises in cases where: (a) it is conveyed
to the premises wholly or partly by means of a distribution system (see
head (1) above); or (b) (without being so conveyed) it is supplied to the
premises from a substation to which it has been conveyed by means of a
transmission system (see head (3) below), but does not include-its supply
to premises occupied by a licence holder6 for the purpose of carrying on
activities which he is authorised by his licence to carry on; (3)
'transmission', in relation to electricity, mean transmission by means of a
transmission system; and 'transmission system' means a system which: (a)
consists (wholly or mainly) of high voltage lines and electrical plant; and (b)
is used for conveying electricity from a generating station to a substation,
from one generating station to another or from one substation to another.”

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that conveyance of electricity, in the
area of operation of Railways, is for consumption at different and diverse
points, and is through a distribution system within the scope of Section
2(19) of the Electricity Act, 2003; the commencement point of such a
distribution system, in the case of Railways, is the TSS and non TSS sub-
stations/switchyard receiving electricity from the Grid; the downstream end

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is connected to the installations where electricity is consumed/ put to end
use; the entire electricity system, in the area of operation of the Railways, is
an ‘essential part of the distribution system’ as provided in Section 2(72) of
the Electricity Act, 2003, notwithstanding whether or not a transmission line
is used; conveyance on such a system amounts to wheeling of electricity
as provided in Section 2(76) of the Electricity Act, 2003; electric traction
equipment, power supply and distribution installations dealt in Sections
2(31) and 11(g) of the Railways Act, 1989, by the very nature of the
activities carried on therein, also involve what are dealt in the Electricity
Act, 2003 namely in Section 2(20) as ‘Electric Line’; in Section 2(22) as
Electric Plant; in Section 2(25) as ‘Electricity System’; in Section 2(40) as
‘line’; in Section 2(42) as ‘main’; in Section 2(48) as ‘Overhead Line’; in
Section 2(50) as ‘power system’; in Section 2(61) as ‘service line’; and in
Section 2(69) as ‘sub-station’; accordingly, Railways has been undertaking
activities of distribution of electricity, as dealt with in the Electricity Act,
2003, having an identified area of operation; as mentioned above, the only
implication to be considered is the use of the expression ‘for supplying
electricity to the consumers in his area of supply’ in Section 2(17), and
‘installation of consumers’ in Section 2 (19); and the submissions in this
regard have been made in the submissions under Issues 6 & 7.

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that, as an alternative and additional
plea, Railways is also a deemed distribution licensee (as also deemed
transmission licensee) under the 3rd proviso to Section 14 of the Electricity
Act, 2003; this is because Railways is a department of the Central
Government, and therefore an Appropriate Government as referred to in

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the 3rd proviso to Section 14; the Railways, in carrying on activities of
distribution of electricity including distribution system up to the point of end
use/consumption, complies with the conditions relating to a Distribution
Licensee, namely, to operate and maintain a distribution system; this is
besides the transmission licensees activities which are also being
undertaken by the Railways; in terms of the above, activities undertaken by
the Railways in the area of its operation, namely, taking/conveying
electricity and conveying it from the traction sub-station and non-traction
sub-station through wires and electricity system to the point of end
use/consumption (which are at different and diverse points) (as dealt under
Issue No. 1) constitutes distribution of electricity even under the Electricity
Act, 2003; electricity traction equipment, and power supply and distribution
installation, when read together as described under Section 11(g) and
2(31) of the Railways Act, 1989, is nothing but a ‘distribution system’ as
provided in Section 2(19) of the Electricity Act, 2003; the functions,
activities etc. associated with a distribution system as defined under
Section 2(19) and other applicable provisions of the Electricity Act, 2003, is
for the purpose of making available electricity for end user/consumption at
different and diverse points in the area of operation of the Railways; the
activities undertaken by Railways constitutes distribution of electricity
within the area of operation of the Railways, and further in connection with
or for the purposes of Railways as defined in Section 2(31) of the Railways
Act, 1989; and the submissions to the contrary made on behalf of the
respondents, on the nature of distribution of electricity under the Railways
Act, 1989, is misconceived and misplaced.

B.SUBMISSIONS ON BEHALF OF RESPONDENTS:

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 It is submitted, on behalf of the Respondents, that a Distribution
Installation is not akin to a Distribution System; establishment of a
‘distribution installation’, as contemplated under the Railways Act, does not
qualify as the establishment of a ‘distribution system’ under the Electricity
Act; a ‘distribution system’ is operated and maintained by a ‘distribution
licensee’ specifically for the purpose of last-mile connectivity, i.e., point of
connection to the installation of the consumers; however, in the case of
Railways, the ‘power supply and distribution installation’ is not for the
purpose of ‘supply’ of electricity to any consumer, but is used for providing
electricity at every point of the traction sub-station for the purpose of, and in
connection with, the Railways; Section 11(g) of the Railways Act
specifically provides for ‘power supply and distribution installation’ in
connection with the working of the railway; it is undeniable, and in fact
admitted by the Appellant, that no electricity is transferred by the Railways
for any purpose other than for the purpose of the Railways itself; therefore,
‘power supply and distribution installation’ cannot be equated to ‘distribution
system’ under the Electricity Act, which is specifically for the purpose of
supplying electricity to consumers; the contention, urged on behalf of the
Railways, that the transmission lines maintained by the Railways also act
as ‘distribution system’, and both are one and the same, is not tenable; this
argument is inherently flawed in as much as the definition of transmission
lines itself provides for it not being an essential part of the distribution
system of a licensee; furthermore, transmission lines as well as
transmission activity do not pre-suppose existence of consumers, which is
the sine qua non of a distribution activity; transmission of electricity could
be to oneself or to another; however, distribution of electricity (as
envisaged under the scheme of the Electricity Act) is to another person

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only, being the consumer; under Section 11(g) of the Railways Act,
“railway” includes electric traction equipment, power supply and distribution
installations which are used by the Railways in connection with any railway;
the Railways is also empowered to construct, operate and maintain the
same; these equipment are necessarily to be seen in the context of their
use by the Railways and, for that purpose, reference may be made to the
Railways Handbook which describes the electricity “supply system” for the
Railways as a system of 25 kV single-phase conventional system, which
uses duplicate feeders running from the nearest sub-station of the supply
authority used for stepping down of 220/132/110/66 kV extra high voltage
three-phase power, into a single-phase 50 Hz power that can be utilized for
electric traction; power for electric traction is derived from the “nearest sub-
station of the supply authority” to the traction sub-station of the Railways
via duplicate twin phase feeders; the aforesaid system, apart from being
totally different from a “distribution system” as defined under Section 2(19)
of the Electricity Act as not being between the two points mentioned
therein, is also not a system built for the purpose of distribution of
electricity, but is rather a system built for the purpose of converting extra
high voltage power supplied at the traction sub-station to consumable
power by a consumer of electricity which, in the present case, is the
Railways utilizing the said electricity for electric traction; in the process of
such consumption, conveyance of electricity by the Railways, to different
locations within the Railway premises using its internal supply system, can
never be regarded as a distribution system within the scope of Section
2(19) of the Electricity Act; and, for any system to qualify as a distribution
system, there has to be a point of connection to the installation of the
consumer at one end and the delivery point on the transmission line or the

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generating station on the other side, which is not the case of the Railways;
and the Railway Electrification System consists of many constituent
elements to enable electrical power to be transferred from where it is
generated to the trains.

C.ANALYSIS:

Part IV of the Electricity Act relates to licensing. Section 12,

thereunder, relates to the person authorised to transmit, supply etc. of
electricity. Thereunder no person shall (a) transmit electricity, or (b)
distribute electricity, or (c) undertake trading in electricity, unless it is
authorised to do so by a licence issued under Section 14, or is exempt
under Section 13 of the Act. As it is not even the case of the Railways that
they have been exempted under Section 13, from the requirement of
obtaining a licence under Section 14, it is unnecessary to take note of what
Section 13 provides.

Section 14 relates to grant of licence and, thereunder, the

Appropriate Commission may, on an application made to it under Section
15, grant a licence to any person-(a) to transmit electricity as a
transmission licensee; or (b) to distribute electricity as a distribution
licensee; or (c) to undertake trading in electricity as an electricity trader, in
any area which may be specified in the licence.

Section 14 of the Electricity Act contains nine provisos. The third

proviso to Section 14 stipulates that, in case an Appropriate Government
transmits electricity or distributes electricity or undertakes trading in
electricity, whether before or after the commencement of the Electricity Act,
such Government shall be deemed to be a licensee under the said Act, but

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shall not be required to obtain a licence under the Act. Section 2(5) (a)(ii)
defines “Appropriate Government” to mean the Central Govt in relation to
any inter-state generation, transmission, trading or supply of electricity and
with respect to, among others, the railways. As Railways has no
independent legal status, and forms part of the Central Govt, it would
undoubtedly fall within the definition of an “Appropriate Government”. While
the third proviso to Section 14 is applicable only to the Appropriate
Government, its application, even with respect to the Appropriate Govt, is
limited. For the Railways to be held to be a deemed distribution licensee,
under the third proviso to Section 14, it must also satisfy the requirement of
being an Appropriate Government which is, in fact, distributing electricity
either before or after the commencement of the Electricity Act, for it is only
then can it be deemed to be a licensee under the Act, and not be required
to obtain a license under Section 14(b) thereof.

We find force in the submission of Mr. M.G. Ramachandran, Learned

Senior Counsel appearing on behalf of Railways, that it is not necessary for
the Railways to seek a specific declaration from the Appropriate
Commission that it is a deemed distribution licensee and it would suffice if,
whenever any such dispute arises, for it to show that it distributes
electricity; and the moment it is able to so establish, it must be held to
satisfy the requirement, of the third proviso to Section 14, of being deemed
to be a distribution licensee under the Electricity Act, without being required
to obtain a license under the said Act. The crux of the dispute is whether or
not the Railways, while carrying on its activities under the Railways
Act,1989, also carries on the activity of “distribution of electricity” in terms of
the provisions of the Electricity Act, 2003.

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 The expression “distribution licensee”, used in the third proviso to
Section 14, is defined, under Section 2(17) of the Electricity Act, to mean a
licensee authorised to operate and maintain a distribution system for
supplying electricity to the consumers in his area of supply. Consequently,
a deemed distribution licensee would mean a deemed licensee which is
operating and maintaining a distribution system for supplying electricity to
the consumers in its area of supply. The words “distribution system”,
“supply”, “consumer”, and “area of supply”, used in Section 2(17), are again
defined expressions.

Mr. M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Indian Railways, wants us to read the words “operate and
maintain a distribution system” in the definition of “distribution licensee”
under Section 2(17) of the Electricity Act, distinct from the words “for
supplying electricity to the consumers in his area of supply” used therein.
The construction placed on Section 2(17), by the Learned Senior Counsel,
is that it would suffice if a distribution system is operated and maintained by
a person in his area of supply, for such a person to be deemed to be a
distribution licensee, and it is unnecessary for such a person to also supply
electricity to consumers, more so as “supply of electricity” is not a licensed
activity under the Electricity Act, 2003. Reliance is placed by the Learned
Senior Counsel on the definition of “distribution system” under Section
2(19) in this regard.

The expression “electric traction equipment”, and “power supply and

distribution installation”, as referred to in Section 2(31)(c) and 11(g), are not
expressions defined in the Railways Act. However, the expression
"distribution system" is defined under Section 2(19) of the Electricity Act to

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mean the system of wires and associated facilities between the delivery
points on the transmission lines or the generating station connection and
the point of connection to the installation of the consumers. To be said to
be a “distribution system”, it should be (a) system of wires and associated
facilities; and (b) this system of wires and associated facilities must exist
between (i) the delivery point on the transmission lines or the generating
station connection; and (ii) the point of connection to the installation of the
consumer. In short, the starting point of the distribution system is the
delivery point of the transmission lines or the generating station connection,
and the ending point is the point of connection to the installation of the
consumer.

The first limb of the definition of a “distribution system”, ie the system

of wires and associated facilities, may possibly bring within its fold the
“electric traction equipment” as also the “power supply and distribution
installation” referred to in Section 2(31)(c) and 11(g) of the Railways Act.
However that, by itself, would not suffice for such a system of wires and
associated facilities to constitute a
“distribution system” under the second limb of Section 2(19) of the
Electricity Act, as the said provision does not bring within its ambit every
system of wires and associated facilities but only those which exist
between (i) the delivery points on the transmission lines or the generating
station connection on the one hand and (ii) the point of connection to the
installation of the consumer on the other. What is contemplated by the said
definition is only a system of wires and associated facilities which is
established to receive electricity from the delivery points of either the
transmission line or the generating station, which is then supplied to the

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installation of the consumer. This distinction is significant, since a system of
wires and associated facilities can exist even at a generating station or in a
transmission system. A “distribution system”, under Section 2(19) of the
Electricity Act, does not bring such systems within its fold. While the end
point of the delivery system of a transmission line/generating station is the
point at which the distribution system commences, the end point of such a
distribution system is the point of connection to the consumer’s installation.

As noted hereinabove, the question, whether or not the Indian

Railways is a deemed transmission licensee, does not arise for
consideration in this batch of appeals. In order to decide the issues under
this head, we shall proceed on the premise that the “distribution
installation”, which it operates, satisfies the first limb of Section 2(19) ie it is
a system of wires and associated facilities at the commencing point of the
distribution system/the delivery point on the transmission line. While the
Respondents’ claim that this, by itself, would not suffice and the end point
of such a system must be the point of connection to the installation of the
consumer, the response thereto, put forth on behalf of Railways, is that
Railways is also a “consumer”, and the provisions of the Electricity Act do
not disable the same entity to be a deemed transmission licensee, a
deemed distribution licensee, and a consumer.

Under the Electricity Act, 2003, a consumer can receive electricity for
his own use either from (i) a licensee which would include a distribution
licensee or (ii) the Government, some of whom, as noted earlier in this
order, also carry on the activity of distribution of electricity in several States
or (iii) by any other person engaged in the business of supplying electricity,
for instance a generating station.

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 What is of relevance, in the definition of “consumer”, is that a person
should (a) for his own use (b) be “supplied” electricity (c) by either (i) a
licensee (ii) the government or (iii) any other person engaged in the
business of supplying electricity. While a
“consumer”, as defined under Section 2(15), no doubt consumes the
electricity supplied to him, the word "Supply" used therein is again a
defined expression under the Electricity Act. Section 2(70) defines “supply”
in relation to electricity, to mean the sale of electricity to a licensee or
consumer.

Under the provisions of the Electricity Act, 2003 and

the Sale of Goods Act, 1930, Electricity is movable property, though it is not
tangible. It falls within the definition of “goods” as provided under
the Sale of Goods Act, 1930. (State of A.P. v. National Thermal Power
Corpn. Ltd. AIR 2002 SC 1895, (2002) 5 SCC 203; Commissioner of
Sales Act, Madhya Pradesh, Indore v. Madhya Pradesh Electricity
Board, Jabalpur (1969) 1 SCC 200, Kartar Singh v. Punjab State
Electricity Board, 2014 SCC OnLine P&H 5917; Sukhwinder Singh v.
Raj Kaur, 2014 SCC OnLine P&H 9003). Electricity is generated,
transmitted and sold under a contract to the consumer. It is moved to its
ultimate destination where it is consumed. (Kartar Singh v. Punjab State
Electricity Board, 2014 SCC OnLine P&H 5917).

Section 4(1) of the Sale of Goods Act, 1930 stipulates that a contract
of sale of goods is a contract whereby the seller transfers or agrees to
transfer property in the goods to the buyer for a price. Section 4(3)
provides that where, under a contract of sale, the property in the goods is
transferred from the seller to the buyer, the contract is called a sale.

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Section 5(1) stipulates that a contract of sale is made by an offer, to buy or
sell goods for a price, and the acceptance of such offer. Section 9(1)
stipulates that the price in a contract of sale may be fixed by the contract or
may be left to be fixed in manner thereby agreed or may be determined by
the course of dealings between the parties. Section 31 relates to duties of
seller and buyer and, thereunder, it is the duty of the seller to deliver the
goods and of the buyer to accept and pay for them, in accordance with the
terms of the contract of sale.

It is clear, from the afore-said provisions of the Sale of Goods Act,

that sale of goods is only for a price which the buyer is required to pay to
the seller. As “supply” is the sale of electricity to a licensee or a consumer,
it is only if it is established that the Indian Railways sells electricity at a
price either to a distribution licensee (as defined in Section 2(17)) or to a
consumer (as defined in Section 2(15)), can it then held to be a deemed
distribution licensee.

Supply (ie sale) of electricity would necessarily require a seller, a

buyer and the price at which such goods are sold or purchased. It is only a
person who purchases electricity for his own use, at a price, who falls
within the definition of a “consumer”. In the present case while the Railways
no doubt purchases electricity at the delivery point on the transmission
lines of the generating station connection on payment of consideration to
the person from whom it procures electricity, its claim to be a distribution
licensee is belied by the fact that, while Railways conveys the electricity so
procured by it to its various consumption units, there is no element of sale
(ie consideration in the form of a price for such conveyance) involved in the
process. Consequently, such act of conveyance can, at best, constitute re-

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distribution of electricity by a consumer among its various units, and
nothing more. The electric traction equipment, and power supply and
distribution installation, referred to in Section 2(31)(c) and Section 11(g) of
the Railways Act cannot therefore be equated to a “distribution system”
under Section 2(19) of the Electricity Act.

Reliance placed by the Railways, on the meaning of the words

‘distribute’, ‘supply’ and ‘transmission’ as defined in the Halsbury's Laws of
England is misplaced since, as noted hereinabove, resort to dictionaries or
other texts is permissible only where such expressions are not defined
under the Act in question. In the present case the word ‘supply’ is defined
under Section 2(70) of the Electricity Act, and it is impermissible to rely on
its definition in dictionaries or other texts which convey a meaning contrary
to, or different from, what is defined in the Electricity Act.

While the “electric traction equipment”, and “the power supply and
distribution installation” are no doubt used in connection with or for the
purposes of the Railways, it cannot be said that Railways is selling
electricity to itself, for that does not satisfy the ingredients of a “sale”. In the
absence of a “sale”, consumption of electricity by various units of the
Railways cannot be understood as a “sale” by the Railways as a
distribution licence to itself as a consumer.

Section 2(72) of the Electricity Act defines “transmission lines" to

mean all high pressure cables and overhead lines transmitting electricity
from a generating station to another generating station or a sub-station,
together with all equipment and buildings referred to thereunder. The
definition, however, explicitly provides that, for such high-pressure cables

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and overhead lines to fall within the definition of “transmission line”, it
should not be an essential part of the distribution system of a licensee.
Once such cables or overhead lines are held to be an essential part of a
distribution system of a distribution licensee, they would fall outside the
definition of a “transmission line under Section 2(72).

Section 2(76) of the Electricity Act defines "wheeling" to mean the

operation whereby the distribution system and associated facilities of a
transmission licensee or distribution licensee, as the case may be, are
used by another person for the conveyance of electricity on payment of
charges to be determined under Section 62. What Section 2(76) provides is
for the use by a person, of the system referred to in Section 2(76), for open
access in terms of Sections 38(2)(d), 39(2)(d) and 40(c) of the Electricity
Act. The definition of “wheeling” in Section 2(76) also requires the person,
who uses the said system, to pay charges to be determined under Section
62. Section 62(1) confers power exclusively on the Appropriate
Commission to determine the tariff ie wheeling charges in terms of Section
2(76) towards open access.

Let us now take note of how certain words/expressions, on which

reliance is placed on behalf of the Railways, are defined in the Electricity
Act. Section 2(20) defines "electric line" to mean any line which is used for
carrying electricity for any purpose through a line would bring such line
within the definition of a electric line. Section 2(22) defines "electrical plant"
to mean any plant, equipment, apparatus or appliance or any part thereof
used for, or connected with, the generation, transmission, distribution or
suppl of electricity, other than those which fall within the excluded
categories under clauses (a) to (c) thereunder. Any plant, equipment or

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apparatus used, among others, for distribution and supply of electricity
would fall within the definition of “electric plant” under Section 2(22).
Section 2(25) defines "electricity system” to mean a system under the
control of a generating company or a licensee, as the case may be, having
one or more (a) generating stations, or (b) transmission lines, or (c) electric
lines and sub-stations. A system under the control of a distribution licensee,
having electric lines and sub-stations, would also fall within the definition of
an electricity system.

Section 2(40) of the Electricity Act defines “line” to mean any wire,
cable, tube, pipe, insulator, conductor or other similar thing which is
designed or adapted for use in carrying electricity. "Main” is defined, under
Section 2(42), to mean any electric supply- line through which electricity is,
or is intended to be, supplied. Section 2(48) defines “overhead line” to
mean an electric line which is placed above the ground and in the open air
but does not include live rails of a traction system.

Section 2(50) defines "power system" to mean all aspects of

generation, transmission, distribution and supply of electricity and includes
any one or more equipment referred to in clauses (a) to (j) thereunder. It is
relevant to note that the said definition refers to distribution and supply of
electricity as distinct from transmission and generation, and does not
disassociate distribution from supply. “Service line” is defined, in Section
2(61), to mean any electric supply-line through which electricity is, or is
intended to be, supplied - (a) to a single consumer either from a distributing
main or immediately from the Distribution Licensee's premises; or (b) from
a distributing main to a group of consumers on the same premises or on
contiguous premises supplied from the same point of the distributing main.

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 None of the above referred expressions, which are defined
expressions under the Electricity Act, disassociate the activity of supply
from those of distribution. While electricity can no doubt be supplied by
others including generating companies, and can be procured from them by
any consumer, there is no provision in the Electricity Act for grant of licence
to a person only for operating and maintaining a distribution installation, or
a system of wires and associated facilities, without also carrying on the
activity of supply of electricity ie sale of electricity to consumers through
such a system of wires and associated facilities. Accepting this submission,
urged on behalf of the Railways, would discharge all distribution licensees
of their obligations under the Electricity Act, including its universal supply
obligation to supply electricity to its consumers on demand. While Railways
is no doubt operating and maintaining a “power supply and distribution
installation”, it is not carrying on the activity of distribution of electricity,
since it does not sell electricity to consumers (third parties), and consumes
it itself.

As noted hereinabove, Section 18 of the Railways Act which enables

the Central Government to require boundary marks or fences to be
provided, and Section 2(31)(a) thereof which brings all lands located inside
those boundaries within the definition of a “Railway”, relate only to the area
within which Railways is entitled to carry on its activities under the Railways
Act to the exclusion of all others. This area is not the
“area of supply” defined under Section 2(3) of the Electricity Act, which is
the area within which a distribution licensee operates, by its license, to
supply electricity (ie sale of electricity to consumers). In the absence of the
activity of supplying electricity, in terms of Section 2(70) of the Electricity

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Act, being carried out by the Railways, the said area, within which railways
operates to the exclusion of all others, cannot be equated to the “area of
supply under Section 2(3) of the Electricity Act.

It is therefore not possible to hold that mere conveyance of electricity

from the traction sub-station/non-traction sub-station/switchyard, through
the “electric traction equipment” and “power supply and distribution
installation”, to different points where electricity is consumed by the
constituent units of the Railways, would constitute distribution of electricity,
since a distribution system of a distribution licensee can only be used for
sale of electricity to its consumers within the area of supply, other than
those who have availed open access on payment of cross subsidy
surcharge. Self-consumption of electricity cannot be equated to the activity
of “distribution of electricity” under the Electricity Act. Mere provision of
electricity at every point of the traction sub-station, in connection with the
Railways, would also not suffice as there is no element of “supply” (sale) of
electricity, to any consumer, involved in the process. While transmission of
electricity can be to oneself or to another, distribution of electricity can only
be to another person ie another licensee or the consumer that too by way
of sale.

While copious reference is made to the manner in which electricity is

conveyed from the traction sub-station/non-traction sub-station/switchyard
to different end points of use within the Railways system, it is unnecessary
for us to burden this order with those details since, admittedly, the
electricity conveyed, through the “electric traction equipment” and “power
supply and distribution installation”, is consumed by the Railways itself.
Even otherwise, it is evident from the handbook that the electric supply

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 system of the Railways is for the purpose of converting extra high voltage
power supplied at the traction sub-station to consumable power by the
Railways as a consumer of electricity.

D. CONCLUSION:

We answer Issue No.5 holding that the “electric traction equipment”

and the “power supply and distribution installation” referred to in Section
11(g) and Section 2(31)(c) of the Railways Act, 1989 do not constitute the
‘Distribution System’ defined in, and falling within the scope of, Section
2(19) of the Electricity Act, 2003; and establishment of a ‘distribution
installation’ contemplated under the Railways Act, 1989 does not qualify as
the establishment of a ‘distribution system’ as, through the former,
electricity is not supplied to consumers, as stipulated under the Electricity
Act, 2003.

X. ISSUES NO. 6, 7 AND 11:

While Railways have filed their written submissions on Issues No. 6 &
7 together, and on Issue No.11 separately, the Respondents have filed
their written submissions on Issue No. 6 separately, but have filed common
written submissions on Issues No. 7 & 11. We have, therefore, dealt with all
the three issues, ie Issues No. 6, 7, and 11, together.

ISSUE 6:

A. Whether the supply of electricity is a licensed activity under Section 12 read

with Section 14 of the Electricity Act, 2003?

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B. Whether establishment of a distribution system by an Appropriate
Government/Indian Railways, is by itself adequate to qualify as a deemed
distribution licensee under the third proviso to Section 14 of the Electricity
Act, 2003?

C. Whether sale of electricity to a consumer is sine qua non for the distribution
of electricity by a distribution licensee, deemed or otherwise, under the
Electricity Act?

AND

ISSUE 7:

A. Whether in terms of the provisions of the Electricity Act, 2003 the status of
a Distribution Licensee cannot be claimed when the electricity is primarily
or otherwise consumed by the Licensee itself?

B. Whether self-consumption of electricity, albeit upon conveying the same to

multiple locations, constitutes distribution of electricity contemplated under
Electricity Act, 2003?

C. Whether actual distribution of electricity by an Appropriate Government, in

addition to establishment of a distribution system is sine qua non for

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 qualifying as a deemed distribution licensee under the third proviso to
Section 14 of the Electricity Act, 2003?

A. SUBMISSIONS OF RAILWAYS ON ISSUES 6 AND 7:

Sri M.G.Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that, since issues 6 and 7 overlap,
common submissions are made in respect thereof; supply of electricity,
namely, sale of electricity to consumers is no longer a licensed activity after
the coming into force of the Electricity Act, 2003 on 10.06.2003; supply of
electricity, as per Section 3 of the Indian Electricity Act, 1910, was also not
conditioned as sale of electricity; supply of electricity was read as provision
of electricity for end use or consumption; the primary contentions raised by
the Respondents are: (a) Section 2(17) provides for the distribution
licensee laying down lines “for supplying electricity to consumers in the
area of supply”; (b) the terms ‘supply’, ‘area of supply’ and ‘consumer’ are
defined terms in the Electricity Act involving sale of electricity by the
licensee to another entity or person and not self or own consumption; (c)
the term ‘installation of consumer’ in Section 2(19) provides for the
distribution to be connected at the end to the consumer as defined, and not
any other person; and (d) the Electricity Act, 2003 provides for the
requirement of a composite and integrated licence for distribution and
supply of electricity, and not only for distribution of electricity, that too only
in order to consider the holder to be a distribution licensee.

Learned Senior Counsel would submit that the aforesaid contentions

of the respondents are not correct in law, and under the scheme and

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provisions of the Electricity Act, 2003, as: (a) licensing means prohibiting
an activity to be carried by any person other than the licensee who has
been granted a licence or person specifically exempted from the
requirement to obtain a licence; (b) “supply of electricity” was a licensed
activity till 10.06.2003, when the Electricity Act, 2003 came into effect,
namely under Section 3 of the Indian Electricity Act, 1910; each of the
State electricity laws, listed in the Schedule to the Electricity Act, 2003, also
provided for licensing of supply of electricity and not for licensing of
distribution of electricity; neither in the Indian Electricity Act, 1910, nor in
the Electricity (Supply) Act, 1948, has the term “supply” been defined,
particularly not with reference to sale of electricity; (c) distribution of
electricity was considered only as an enabling part under the previous
Electricity Laws (ie Section 3 of the Indian Electricity Act, 1910); (d) there
has been a conscious shift to make ‘distribution’, in the place of ‘supply’, as
a licensed activity under the Electricity Act, 2003; the rationale is writ large,
as the activity of supply of electricity has been consciously freed from the
requirement of taking a licence; ‘supply’ can be undertaken by any person,
viz. a generating company, a captive generating plant, an electricity trader,
the distribution licensee of another area of supply, as specifically covered in
Section 49, and further through collective transactions in power exchanges,
and other power market development as envisaged in Section 60 of the
Electricity Act, 2003; the prohibition contained in Section 12 of the
Electricity Act, 2003, of no person undertaking the activity specified therein,
has no application to supply; supply, being a de-licensed activity, is
necessary to give effect to the concept of Open Access which has been
introduced by the Electricity Act, 2003 as an important and significant
aspect of departure from earlier dispensation; and (f) if supply of electricity

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is treated as a part of the licensed activity, then Open Access will be
rendered redundant, and it would mean that only a person licensed can
supply electricity; and this will be a misreading of the scheme, objective
and provisions of the Electricity Act, 2003.

Learned Senior Counsel would submit that supply of electricity is

only a commercial activity of sale of electricity, and not a part of the wire
business for which the distribution license is given; as mentioned
hereinabove, the supply license, under the earlier laws, is no longer
retained; accordingly, a contextual interpretation of Section 2(17), stating
‘for supplying electricity to the consumers in his area of supply’, would only
require that the distribution system enables supply of electricity to
consumers by any means, and not necessarily only by the distribution
licensee; further, when read with Section 42(1) and 43(1) of the Electricity
Act, 2003, it means the obligation of the distribution licensee to supply if
demanded by the person, owner or occupier of the premises including the
consumer; if such person desires to take electricity, entirely from other
sources, the distribution licensee cannot compel him to take electricity only
from him; while the distribution system is laid down, operated or maintained
for supply of electricity to the consumers, it does not mean that the same
cannot be used for other purposes such as to provide open access to
others where the sale or supply of electricity is by others or conveyance of
electricity is for own consumption of others; similarly, ‘the installation of the
consumers’, used in Section 2(19), should be given a contextual meaning
of being a place where the consumption or end use of electricity occurs; as
mentioned above, the expression ‘supply’ used in Section 2(17) of the
Electricity Act, 2003, in the context of ‘for supplying electricity to the

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consumers in the area of supply’, cannot be interpreted as a part of the
licensed activity to be undertaken; this is clear from a reading of various
provisions of the Act, particularly providing for open access and ability of
the consumers to source electricity from a person other than the distribution
licensee of the area where the premises of the person is situated; if ‘supply’
is considered a licensed activity, it would mean that a Generator, a Trader,
a Licensee other than the Licensee of the area of supply where the
premises is situated, a captive generator with excess capacity to sell etc,
will not be authorised to effect such supply without obtaining a license; and
this would lead to an anomalous and absurd situation.

Learned Senior Counsel would submit that Section 43 (dealing with

duty to supply – Universal Service Obligation), as also Sections 44 to 48
and 50 of the Electricity Act, 2003, are not restricted to supply of electricity
to consumers; Section 42(1) does not use the expression ‘consumer’; the
expressions used in Section 43 and in Sections 44 to 48 are also ‘owner or
occupier of any premises” or person, which is much wider in scope than
only consumer, and includes others such as Railways, MES connected to
the distribution licensee, and the distribution licensee has the duty and
obligation to supply; supply of electricity by one distribution licensee in bulk
(called bulk licensee) to another distribution licensee has always been a
recognised concept; in this regard, reference be made to clause IX of the
Schedule to the Indian Electricity Act, 1910, Section 19 of the Electricity
(Supply) Act, 1948 defining the term Bulk Licensee, Section 86(1)(a) which
uses the term Bulk, and Sections 43, 44 to 48 and 50 of the Electricity Act,
2003 providing for supply of electricity to owner or occupier of any
premises, and Section 86(1)(a) for determination of tariff for bulk supply; in

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terms of Sections 42(1) and 43(1) of the Electricity Act, 2003, a Distribution
Licensee has a legal and binding obligation and a duty to supply electricity
at the traction sub-station of the Railways, even though Railways is not a
consumer within the scope of Section 2(15) of the Electricity Act, 2003,
particularly the first part; supply of electricity, by another Distribution
Licensee under the Electricity Act to Railways, is not a supply to Railways
as a consumer, but a supply to Railways as a Distribution Licensee i.e. a
person or owner or occupier of the premises other than a consumer as
defined under Section 2(15) of the Electricity Act, 2003; and the
respondents are also misreading the obligation/duty to supply, under 43(1)
of the Electricity Act, 2003 (without any corresponding obligation on the
part of the consumer to take electricity from the distribution licensee), with a
licensed activity.

Learned Senior Counsel would submit that the concept of

distribution, under the Electricity Act, 2003, is the laying down,
development and operation of the distribution system, and not the sale of
electricity; Section 62(2) of the Electricity Act, 2003 requires the petition, for
determination of tariff, to be segregated between generation, transmission
and distribution, and not with reference to supply; the revenue
requirements are always calculated with respect to generation,
transmission and distribution, and not retail supply of electricity undertaken
by the licensee; therefore, establishment of a distribution system is
adequate to qualify the Railways to claim the status of a deemed
distribution licensee statutorily provided for under Section 14- 3rd proviso of
the Electricity Act; sale of electricity to a consumer is not the sine qua non
for distribution of electricity by a distribution licensee, deemed or otherwise,

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under the scheme of the Electricity Act, 2003; it is therefore not necessary
for Railways to show that there is, in fact, sale of electricity to another
person in its area of operation; and, even if the entire consumption of
electricity is considered to be of the Railways, the conditions specified in
the 3rd proviso to Section 14 stands satisfied for treating Railways as a
deemed distribution licensee.

Learned Senior Counsel would submit that, without prejudice to the

above, Railways has third parties to whom electricity is supplied/sold by
Railways as detailed in IA No. 654 of 2023 dated 03.04.2023, and the
Annexures therewith, which is further discussed in Issue No. 8; reliance
placed by one of the respondents on the decision of the Calcutta High
Court, in Srijan Realty (P) Ltd. -v- Commissioner of Service Tax,
Kolkata, 2019 SCC Online Cal 9139 [Pages 1205 to 1211, Vol – IV C,
CC], to claim that the Railways, making available electricity to
contractors/vendors/etc, is akin to services rendered under a principal and
an agent relationship, or as landlord and tenant leasing spaces, and not as
sale of electricity, is misplaced; the decision of the Calcutta High Court
relates to service tax, and has nothing to do with interpretation of the
provisions of the Electricity Act, 2003; in any case, Railways are exempt
from tax liabilities under Sections 184 and 185 of the Railways Act, 1989;
and under the scheme of the Electricity Act, 2003, supply of electricity by
the owner of a mall to the shops or owner of a commercial complex to
different units has been held to be distribution of electricity, and cannot be
undertaken as a business without a license. Reliance is placed in this
regard on the following decisions of this Tribunal (1) K. Raheja
Corporation Private Limited -v- Maharashtra Electricity Regulatory

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 Commission and Others: (Order in Appeal No. 156 of 2010 dated
11.07.2021); and M/s DLF Utilities Limited -v- Haryana Electricity
Regulatory Commission and Another: (Order in Appeal No 193 of 2011
dated 03.10.2012); however, if supply of electricity within such places is
undertaken as a part of the distribution licensee’s business, and at the tariff
terms and conditions determined by the Appropriate Commission, the same
has been recognised by the Electricity Supply Code notified under Section
50 of the Electricity Act, 2003 read with the 7th proviso to Section 14, as
one point supply; reference in this regard may be made to the relevant
Electricity Supply Codes of the States of (i) Haryana, (ii) Delhi, (iii)
Rajasthan, (iv) Kerala, and (v) Punjab; in the above, the Distribution
Licensee retains total control, including providing electricity directly if the
end user/consumer so decides; and the distribution of electricity, by
Railways in its area of operation, cannot be equated to such one point
supply as the exclusivity and monopoly in such distribution is of Railways,
and no other Distribution Licensee can interfere in the matter.

ISSUE 11:

Whether as per Sesa Sterlite Limited -v- Orrisa Electricity Regulatory

Commission & Others, (2014) 8 SCC 444, the deemed distribution licensee
status cannot be claimed when there is no sale of electricity to
consumers/end users and the electricity is predominantly consumed by the
Distribution Licensee itself?

B. SUBMISSIONS OF RAILWAYS ON ISSUE 11:

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 Sri M.G. Ramachandran, Learned Senior Counsel appearing on
behalf of the Railways, would submit that the judgement in Sesa Sterlite
Limited -v- Orrisa Electricity Regulatory Commission & Others, (2014)
8 SCC 444 does not decide that a deemed distribution licensee cannot be
a primary end user of the electricity being distributed by it; the facts of the
case, as noted in para 2 of the decision, is that Sesa Sterlite was both the
aluminium plant/ manufacturing unit and a developer of the SEZ; Sesa
Sterlite itself was to supply electricity to itself as a developer; this itself
establishes that supply of electricity to a third party is not a necessary
condition for deemed distribution licensee status; similar is the case of
Military Engineering Services (‘MES’) where primary consumption is by the
defence department itself; MES has been a deemed distribution licensee
under the third proviso to Section 14 of the Electricity Act, 2003; the law
laid down by the Supreme Court, in SESA Sterlite, is to be considered as
per the contents of Paras 46 and 47 thereof; the decision of this Tribunal,
against which the appeal was filed before the Supreme Court in SESA
Sterlite, (reproduced in para 45) quoted Paras 42 to 50 of the Appellate
Tribunal’s decision; this should be considered as circumscribed by the
decision in Paras 46 and 47 of the Supreme Court decision; the quoted
paras of this Tribunal’s decision cannot be independently applied; in the
first sentence of para 46, the Supreme Court has expressed its agreement
in regard to the manner in which the two Acts, namely the Special
Economic Zones Act, 2005 and the Electricity Act, 2003 are to be
harmoniously construed as was done by this Tribunal in the quoted paras
42 to 50; a perusal of the SEZ Act would show that there are two types of
participants in the SEZ; they are (a) the developer of the SEZ; and (b)
entrepreneurs other than the developers who established their units in the

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SEZ; the developer of the SEZ also establishes
manufacturing/service/industries etc within the SEZ Area and, in addition
thereto, the entrepreneurs, as defined under Section 2(j) of the SEZ Act,
2005, establish the industrial/services and other units; Section 15 of the
SEZ Act deals with setting up of a unit; the persons, who set up units for
carrying on authorised operations in the SEZ, get necessary approval from
the development commissioners which approval vests the entrepreneur
status on such person as provided in Section 2(j) of the SEZ Act, 2005; the
provisions of the SEZ Act, and the Rules framed thereunder, therefore
clearly envisage both the developer and the entrepreneur establishing plant
/units in the SEZ Area, and the developer providing for infrastructural
facilities including provision of electricity to all such units whether it is the
developer’s unit or the unit of the entrepreneur, i.e., other than the
developer’s various service providers; it is therefore inherent, in the above,
that the developer has to establish the distribution system connecting the
multiple units within the SEZ Area for supplying electricity to all of them;
this has been specifically considered in para 46 of the decision of the
Supreme Court by stating that SESA Sterlite was required to develop the
system for providing electricity to multiple units; in the above context, while
the notification dated 03.03.2010 under the SEZ Act, incorporating a
proviso into Section 14 of the Electricity Act, 2003, recognize the Deemed
Licensee Status to a SEZ, but such a status can become effective only
when the developer takes steps to establish the distribution system to
connect all the units (the developer’s as well as entrepreneurs other than
the developer) in the SEZ Area; non-consideration of SESA Sterlite, for
release from the payment of cross-subsidy surcharge in the above decision
of the Supreme Court, was on account of SESA Sterlite not laying down the

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distribution system to supply electricity to all the units; for the SESA Sterlite
Decision, to be considered in the context of Indian Railways, it is necessary
to ascertain whether Indian Railways have developed the distribution
installation and system for getting electricity conveyed to different points of
end use/consumption; in issue No.1 these aspects have been dealt with;
indisputably, the Indian Railways had established the necessary distribution
system; the ratio of SESA Sterlite decision is clear, namely, that SESA
Sterlite was not granted the relief because it had not developed the
distribution system to service all the units envisaged in the SEZ Area;
conversely, if SESA Sterlite had developed the distribution system for
supplying electricity to all the units, and there are multiple units functioning
in the SEZ, the Supreme Court’s decision would have been to the contrary;
in such a case, the unit of SESA Sterlite, i.e., the developer, would also
have had the benefit of Deemed Licensee Status; and the above decision
cannot be interpreted to mean that, in no event, the developer of a SEZ can
claim the benefit of the Deemed Licensee status.

Learned Senior Counsel would submit that the summary of the

decision of the Supreme Court, in Para 46 of SESA Sterlite which is the
operative part on the levy of Cross Subsidy Surcharge, is as under: (a) the
Appellant, SESA Sterlite Ltd, was declared as the developer of the Special
Economic Zone (SEZ) under the Special Economic Act, 2005; (b) by virtue
of being a developer of the SEZ, in terms of the amendment brought about
by notification dated 03.03.2010 under Section 49 of the SEZ Act, a proviso
has to be read in Section 14 of the Electricity Act, 2003 to the effect that a
developer of the SEZ notified under the SEZ Act, 2005 shall be deemed to
be a licensee; (c) the Developer becomes a Deemed Licensee for the

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specific purpose as envisaged under the SEZ Act, and the Developer can
implement its status as a Deemed Licensee only for such purpose, and in
fulfillment of the conditions requiring the Deemed Licensee status; (d) in the
context of the provisions of the SEZ Act, the .notification dated 03.03.2010
issued under the SEZ Act, and considering the nature of the SEZ to be
developed by them, it was incumbent on SESA Sterlite to develop a
distribution system for supply of electricity to several units to be set up in
the SEZ Area; and (e) the Deemed Licensee status which authorized SESA
Sterlite to be implemented required development of several units, i.e., as
described by the Supreme Court at placitum ‘e’ —will apply to such
cases in which the developer is supplying the power to multiple units
in the SEZ and cannot apply to the developer establishing a unit in the
SEZ only for itself; the conclusion of the Supreme Court is not that, in no
event, the Deemed Licensee Status cannot be applied in regard to the units
established by the developer himself in the SEZ; the use of the expression
“only for itself”, used in ‘para 46 – end’, cannot be read to the effect that
the SEZ developer himself will never have the benefit of the deemed
distribution licensee status, and will have to pay cross subsidy in all
situations, i.e., even if multiple units had come as envisaged and the
distribution system had been laid down for supply of electricity to such
multiple units; if the above was the conclusion of the Supreme Court, it
would have been simple for the Supreme Court to state that the Deemed
Licensee Status cannot be availed to supply electricity to itself; a reading of
Para 46 of the SESA Sterlite decision, excluding the first sentence, shows
that the Supreme Court had clarified the position in the quoted paras 42 to
50 of this Tribunal’s decision, including the portion quoted in para 49
placitum ‘g’; it only means that a Developer of the SEZ cannot, without

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laying down the distribution system and supplying power to various units,
claim implementation of the Deemed Licensee status by only getting the
power and consuming such power for its own use; this is further made clear
in the quoted para 50 placitum ‘a’ to the effect that the legal fiction cannot
go further, and make a person who does not distribute electricity to the
consumer as a distribution licensee; these observations cannot be
interpreted to mean that, in no event, a developer of SEZ cannot consume
power on its own, when the distribution system has been laid down, and
power has been made available to units in the SEZ as envisaged under the
SEZ Act, and the notification issued thereunder; if so interpreted, it would
lead to anomalous results; in such a type of SEZ, the developer is the one
who establishes the main industry, and other units are mostly ancillary
units; it would then mean that the Developer would be treated as liable to
pay cross subsidy surcharge on the specific ground that it cannot be a
distribution licensee for supplying to itself whereas other units will not be
liable to pay cross subsidy surcharge; this was never the intention of the
decision of this Tribunal in quoted paras 42 to 50, and in any event not the
decision of the Supreme Court in Para 46; in addition, in quoted para 43,
this Tribunal had also observed that the developer had not established the
captive power plant which was also envisaged in the approval; in
comparison to the above, in the case of Railways, the entire Railway
network, on the length and breadth of the country, stands established for
the purposes of Section 11 of the Railways Act, 1989, and individual units,
in addition to Indian Railways, have come up at various places to whom
electricity is supplied besides consumption by Railways itself; and the
Indian Railways therefore fulfils the conditions provided under Section 11

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read with Section 2(31) of the Railways Act, 1989, unlike SESA Sterlite
which did not fulfil conditions as per the SEZ Act.

Learned Senior Counsel, would further submit that the respondents

have misread the Report of the Standing Committee dealing with Railways
vis a vis the Electricity Bill leading to the enactment of the Electricity Act,
2003; the Standing Committee on Energy (2002) of the Thirteenth Lok
Sabha, in its thirty first report, found that the Railways were empowered to
erect, maintain, and operate transmission lines needed for the working of
the Railways, in terms of Section 11(g) of the Railways Act, 1989; the
Committee did not find any justification for the requirement of a license for
Railways for transmitting electricity, provided under Section 12 of the Bill, if
such transmission lines were not connected to the grid, and erected for
their own use of supply; the Committee, therefore, desired that the
Railways should be given exemption from licensing as required under
clause 12 of the Bill; the committee desired that suitable amendments be
made in the Bill; pursuant to the suggestions of the Standing Committee in
its report, Parliament, on 08.04.2003, adopted the motion of inserting the
term “or the Railways Act, 1989” after “Atomic Energy Act, 1962” in Clause
168 of the Bill dealing with inconsistency in laws (Section 173 in the
present Act); reference by the Respondents to the decision of the Supreme
Court, in Kalpana Mehta and Others -v- Union of India and
Others,(2018) 7 SCC 1, is misplaced; Parliamentary Reports can be
looked into for the purposes of taking into consideration legislative history
for interpreting a statute as well as to refer the statements made by the
Minister; Parliamentary Reports are only an aid to interpretation of
statutes, and are not binding on courts; and, in any event, the contention of

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the Respondents, based on the Standing Committee Report, is without any
basis.

C.SUBMISSIONS OF RESPONDENTS ON ISSUE No.6:

It is submitted, on behalf of the Respondents, that supply of electricity

is an integral part of ‘distribution of electricity’; supply of electricity to
consumers falls exclusively within the scope of distribution, which is
performed by a distribution licensee, barring the following three statutory
exceptions: (a) supply of electricity to a consumer from a captive
generating plant, through dedicated transmission lines, as provided under
Section 9(1) of the Electricity Act. ‘Captive generating plant’ is defined
under Section 2(8) of the Electricity Act as “a power plant set up by any
person to generate electricity primarily for his own use …”; (b) supply of
electricity by a generating company to any licensee through dedicated
transmission lines as provided under Section 10 of the Electricity Act;
‘Dedicated Transmission Line’ is defined by Section 2(16) of the Electricity
Act, and are operated and maintained by generating companies as per
Section 10(1) of the Electricity Act; (c) supply of electricity by a generating
company to a consumer availing open access as provided by the second
proviso to Section 9 of the Electricity Act and by Section 10(2) of the
Electricity Act; barring the above statutory exceptions, the distribution
licensee is exclusively in charge of maintaining and operating the last mile
connectivity to the consumer; this is further corroborated by Section 46 of
the Electricity Act which provides that it is only a distribution licensee that is
entitled to charge for expenses incurred for providing an electric line for
supply of electricity to a consumer; there is no similar provision allowing a
transmission licensee to recover the expenses incurred for maintaining

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lines used for the ‘supply’ of electricity; it is envisaged, within the scheme
of the Electricity Act, that, if a consumer secures supply of electricity from a
generating company or any licensee other than the distribution licensee in
whose licensed area the consumer is located, then such consumer must
pay open access charges to the distribution licensee of the licensed area
where the consumer is located (Section 42(3) and 42(4)); even such mode
of supply would require distribution of electricity through a distribution
licensee’s distribution system. (Sesa Sterlite Ltd. v OERC., (2014) 8 SCC
444, Para 37; Orissa Power Transmission Corporation Limited v
OERC, (2012) SCC Online APTEL 206, Para 37, 41); the Electricity Act
does not contemplate distribution of electricity outside the distribution
system. (Orissa Power Transmission Corporation Limited v Orissa
Electricity Regulatory Commission, (2012) SCC Online APTEL 206,
Para 35 – 38) (APTEL held that any line connecting a transmission system
or generating station to a consumer’s premises, primarily used for
distribution, forms part of the distribution system) (Sesa Sterlite Ltd. v
Orissa Electricity Regulatory Commission & Ors., (2014) 8 SCC 444,
Para 37; Jindal Steel and Power Limited v Chhattisgarh Electricity
Regulatory Commission & Ors.,( Order of APTEL in Appeal No. 27 of
2006 dated 7 May 2008, Para 49, 50); under the Electricity Act, there is a
clear divide between the functions of a transmission licensee and a
distribution licensee; the distribution licensee is tasked with the function of
distribution of electricity to consumers (i.e., last mile connectivity), along
with the ancillary functions of maintaining all lines and cables used for
distribution; the transmission licensee is only tasked with the responsibility
to maintain transmission lines which are lines and cables not used for
distribution; it is thus not adequate to have a distribution system to qualify

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as a deemed distribution licensee; the entity claiming such status must fulfil
all requirements of being a distribution licensee, which have been
described herein above; and, further, sale of electricity is the sine qua non
for supply of electricity as the definition of supply itself defines it as sale of
electricity. (Chandu Khamaru v. Nayan Malik & Others, (2011) 12 SCC
314).

It is submitted, on behalf of the Respondents, that the term ‘supply’

has been defined under Section 2(70) of the Electricity Act which, in
relation to electricity, means the sale of electricity to a licensee or a
consumer; supply of electricity would only be completed when there is a
sale of electricity to a third party (i.e., a licensee or a consumer); one of the
requisites of ‘supply’ of electricity is that it must be sold to the other party;
‘sale’ of electricity to a third party is essential for dispensing the activity of
‘supply’ of electricity; there should be a seller (distribution licensee herein),
buyer (consumer herein) and price (tariff herein) for the sale of electricity;
mere movement of power from one point to another cannot be construed
as sale of electricity, as has been contended; and Railways has, in fact,
admitted that it does not supply electricity to any third-party consumers.

It is submitted, on behalf of the Respondents, that, alternatively, supply

of electricity was a licensed activity under the provisions of the 1910 Act;
generation of electricity was also a licenced activity under the provisions of
the 1910 Act; at the time of enactment of the Electricity Act, generation of
electricity became delicensed, and the same is very clearly mentioned in
Section 7 thereof, that no licence is required for generating electricity;
however, generation is regulated under the Electricity Act; the second
proviso to Section 9 of the Electricity Act, dealing with captive generation,

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specifically states that no licence is required for supply of electricity
generated from the captive generation plant to any licensee or to any
consumer subject to Regulations made under Section 42(2) of the
Electricity Act; nowhere in the Electricity Act, is it mentioned that no license
is required for supply of electricity; further, Section 2(3) of the Electricity Act
states that “area of supply” means the area within which a distribution
licensee is authorized by its licence to supply electricity; the definition of
distribution licensee, under Section 2(17) of the Electricity Act, also lays
emphasis on supplying electricity to consumers in its area of supply;
therefore, unlike the provisions for generation which clearly indicates that
no licence is required, and that of captive generation wherein also such a
declaration is given that no license is required, no such positive assertion
or declaration is provided for in the Electricity Act that no licence is
required for supply of electricity, which was also a licensed activity like
generation under the provisions of the 1910 Act; on the contrary, Section
2(3) read with Section 2(17) of the Electricity Act, 2003 leads to the
conclusion that a licence is required for authorizing supply of electricity in a
particular area of supply of a distribution licensee; Part IV of the Electricity
Act pertains to licensing, the heading of Section 12 reads as “Authorized
Persons to transmit, supply, etc., electricity”; therefore, the word “distribute
electricity” under Section 12(b) should take colour from “supply” as
transmitting electricity under Section 12(a) takes colour from the word
“transmit” used in the heading; Section 24(a) of the Electricity Act provides
for suspension of distribution licence in case the licensee fails to maintain
uninterrupted supply of electricity conforming to standards regarding quality
of electricity to the consumers; further, Rule 3 of the Distribution of
Electricity License (Additional Requirements of Capital Adequacy,

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Creditworthiness and Code of Conduct) Rules, 2005, which relates to
requirement of capital adequacy and creditworthiness, also mandates that,
prior to giving a licence to a second licensee in a particular area, the ability
for capital investment, for distribution network as well as service obligation
within that area in terms of Section 43 must be seen; this clearly indicates
that supply of electricity is an integral part of the distribution license and,
therefore, it is a licensed activity which is clubbed with the laying of the
distribution network under the Electricity Act; and, therefore, sale of
electricity to a consumer is the sine qua non for distribution of electricity by
a distribution licensee, deemed or otherwise, under the Electricity Act and
such supply is also a licensed activity under the Electricity Act.

It is submitted, on behalf of the Respondents, that the Airport

Authority also procures electricity on a single point delivery method in a
similar manner; Airports also consist of various shops and establishments,
to whom electricity is internally allotted by the administration; this function
of the Airports Authority does not amount to being a distribution licensee;
similarly, Rourkela Steel Plant also collects electricity on a single point
delivery method from the area distribution licensee (TPCODL) in the State
of Orissa, and thereafter branches out the same to various establishment
within its premises; this act of RSP does not constitute distribution of
electricity; and a similar contention was dealt with by the High Court of
Calcutta in Srijan Realty (P) Ltd. v. Commissioner of Service Tax,
Kolkata (2019 SCC OnLine Cal 9139).

D.SUBMISSIONS OF RESPONDENTS ON ISSUE Nos.7 AND 11:

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 It is submitted, on behalf of the Respondents, that issues 7 and 11
have been dealt together as they are substantially similar; these issues are
squarely covered by the judgment of the Supreme Court in Sesa Sterlite;
in Sesa Sterlite, the Supreme Court decided the issue whether the
Appellant therein was still liable to pay CSS to the distribution licensee of
the area in question; the Appellant therein had its unit in a special
economic zone, and it was also the developer in the said SEZ area; the
Appellant had entered into a Power Purchase Agreement with a generator,
and was not drawing power from the distribution licensee in that area; they
claimed to be a deemed distribution licensee, for the purpose of the
Electricity Act by virtue of being a “developer”, as its unit was in the SEZ
area, and such a recognition was statutorily given to them under the
provisions of the Special Economic Zones Act, 2005; the Ministry of
Commerce and Industry, Government of India had issued Notification dated
27.02.2009 declaring the unit of the Appellant therein as an SEZ; the said
Notification was followed by a Notification dated 03.03.2010 under Section
49(1) of the SEZ Act; by the said notification, the GOI, for promoting the
objects of the SEZ and under the powers delegated under the SEZ Act,
introduced a proviso to Section 14(b) of the Electricity Act in terms of which
a developer of a SEZ was declared as a deemed licensee authorised to
distribute electricity within the special economic zone area; in the Order
impugned in the Sesa Sterlite Judgment, this Tribunal had appropriately
held that “By merely being authorised to operate and maintain a distribution
system as a deemed licensee, would not confer the status of distribution
licensee to any person. The purpose of such establishment is for supply of
power to consumers. Mere fact that the appellant claims to be deemed
distribution licensee is of no consequence at all since admittedly, the entire

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power purchased by the appellant is for its own use and consumption and
not for the purpose of distribution and supply/ sale to consumers.”. (Ref.
Para 49 of Vedanta Aluminium Limited v. OERC & Ors. [2013 SCC
OnLine APTEL 76); the Supreme Court agreed with the above findings of
this Tribunal, and further held that, in order to avail benefits under the
Electricity Act, the appellant was required to show that it is in fact having a
distribution system, and has a number of consumers to whom it is
supplying electricity; similar to the Railways herein, the Appellant in the
Sesa Sterlite Judgment had also claimed to be a deemed distribution
licensee; in such a scenario, this Tribunal as well as the Apex Court agreed
that, in order to avail benefits under the Electricity Act, it is necessary that
such person also performs the duties of a distribution licensee; despite
there being an explicit proviso inserted in Section 14(b) of the Electricity Act
for SEZ, the Supreme Court held that fulfilling the various requirements of a
‘distribution licensee’ under the Electricity Act is crucial, and no benefits
can be availed without the same. (Ref. Para 46); unlike the Railways Act,
the SEZ Act, vide Rule 5A of SEZ Rules, 2006, provides that twenty-four
hours uninterrupted power supply at stable frequency in SEZ should be
ensured in case of a SEZ relating to information technology, Biotechnology,
Research and Development Facilities etc; Rule 5A was inserted to the SEZ
Rules, 2006, vide SEZ (Amendment) Rules, 2016; there is no similar
obligation put on the Railways under the Railways Act; Railways is not
required to supply electricity to any of its alleged consumers in its alleged
area of supply; furthermore, an express deeming provision has been
provided in the Electricity Act for SEZ, however no such deeming provision
has been provided for Railways; thus, in the present case, Railways is in
no better position than the Appellant in the Sesa Sterlite Judgment;

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therefore, the findings in the said case are squarely applicable in the
present case; and as the entire power, being supplied to the Railways, is
consumed for its own use and consumption, it cannot avail the benefits of
being a distribution licensee.

It is further submitted, on behalf of the Respondents, that, when the

Bill was being discussed in the Standing Committee of Parliament, it was
clearly mentioned that the deeming provisions, provided for in Section 14,
are transitory in nature for the purposes of smooth transition from the 1910
Act (Clause 6.2 of the Standing Committee Report) to the Electricity Act as
given at Chapter VI (Licensing) (Clause 6.4(ii)); it is, therefore, clear that
the third proviso pertaining to “distribute electricity” has to be read as
supply of electricity under the 1910 Act and laying of the distribution
network and supply of electricity to consumers under the Electricity Act; for
being considered a distribution line, there should be conveyance of
electricity from the distribution line to the point of installation of the
consumer; there is no such point of installation and, on the contrary, it is a
continuous line of installation, if one may describe it as such, extending to
wherever the traction lines are connected in India; on perusal of the
Railway Handbook, it is clear that, once power from the nearest sub-station
of the supply authority, is delivered at the traction sub-stations of the
Railways, the same is carried forward through the electric traction
equipment, power supply and distribution installations which finds mention
in Section 2(31) of the Railways Act; these power supply and distribution
installations, installed, operated, and maintained by the Railways, are used
for the purpose of onward conveyance of power within the system of the
Railways, after delivery of power at the traction sub-station by an area

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distribution licensee or through open access; as such, “distribution” of
electricity, carried on by the Railways, is only for internal supply and
distribution within its own system, which begins after power is delivered at
its traction sub-station; such distribution cannot be regarded as “distribution
of electricity as a distribution licensee” within the meaning of the Electricity
Act; it is for this reason that the Railways has always been considered as a
“consumer” of electricity, rather than a “distributor” of electricity, as it is not
involved in any form of distribution of electricity to any entity other than to
itself; and power consumption by the Railways is for operating its own
railways through a system of electric traction equipment and power lines,
through which power delivered at its traction sub-station is passed for use
in the railways.

It is submitted, on behalf of the respondents, that the fact that

Railways is not a deemed distribution licensee, and was never intended to
be so, is also apparent from a perusal of the Standing Committee on
Energy (2002), (Ref. 31st Report of the Standing Committee on Energy –
Ministry of Power on Electricity Bill, 2001 which prepared a report on the
Electricity Bill, 2001); taking into consideration, the public importance of the
Bill, the Committee invited suggestions from the public at large who may be
interested in the subject matter of the Bill; the Committee received written
submissions from various quarters including the Railways; even before the
above-mentioned standing committee, the Railways sought exemption only
for transmission activity and not for distribution activities; the relevant para
is Para 6.8 of the report of the Standing Committee on Energy (2002); the
Committee also agreed with the suggestion of the Railways, and found that
the Railways are empowered to erect, maintain and operate transmission

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lines needed for the working of the Railways in terms of Section 11(g) of
the Railways Act; the Committee therefore suggested that the Railways
should be given exemption from licensing as required under Clause 12 of
the Bill (Para 6.42 of the report of the Standing Committee on Energy
(2002); Railways also suggested that, along with Defense and Atomic
Energy, Railways should also be inserted in Clause 179; Railways claimed
that the provisions of the Electricity Act should not be applicable to the
Railways (Para 20.12 of the Standing Committee on Energy (2002);
Ministry of Railways also requested for exemption/ concession under
Clauses 12, 42, 47, 67, 68 and 169 of the Bill (Para 20.13 of the Standing
Committee on Energy (2002); the Committee took note of the request of
the Ministry of Railways for exemption from the provisions contained in
Clauses 12, 42, 47, 67, 68 and 179 of the Bill, and suggested that the
Ministry of Railways be exempted from licensing for erecting, maintaining
and transmission of electricity, subject to the condition that the transmission
network is outside the grid and is erected for their own use, the licence
would be insisted upon for grid operation (Para 20.32 of the Standing
Committee on Energy (2002)); and, thus, it can be seen even from the
Standing Committee Report that exemption was given to the Railways for
transmission activities only, and not for distribution activities as has been
alleged by the Railways in the present Appeal. Reliance is placed on the
judgment of the Supreme Court, in Kalpana Mehta & ors. v. Union of
India & Ors :(2018) 7 SCC 1.

E.ANALYSIS:

The question, we must pose to ourselves, is not whether electricity

can be supplied by a person other than a distribution licensee, but whether

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a person is entitled for grant of a distribution licence only to maintain an
“electric traction equipment” or a “power supply and distribution installation”
without having to discharge the concomitant obligation of supplying
electricity, through such an installation/ equipment, to the consumers in the
area of supply earmarked by the Commission in favour of such a licensee.
Supply of electricity, which was a licenced activity under Section 3 of the
Indian Electricity Act, 1910, has now been relaxed under the Electricity Act,
2003 and, besides captive generating plants, electricity traders, distribution
licensees of other areas of supply, and through collective transactions in
the power exchange, even companies which generate electricity (which is a
delicenced activity under the Electricity Act, 2003) can supply the electricity
so generated by them to others. That does not detract from the fact that
various provisions of the Electricity Act obligate a person, to whom a
distribution licence is granted, not only to install and operate a distribution
system (ie the system of wires and associated facilities) but also to supply
electricity through such a system to the consumer’s installation.

F. DISTRIBUTION IS INTEGRALLY CONNECTED WITH SUPPLY OF

ELECTRICITY:

It matters little that the term “supply” is not defined in the Indian
Electricity Act, 1910 or the Electricity Supply Act, 1948, since the said term
is defined under Section 2(70) of the Electricity Act,2003 as sale of
electricity either to a licensee or to a consumer. While such a system of
wires and associated facilities installed by a distribution licensee can also
be used, by way of open access by others, the person in whose favour a
distribution licence is granted is obligated to utilise such a system of wires
and associated facilities to supply electricity (ie sell electricity) to

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consumers. Unlike generation which has been specifically delicenced, the
rigour placed by earlier enactments, with respect to supply of electricity,
has been considerably relaxed under the Electricity Act, 2003, and freedom
is given thereby to a consumer to procure electricity not only from the
distribution licensee in whose area of supply the consumer is located, but
also from any other distribution licensee or a generating company etc.
While the 2003 Act gives a wider choice of procurement of electricity to a
consumer, it does not free a distribution licensee of its obligation to supply
electricity to the consumers, in its area of supply, who seek supply of
electricity from them. The distribution licensee, within whose area of supply
a consumer is located, has no choice but to supply electricity to such
consumers.

Supply of electricity is part of the licensed activity of a distribution

licensee, while supply by a generator is not. A distribution licensee can no
doubt supply electricity to another distribution licensee. That does not
absolve the former of its obligation to also supply electricity to the
consumers in its area of supply. Besides the duty to develop and maintain
an efficient distribution system in its area of supply, Section 42(1) also
obligates a distribution licensee to supply electricity in accordance with the
provisions of the Electricity Act. The word “supply”, used in Section 42(1),
when read with Section 2(70) of the Electricity Act, undoubtedly places on
the distribution licensee the duty to supply electricity to its consumers.
Absence of the specific word, “consumer”, in Section 42(1) matters little.

Section 44 provides for exceptions discharging a distribution licence

of its obligation to supply electricity. Section 45 relates to the power to
recover charges. Under sub-section (1) thereof, the price which a

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distribution licensee is entitled to charge for supply of electricity can only be
in terms of the tariff fixed by the concerned State Commission. Section 46
relates to the power to recover expenditure, and thereunder any
reasonable expenditure incurred by a distribution licensee in providing
electricity may be permitted by the State Commission to be recovered by it.
Section 47 relates to the power to require security. Section 48 confers
power on the distribution license to require any person, who seeks supply
of electricity, to fulfil certain conditions and Section 50 requires an
Electricity Supply Code to be made to provide for recovery of electricity
charges etc. These provisions require the distribution licensee to fulfil
certain obligations, but does not discharge them of their duty to supply
electricity to consumers within their area of supply. While Railways contend
that Military Engineering Services has been held to be a deemed
distribution licensee without any obligation to supply electricity to its
consumers, reference is made on behalf of the Respondents to instances
such as bulk supply being taken by Roorkela steel plant or the Airports
Authority which, in turn, distributes electricity to its different constituents
located within its area of operations. It may not be appropriate for us to
consider the instances/illustrations given by both sides, since the parties
with respect to whom the illustrations relate, are not before this Tribunal.
Supply of electricity by various distribution licensees to Railways is supply
of electricity to a consumer, and is not supply of electricity to another
distribution licensee, since Railways does not fulfil the requirements of
being a distribution licensee/deemed distribution licensee as it does not
supply electricity by way of sale to third parties other than to itself or to its
constituents.

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G. OPEN ACCESS SOUGHT BY A DISTRIBUTION LICENSEE AND A
CONSUMER: DISTINCTION:

Grant of open access frees a consumer from having to procure

electricity from the distribution licensee within whose area of supply it is
carrying on its activities and not vice versa, as a distribution licensee
cannot avoid its obligation to supply electricity to consumers seeking it.
Reliance placed by the Railways on Section 60 of the Electricity Act is
misplaced. Section 60 confers power on the Appropriate Commission to
issue such directions as it considers appropriate to a licensee or a
generating company if such licensee or generating company enters into
any agreement or abuses its dominant position or enters into a combination
which is likely to cause or causes an adverse effect on competition in the
electricity industry. It is evident from Section 60 that, while generation is
longer a licensed activity, it is an activity which can be regulated under the
provisions of the Electricity Act. Supply per se is not a licenced activity,
since electricity can also be supplied by a generating company or by a
captive generating plant. However, the Electricity Act does not disassociate
supply from distribution, and a distribution licensee has the obligation both
to operate and maintain a distribution system, as also to supply electricity
by way of sale through the said system.

There is nothing in the context of the Electricity Act which requires the
word “supply” to be given a meaning other than what is contained in its
definition under Section 2(70). As the freedom to procure electricity, from a
source other than the distribution licensee in whose area of supply they are
located, is given to a consumer, Railways, as a consumer, also has the
choice to procure electricity from anyone other than the concerned

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distribution licensee. However, when such a right is exercised by the
Railways as a consumer, it is obligated to pay additional surcharge/cross
subsidy surcharge to its distribution licensee under Sections 42(2) and (4)
of the Electricity Act. In the present batch of appeals the Railways does not
seek to exercise its right, as a consumer of electricity, to procure electricity
from a source other than the distribution licensee, but claims to be a
deemed distribution licensee itself. The distinction between a distribution
licensee/deemed distribution licensee on the one hand, and a consumer on
the other, is that, while the former is governed by clause (i) of Sections
38(2)(d), 39(2)(d) and 40(c), the latter falls within the clause (ii) of the
aforesaid provisions. While a distribution licensee is entitled, in view of
clause (i) of the aforesaid provisions, to seek open access without
discharging the corresponding obligation to pay additional surcharge/cross
subsidy surcharge, a consumer falls within clause (ii) of the aforesaid
provisions, and is obligated thereby to pay to its distribution licensee, (from
whom it no longer procures electricity), additional surcharge and cross
subsidy surcharge.

H. SECTION 62 OF THE ELECTRICITY ACT : ITS SCOPE:

Section 62(2) of the Electricity Act should not be read dehors Section
62(1)(d) thereof. The power conferred on an Appropriate Commission,
under Section 62(1)(d), is to determine the tariff for retail sale of electricity
ie sale of electricity by a distribution licensee to consumers within its area
of supply. It is such a distribution licensee which is required under Section
62(2) to furnish details in respect of distribution for determination of tariff.
Since tariff is determined for retail sale of electricity under Section 62(1)(d),
the words “distribution for determination of tariff”, used in Section 62(2),

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would relate only to such retail sale by the distribution licensee to its
consumers.

As reliance is placed, on behalf of the Respondents, on the

judgement of the Supreme Court, in Sesa Sterlite Ltd. v Orissa
Electricity Regulatory Commission & Ors., (2014) 8 SCC 444, and the
said judgement is sought to be distinguished by Sri M.G. Ramachandran,
Learned Senior Counsel appearing on behalf of the Railways, it is
necessary to take note of both the order of this Tribunal in Vedanta
Aluminium Ltd, as well as the judgement of the Supreme Court in Sesa
Sterlite Ltd, since the former judgement was affirmed in the latter.

I.ORDER OF APTEL IN “VEDANTA ALUMINIUM LTD VS OERC”

(ORDER IN APPEAL NO.206 of 2012 DATED 03.05.2013)
The appeal before this Tribunal, in M/s Vedanta Aluminium Ltd vs
OERC and others (Order in Appeal No.206 of 2012 dated 03.05.2013),
was filed by the appellant which, in its capacity as a deemed Distribution
Licensee, had executed a Power Purchase Agreement with M/s Sterlite
Energy Ltd for supply of 2050 MW of power for 25 years; and the petition
filed seeking approval of the said PPA had been rejected by the Orissa
Electricity Regulatory Commission (“OERC” for short).

The Appellant, which had set up a 1.25 MTPA capacity aluminium

smelter project in a sector specific Special Economic Zone, was granted
approval by the Government of India for the development, operation and
maintenance of a sector specific Special Economic Zone in Orissa.
Thereafter, the Ministry of Commerce and Industry, Government of India
issued a notification, under Section 49(1) of the Special Economic Zones
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Act, 2005, introducing a proviso to Section 14(b) of the Electricity Act, 2003
whereby a developer of a Special Economic Zone was declared a
deemed licensee authorised to distribute electricity within the Special
Economic zone area.

In the order, impugned in the appeal before this Tribunal, the OERC
had observed that, even though deemed distribution licensee status had
been granted to the Appellant by virtue of the notification under the Special
Economic Zones Act, the State Commission was required and empowered
to look into the other aspects with regard to compliance of the basic
conditions provided in the Electricity Act, 2003; it was not satisfied that the
application was for getting distribution licence to distribute electricity to
consumers as envisaged under Section 2(15), 2(17) and 2(70) read with
Sections 42(6), 55, 56 and 57 of the Electricity Act,2003, and the
application for grant of distribution licence was not intended for supply of
electricity to consumers, but was meant only for self-utilization and self-
consumption; the Applicant was not entitled to the grant of distribution
license even though it was granted deemed licensee status by virtue of the
notification issued by the authority concerned; they should be treated as a
consumer of the existing distribution licensee, and should pay surcharge
to WESCO for drawal of power from Sterlite Energy Limited; and, since the
Application for grant of distribution licence was rejected, the application
filed by the appellant seeking approval of the PPA need not be considered.
On the question whether the State Commission lacked jurisdiction
to declare that the Appellant is not a deemed distribution licensee when, by
operation of law through notification of the Central Government, the
Appellant had already been conferred with the said status, this Tribunal

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observed that the notification had been issued under Section 49(1) of the
Special Economic Zone Act, 2005 which conferred authority on the Central
Government to direct that any of the provisions of a Central Act and rules
and regulations made thereunder would not apply or to declare that some
of the provisions of the Central Act shall apply with exceptions,
modifications and adaptation to the Special Economic Zone; under the
scheme of the Special Economic Zones Act, the Central Government had
to first notify as to what extent the provisions of the other Acts should be
made applicable, or applicable with modification, or not applicable for the
Special Economic Zone area; accordingly, the Government of India,
Ministry of Commerce and Industry, through their notification dated
21.3.2012 with regard to power generation in Special Economic Zone, had
declared that all the provisions of the Electricity Act, 2003 and Electricity
Rule,2005 shall be applicable to the generation, transmission and
distribution of power; the notification clarified that there was no
inconsistency between the Special Economic Zones Act, 2005 and the
Electricity Act, 2003; and, as such, the Special Economic Zones Act, 2005
cannot have any overriding effect on the Electricity Act, 2003.
This Tribunal observed that a harmonious construction of both the
SEZ Act, 2005 and the Electricity Act, 2003 required the provisions of both
the Acts to be given effect to, so long as they were not inconsistent with
each other; the provisions of Section 51 of the SEZ Act, 2005 should be
considered along with the provisions of Section 49 of the said Act;
accordingly, in view of the provisions of the SEZ Act, 2005 and the
consequent notification by the Ministry of Commerce and Industry, the
deemed distribution licensee status as claimed by the Appellant should
also be tested through the other provisions of the Electricity Act, 2003 and

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Electricity Rules, 2005, for certifying its validity and converting it into a
formal distribution licensee; Section 14 of the Electricity Act, 2003
contained 9 provisos; one more proviso to Section 14 of the Electricity
Act,2003 had been added through the notification dated 3.3.2010; there
were some provisos which declared a party as a deemed distribution
licensee who was not required to obtain separate licence from the State
Commission under the Act; there were some other provisos which merely
declared the party as a deemed distribution licensee; proviso 4 declared
that the Damodar Valley Corporation shall be deemed to be a licensee but
it shall not be required to obtain a licence under the Act as well as under
the provisions of the Damodar Valley Corporation Act, 1948; the 3rd
proviso provided that, if an appropriate Government transmits or distributes
electricity, it shall be deemed to be a licensee but shall not be required to
obtain licence under this Act; some of the other provisos did not confer the
said privilege to the effect that they shall not be required to obtain licence;
this meant that those companies, which were not conferred with the said
privilege, shall obtain the distribution licence from the State Commission;
the proviso, referred to in the notification dated 3.3.2010, merely stated that
the developer of the SEZ shall be a deemed licensee; it did not provide that
it was not required to obtain separate licence under this Act; the Appellant,
though declared as a deemed distribution licensee through the
notification dated 3.3.2010, was bound to approach the State Commission
seeking the distribution licence by placing material to satisfy that he is
entitled to the grant of distribution licence along with the material namely
notification under which the Appellant was treated as deemed distribution
licensee; in other words, the notification can be placed before the State
Commission as one of the material for grant of licence, but that notification

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alone would not be sufficient to compel the State Commission to grant such
licence; as per this proviso, the developer of an SEZ is a deemed
distribution licensee and not the person who develops and operates the
SEZ simultaneously; if the developer and operator is allowed to hold a
distribution licence, it means that both the licensee and the consumer is
one and the same; if it is so, then it will contradict the Electricity Act and
the notification of the Government of India making the whole affair non-est
in the eyes of law; development and operation of the SEZ are two distinct
activities; the jurisdiction of the State Commission to scrutinise the deemed
distribution licensee status of the Appellant is well established in view of
Section 49(1) of SEZ, Act,2005, and the notification of the Central
Government dated 21.3.2012; and, therefore, the contention of the
Appellant that the State Commission dealt with the matter, relating to the
grant of distribution licence, by going beyond its jurisdiction is misplaced.
This Tribunal further observed that a perusal of the notification
dated 3.3.2010 would make it evident that the legislation’s intention, in
declaring the developer in the SEZ area as a deemed distribution licencee,
is confined only to clause (b) of Section 14 of the Electricity Act, which
deals with the grant of license by the appropriate State Commission to any
person for distribution of electricity; the said notification has not curtailed
the power of the State Commission so far as applicability of other
provisions are concerned; as correctly indicated by the State Commission,
the definition of the term “distribution licensee”, as enumerated in Section
2(17) of Electricity Act,2003, emphasises upon the distribution licensee to
operate and maintain a distribution system and supply of power to the
consumers; considering the definition of ‘supply’ in Section 2(70), supply
here means sale of electricity to consumers; merely being authorised to

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operate and maintain a distribution system, as a deemed licensee, would
not confer the status of a distribution licensee to any person; the purpose of
such establishment is for supply of power to consumers; the mere fact that
the Appellant claims to be a deemed distribution licensee is of no
consequence, since the entire power purchased by the Appellant is for its
own use and consumption, and not for the purpose of distribution and
supply/sale to consumers; an entity which utilises the entire quantum of
electricity for its own consumption, and does not have any other
consumers, cannot, by such a notification, be deemed to be a distribution
licensee even by legal fiction; by virtue of the legal fiction created by the
notification dated 3.3.2010, the Developer of the SEZ notified under the
SEZ Act, who distributes electricity, can be deemed to be a distribution
licensee; and this legal fiction cannot go further and make a person, who
does not distribute electricity to the consumers, as a distribution licensee.
This Tribunal concluded by summarising its findings thus: (1) Govt.of
India notification dated 3.3.2010, by modifying clause(b) of Section 14 of
the Electricity Act by inserting a proviso that Developer of SEZ notified
under the SEZ Act,2005 shall be deemed to be licensee for the purpose of
this clause, does not exempt the Developer of the SEZ to obtain licence
from the State Commission, (2) the notification dated 21.3.2012, issued by
the Ministry of Commerce and Industry, has clarified that all the provisions
of the Electricity Act, 2003 and the Electricity Rules, 2005 will be applicable
to generation, transmission and distribution of power in the Special
Economic Zone, (3) This Tribunal, in Appeal No. 3 of 2011 dated
23.3.2012, has observed that, on a harmonious construction of both the
SEZ Act, 2005 and the Electricity Act, 2003, effect should be given to the
provisions of both the Acts, so long as they are not inconsistent with each

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other; in view of the provisions of the SEZ Act, 2005 and the consequent
notification dated 21.3.2012 by the Ministry of Commerce and Industry, the
deemed distribution licensee status, as claimed by the Appellant, shall
also be tested, through t h e other provisions of the Electricity Act, 2003
and the Electricity Rules, 2005, for certifying its validity and converting it
into a formal distribution licensee; the Appellant, by filing a petition before
the State Commission for approval of PPA and grant of distribution licence,
has submitted to the jurisdiction of the State Commission; therefore, the
contention of the Appellant that the State Commission has dealt with the
matter of granting distribution licence, which is beyond its jurisdiction, is
misplaced, (4) the definition of the term “distribution licensee” as
enumerated under Section 2(17) of the Electricity Act, 2003 emphasises
upon the distribution licensee to operate and maintain a distribution system
and supply electricity to the consumers; considering the definition of ‘supply’
in Section 2(70), ‘supply’ here means sale of electricity to consumers; by
merely being authorized, to operate and maintain a distribution system as a
deemed licensee, would not confer the status of a distribution licensee on
any person; the purpose of such establishment is for supply of power to
consumers; and the mere fact that the Appellant claims to be a deemed
distribution licensee is of no consequence since, admittedly, the entire
power is purchased by the Appellant for its own use and consumption, and
not for the purpose of distribution and supply/sale to consumers.
J. SESA STERLITE JUDGEMENT:

The judgement of the Supreme Court, in Sesa Sterlite Ltd. v. Orissa

Electricity Regulatory Commission, (2014) 8 SCC 444, was passed in a
statutory appeal filed under Section 125 of the Electricity Act, 2003 against

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the above referred order of APTEL in Vedanta Aluminium Ltd. v. Odisha
Electricity Regulatory Commission (Order in Appeal No. 206 of 2012
dated 3-5-2013). By the said judgment, APTEL had, while affirming the
order of the Odisha Electricity Regulatory Commission, held that, even
though the appellant was a “deemed distribution licensee” for the purpose
of the Electricity Act, it was nonetheless a “consumer” liable to pay cross-
subsidy surcharge (CSS) to WESCO which was the distribution licensee for
the subject area.

The units of the appellant were divided into two broad areas, one
the domestic tariff area (DTA) where it had established one of its units, and
the other, the VAL-SEZ unit which was in the SEZ. The DTA unit drew
power from open access, and duly paid cross-subsidy surcharge. The
appeal was confined to the VAL-SEZ unit in the SEZ area. For supply of
energy to this unit, the appellant had entered into a PPA with Sterlite
Energy Ltd which, soon thereafter, stood merged with the appellant.

Since supply of power by a generating company to a distribution

licensee is regulated under the provisions of the Electricity Act, 2003, the
appellant filed a petition before the OERC for approval of the said PPA.
Subsequently the OERC, at the preliminary hearing, sought some
clarifications with regard to certain factual aspects. The appellant,
thereafter, filed two amendment petitions seeking additional prayers to
grant them a deemed distribution licence on the strength of the
Government of India Notification dated 3-3-2010. The OERC rejected this
application, for grant of deemed distribution license, holding that VAL is to
be treated as a consumer of WESCO.

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 The question of law, which arose for the consideration of the Supreme
Court, was whether a developer of a notified special economic zone, who
was deemed by law to be a licensee for distribution of electricity, was
required, once again, to apply to the Regulatory Commission under the
Electricity Act for grant of a licence, or the deeming fiction carved out in
Section 14 of the Electricity Act automatically dispensed with this
requirement, and ipso facto made such an SEZ developer a distribution
licensee.

In answering this question, the Supreme Court observed that the

primary dispute related to cross subsidy surcharge, which the appellant
was called upon to pay to WESCO; it was necessary to conceptually
understand the rationale for payment of such CSS to the distribution
company under the scheme of the Electricity Act; open access implied
freedom to procure power from any source; the expression “open access”
has been defined in 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”; the Act mandated that it shall be duty of the
transmission utility/licensee to provide non-discriminatory open access to
its transmission system to every licensee and generating company; open
access in transmission enabled the licensees (distribution licensees and
traders) and generating companies to use the transmission system without
any discrimination; this would facilitate sale of electricity directly to the
distribution companies; this would generate competition amongst the
sellers and help reduce, gradually, the cost of generation/procurement;

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while open access in transmission implied freedom to the licensee to
procure power from any source of his choice, open access in distribution
meant freedom to the consumer to get supply from any source of his
choice, and conferred on them the right to get supply from a person, other
than the distribution licensee of his area of supply, by using the distribution
system of such a distribution licensee; unlike in transmission, open access
in distribution had not been allowed from the outset primarily because of
the consideration of cross-subsidy; the law provided that open access in
distribution would be allowed by the State Commission in phases; for this
purpose, the State Commissions were required to specify the phases and
conditions for introduction of open access; however, open access could be
allowed on payment of a surcharge, to be determined by the State
Commission, to take care of the requirement of the current level of cross-
subsidy and the fixed cost arising out of the licensee's obligation to supply;
and consequent to the enactment of the Electricity (Amendment) Act, 2003,
it had been mandated that the State Commission shall, within five years,
necessarily allow open access to consumers having demand exceeding
one megawatt.

On the rationale of cross-subsidy surcharge (CSS), the Supreme

Court observed that there were two aspects to the concept of surcharge —
one, the cross-subsidy surcharge i.e. the surcharge meant to take care of
the requirements of current levels of cross-subsidy, and the other, the
additional surcharge to meet the fixed cost of the distribution licensee
arising out of his obligation to supply; the presumption, normally, was that,
generally, bulk consumers would avail open access, who also pay at
relatively higher rates; as such, their exit would necessarily have adverse

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effect on the finances of the existing licensee, primarily on two counts —
one, on its ability to cross-subsidise the vulnerable sections of society, and
the other, in terms of recovery of the fixed cost which such licensee may
have incurred as part of his obligation to supply electricity to that consumer
on demand (stranded costs); the mechanism of surcharge was meant to
compensate the licensee for both these aspects; through this provision of
open access, the law balanced the right of the consumers to procure power
from a source of his choice, and the legitimate claims/interests of the
existing licensees; apart from ensuring freedom to the consumers, the
provision of open access was expected to encourage competition amongst
suppliers, and also to put pressure on the existing utilities to improve their
performance in terms of quality and price of supply so as to ensure that
consumers did not go out of their fold to get supply from some other
sources; with this open access policy, the consumer was given a choice to
take electricity from any distribution licensee; however, at the same time,
the Act made provision for surcharge for taking care of the current level of
cross-subsidy; thus, the State Electricity Regulatory Commissions were
authorised to frame open access in distribution in phases with surcharge,
for the current levels of cross-subsidy, to be gradually phased out along
with cross-subsidies, and obligation to supply; in the aforesaid
circumstances, CSS is payable by the consumer to the distribution licensee
of the area in question, when it decides not to take supply from them but to
avail it from another distribution licensee; in a nutshell, CSS is a
compensation to the distribution licensee irrespective of whether its line is
used or not, in view of the fact that, but for open access, the consumer
would pay the tariff applicable for supply which would include an element of
cross-subsidy surcharge on certain other categories of consumers; a

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consumer situated in an area is bound to contribute to subsidising a low
end consumer if he falls in the category of a subsidising consumer; once
cross-subsidy surcharge is fixed for an area, it is liable to be paid and such
payment will be used for meeting the current levels of cross-subsidy within
the area; afortiori, even a licensee, which purchases electricity for its own
consumption either through a “dedicated transmission line” or through
“open access”, would be liable to pay cross-subsidy surcharge under the
Act; thus cross-subsidy surcharge, broadly speaking, is the charge payable
by a consumer who opts to avail power supply through open access from
someone other than such distribution licensee in whose area it is situated;
and such surcharge is meant to compensate such distribution licensee for
the loss of cross-subsidy that such distribution licensee would suffer by
reason of the consumer taking supply from someone other than such
distribution licensee.

On application of the principle of cross-subsidy surcharge to the case

before it, the Supreme Court observed that, in the present case, the
appellant (which was the operator of an SEZ) was situated within the area
of supply of WESCO; it was seeking to procure its entire requirement of
electricity from Sterlite (an independent power producer (IPP) - which at the
relevant time was a sister concern under the same management), and was
thereby seeking to denude WESCO of the cross-subsidy
which WESCO would otherwise have got from it, if WESCO were to supply
electricity to the appellant; in order to be liable to pay cross-subsidy
surcharge to a distribution licensee, it was necessary that such distribution
licensee must be a distribution licensee in respect of the area where the
consumer is situated, and it is not necessary that such consumer should be

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connected only to such distribution licensee; it would suffice if it was a
“consumer” within the aforesaid definition; having regard to the aforesaid
scheme, in the normal course when the appellant had entered into a PPA
with Sterlite-another electricity generating company, and was purchasing
electricity from the said company, it was liable to pay CSS to WESCO;
admittedly under the PPA, the appellant was purchasing electricity from the
said generating station, and it was consumed by the single integrated unit
of the appellant; the appellant, therefore, qualified to be a “consumer”
under Section 2(15) of the Electricity Act; and it was also not in dispute that
the unit of the appellant was in the area which was covered by the licences
granted to WESCO as a distribution licensee.

The Supreme Court noted the contention of the appellant that, in a

scenario where the VAL-SEZ unit of the appellant was situated in an SEZ
area, and the appellant was declared as the developer for that area under
the SEZ Act, it was not liable to pay any CSS to WESCO in view of the
notification issued under the proviso to Section 49 of the SEZ Act, and the
appellant itself being treated as a deemed distribution licensee as per the
provisions of Section 14 of the Electricity Act; as the appellant is deemed
to be a licensee, it cannot be treated as a “consumer” under the Electricity
Act; since the supply-line of VAL-SEZ was not connected to WESCO, and it
was getting electricity directly from Sterlite under the PPA, there was no
question of payment of CSS to WESCO; and it was not even the case
of WESCO that the supply-line of SEL-VAL was a part of the
WESCO distribution system.

On the effect of the appellant’s claim to be a deemed distribution

licensee, and whether this would take them away from the clutches of the

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CSS liability, the Supreme Court referred to Section 49 of the Special
Economic Zones Act, Section 14 of the Electricity Act and its provisos, and
to the Notification dated 3-3-2010, and then observed that, under the
scheme of the Special Economic Zones Act, the Central Government had
to first notify as to what extent the provisions of other Acts were to be
made applicable or applicable with modification or not applicable for the
special economic zone area; in furtherance thereto, the Government of
India, Ministry of Commerce and Industry, through its Notification dated 21-
3-2012, with regard to power generation in special economic zones, had
declared that all the provisions of the Electricity Act, 2003 and the
Electricity Rules, 2005 shall be applicable to generation, transmission and
distribution of power, whether stand-alone or captive power; this notification
clarified that there was no inconsistency between the Special Economic
Zones Act, 2005 and the Electricity Act, 2003; and, vide Notification dated
3-3-2010, the Central Government added an additional proviso to clause
(b) of Section 14 of the Electricity Act viz. the appellant shall be deemed to
be a licensee for the purpose of the said clause w.e.f. the date of
notification of such SEZ.

The Supreme Court noted that the appellant’s contention, that as it is

already a deemed distribution licensee it need not apply for this licence to
the said Commission before entering into the PPA and the State
Commission was bound to grant the licence, was negated by the Appellate
Tribunal on two grounds. The Supreme Court then observed that they were
in agreement with the rationale in the impugned order passed by this
Tribunal as that was the only manner in which the two Acts can be
harmoniously construed; in the present case, by virtue of the status of a

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developer in the SEZ area, the appellant was also treated as a deemed
distribution licensee; however with this, it only got exemption from
specifically applying for a licence under Section 14 of the Act; in order to
avail further benefits under the Act, the appellant was also required to show
that it was in fact having a distribution system and had a number of
consumers to whom it was supplying electricity; that was not the case here;
the appellant was getting electricity from Sterlite Ltd for its own plant only,
for which it had entered into a PPA; the object and scheme of the SEZ Act
envisaged several units being set up in an SEZ area; there could be a
sector specific SEZ with several units i.e. for IT, mineral based industries,
etc. but instances of single unit SEZ, like in the present case of the
appellant, may be rare; the Notification dated 3-3-2010 providing for the
“developer” of SEZ being deemed as a “distribution licensee” was issued
keeping in view the concept of multi-unit SEZs and would apply only to
such cases in which the developer was supplying power to multiple units in
the SEZ; the said notification would not apply to a developer like the
appellant which had established SEZ only for itself; and having regard to
the aforesaid factual and legal aspects, and keeping in mind the purpose
for which CSS was payable, they were of the view that, on the facts of this
case. it was not possible for the appellant to avoid payment of CSS
to WESCO. The appeal was dismissed.

K. JUDGEMENT OF SUPREME COURT IN “SESA STERLITE” IS

BINDING:

The law declared by the Supreme Court, in Sesa Sterlite, governs

the field and is binding on this Tribunal. In the hierarchical system of
Courts, it is necessary for each lower tier to accept loyally the decisions of

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the higher tiers. The judicial system only works if someone is allowed to
have the last word and that last word, once spoken, is loyally accepted.
The wisdom of the Court below must yield to the higher wisdom of the
Court above. That is the strength of the hierarchical judicial system. Under
Article 141 of the Constitution the law declared by the Supreme Court shall
bind all Courts (and Tribunals) within the territory of India and, under Article
144, all authorities, civil and judicial in the territory of India, shall act in the
aid of the Supreme Court. (CCE v. Dunlop India Ltd., (1985) 1 SCC 260;
Cassell & Co. Ltd. v. Broome, (1972) AC 1027; Siliguri Municipality v.
Amalendu Das, (1984) 2 SCC 436; Rajeswar Prasad Misra v. State of
W.B., AIR 1965 SC 1887; Yelamarthi Sarath Kumar Versus State of
Andhra Pradesh and others, 2011 SCC OnLine AP 201).

It is well to remember that, on the law having been declared by the

Supreme Court, it is the duty of the Courts below, whatever be its view, to
act in accordance with Article 141 of the Constitution of India and to apply
the law laid down by the Supreme Court. Judicial discipline to abide by the
declaration of law of the Supreme Court cannot be forsaken by any Court
(or Tribunal) oblivious of Article 141 of the Constitution of India. (Chandra
Prakash v. State of U.P., (2002) 4 SCC 234; State of Orissa v.
Dhaniram Luhar, (2004) 5 SCC 568). Decisions of the Supreme Court are
of significance not merely because they constitute an adjudication on the
rights of the parties, and resolve the disputes between them, but also
because, in doing so, they embody a declaration of law operating as a
binding principle in future cases. The doctrine of binding precedent
promotes certainty and consistency in judicial decisions. (Chandra
Prakash v. State of U.P., (2002) 4 SCC 234). A judgment which refuses to

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follow the decision and directions of the Supreme Court, or seeks to revive
a decision which had been set aside by the Supreme Court, is a nullity.
(Narinder Singh v. Surjit Singh, (1984) 2 SCC 402) and (Kausalya Devi
Bogra v. Land Acquisition Officer, (1984) 2 SCC 324).

As noted hereinabove, in Sesa Sterlite Limited, the Supreme Court

observed that, in order to be liable to pay cross subsidy surcharge to a
distribution licensee, it was not necessary that such distribution licensee
must be a distribution licensee in respect of the area where the consumer
is situated; it is not necessary that such a consumer should be connected
only to such distribution licensees; and it would suffice if it is a consumer
within the definition under the Electricity Act.

While the consumer has the freedom to procure electricity from any
available source and not necessarily only from the distribution licensee in
whose area of supply the consumer is located, the distribution licensee, in
view of its universal supply obligation, does not have any such freedom,
and must supply electricity to all consumers, in its area of supply, on
demand. Merely establishing a distribution installation, through which
electricity can be supplied by others to consumers, would not suffice for the
person operating such a distribution installation (i.e. the system of wires
and associated facilities) to be held to be a deemed distribution licensee.

In Para 45 of its judgment in Sesa Sterlite Limited vs. Orissa

Electricity Regulatory Commission and Others, the Supreme Court
noted Paragraphs 42, 43, 45, 47, 49 & 50 of the judgment of this Tribunal in
M/s Vedanta Aluminium Limited vs. Odisha Electricity Regulatory
Commission and Others (judgment in Appeal No. 206 of 2012 dated

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03.05.2013). Thereafter, in Para 46, the Supreme Court expressed its
agreement, with the aforesaid rationale in the impugned order of this
Tribunal, holding that it was the only manner in which the two Acts (ie the
Electricity Act and the SEZ Act) could be harmoniously construed; in order
to avail further benefits under the Electricity Act, the appellant was also
required to show that it was in fact having a distribution system and had a
number of consumers to whom it was supplying electricity; and this was not
the case there.

It is clear from the aforesaid observations of the Supreme Court, that,

in order to be a deemed distribution licensee, it is not sufficient for the
person concerned merely to erect, operate and maintain a distribution
installation (a system of wires and associated facilities), but he should also
be supplying (selling) electricity to the consumers in his area of supply;
and, since the appellant therein was the sole consumer, the Supreme
Court, in Sesa Sterlite Limited, held that the appellant before it could not
be deemed to be a distribution licensee.

L. A JUDGEMENT IS AN AUTHORITY FOR WHAT IT DECIDES AND

NOT WHAT MAY POSSIBLY FOLLOW THEREFROM:

The submission of Mr. M. G. Ramachandran, learned Senior

Counsel, is that it would suffice for the developer, to be held to be a
distribution licensee, to establish a distribution system which connects
multiple units; so long as the distribution system is capable of supplying
electricity to multiple units, it matters little who supplies electricity through
such a system; and it is not necessary for the developer to also supply

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electricity to them. These submissions of the Learned Senior Counsel do
not merit acceptance.

Nowhere in the judgment, in Sesa Sterlite Limited, has the Supreme

Court held that it would suffice for a person to be held to be a distribution
licensee merely by establishing a distribution installation through which
electricity can be supplied by others to their respective consumers. On the
contrary, the Supreme Court has categorically held that, to avail the
benefits under the Electricity Act, a deemed distribution licensee is required
to show that it is, in fact, (1) having a distribution system; and (2) it has a
number of consumers to whom it is supplying electricity. To fulfil the
requirements of a distribution licensee, both the requirements of having a
distribution system and to be supplying electricity to consumers must be
satisfied. The mere fact that a distribution installation has been erected,
maintained or is being operated would not suffice for the person, who
undertook such activities, to be deemed to be a distribution licensee.

The first line in Paragraph 46, of the judgement in Sesa Sterlite

Limited, clearly records the agreement of the Supreme Court with the
rationale in the extracted portion of the judgment of APTEL in Paragraph
45. The Supreme Court has nowhere held that it is taking a view different
from the one taken by APTEL and has, in fact, dismissed the appeal
preferred against the said judgment. The law laid down, in Sesa Sterlite
Limited, is not that a deemed distribution licensee cannot, along with other
consumers, also consume a part of such supply itself. What is held therein
is that, while it can be one among several consumers to whom electricity is
supplied, it cannot be the sole consumer. Mere establishment of a
distribution installation would not suffice since a distribution system

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contemplates not just a system of wires and associated facilities, but for
such a system to be connected to the installation of a consumer. In the
present case, Railways, on its own admission before the State Regulatory
Commissions, consumes the entire electricity, received by it at the traction
substation/non-traction substation/ switchyards, itself. It does not, therefore,
satisfy the requirements of being deemed to be a distribution licensee
under the Electricity Act.

We find it difficult to agree either with the understanding of the

Learned Senior Counsel for the Railways regarding the law declared in the
judgement of the Supreme Court in Sesa Sterlite. Suffice it to observe that
It is impermissible for a judgment to be read as implying something which it
does not explicitly hold, and we may not be justified in drawing any
inference therefrom to presume that, in a different fact situation, the
Supreme Court would have held otherwise, for it is well settled that a
judgment is only an authority for what it actually decides. What is of the
essence in a decision is its ratio, and not every observation found therein
nor what logically follows from the various observations made in it. (State
of Orissa v. Sudhansu Sekhar Mistra, AIR 1968 SC 647; Quinn v.
Leathem, 1901 AC 495).

A deliberate judicial decision arrived at after hearing an argument on

a question which arises in the case, or is put in issue, would alone
constitute a precedent. What is of the essence in a decision is the rule
deducible from the application of law to the facts and circumstances of the
case which constitutes its ratio decidendi. (Union of India v. Dhanwanti
Devi, (1996) 6 SCC 44; State of Orissa v. Mohd. Illiyas, (2006) 1 SCC
275; ICICI Bank v. Municipal Corpn. of Greater Bombay, (2005) 6 SCC

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404; Girnar Traders v. State of Maharashtra, (2007) 7 SCC 555; ADM,
Jabalpur v. Shivakant Shukla, (1976) 2 SCC 521; Quinn v. Leathem,
[1901] A.C. 495 : (1900-03) All ER Rep 1 (HL); State of Orissa v.
Sudhansu Sekhar Misra : (AIR 1968 SC 647; T. Sharath v. Govt. of
A.P., 2013 SCC OnLine AP 324). The enunciation of the reason or
principle on which a question before a court has been decided is alone
binding as a precedent. (Union of India v. Dhanwanti Devi, (1996) 6 SCC
44; State of Orissa v. Mohd. Illiyas, (2006) 1 SCC 275; ICICI Bank v.
Municipal Corpn. of Greater Bombay, (2005) 6 SCC 404; State of
Orissa v. Sudhansu Sekhar Misra, AIR 1968 SC 647; Quinn v.
Leathem, [1901] A.C. 495; Rachakonda Nagaiah v. Govt. of A.P., 2012
SCC OnLine AP 447).

As Sri M.G. Ramachandran, Learned Senior Counsel for the

Railways has only extracted a part of the last two sentences in Para 46 of
the judgement in Sesa Sterlite Limited, It is useful to read it in its entirety:

“the Notification dated 3-3-2010 providing for the “developer” of SEZ being
deemed as a “distribution licensee” was issued keeping in view the concept
of multi-unit SEZs and will apply only to such cases in which the developer
is supplying the power to multiple units in the SEZ. The said notification
will not apply to a developer like the appellant who has established SEZ
only for itself.”

The first sentence, in the afore-extracted passage, makes it clear that

the notification, requiring a developer of SEZ to be deemed as a distribution
licensee, was issued for multi-units in the SEZ and would apply only to
cases where the developer was supplying power to multiple units in the

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SEZ and not solely to itself. It is the admitted case of Railways, before the
State Commissions, that Railways is conveying electricity, from the traction
substation/non-traction substation/switchyards only to itself. Mere
establishment of a distribution installation would not suffice since a
distribution system contemplates not just a system of wires and associated
facilities, but for such a system to be connected to the installation of a
consumer.

It is for this reason that placitum e, in Paragraph 46 of the judgment,

in Sesa Sterlite Limited, should not be read out of context, more so as it is
settled law that observations in a judgment should not be read in isolation.
A judgment should not be read as Euclid's theorems or as provisions of a
statute. (Goan Real Estate & Construction Ltd. v. Union of India, (2010)
5 SCC 388; Amar Nath Om Prakash v. State of Punjab, (1985) 1 SCC
345; CCE v. Alnoori Tobacco Products, (2004) 6 SCC 186; London
Graving Dock Co. Ltd. v. Horton; [1951] A.C. 737; Home Office v.
Dorset Yacht Co., (1970) 2 All ER 294; Shepherd Homes Ltd. v.
Sandham, [1971] 1 WLR 1062; British Railways Board v. Herrington,
[1972] 2 WLR 537). Judges interpret statutes, they do not interpret
judgments. They interpret words of statutes; their words are not to be
interpreted as statutes. (Hindustan Petroleum Corpn. Ltd. v. Dolly Das,
(1999) 4 SCC 450; Bharat Petroleum Corporation Ltd. v. N.R.
Vairamani, (2004) 8 SCC 579; T. Sharath v. Govt. of A.P., 2013 SCC
OnLine AP 324).

It is not a profitable task to extract a sentence here and there from a

judgment and to build up on it. (Quinn v. Leathern, [1901] A.C. 495; State
of Orissa v. Sudhansu Sekhar Misra, AIR 1968 SC 647; Delhi

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Administration (NCT of Delhi) v. Manohar Lal, (2002) 7 SCC 222; Dr.
Nalini Mahajan v. Director of Income-tax (Investigation), (2002) 257 ITR
123 Delhi) and Bhavnagar University v. Palitana Sugar Mill P. Ltd.,
(2003) 2 SCC 111; B.F. Ditia v. Appropriate Authority, Income-Tax
Department, 2008 SCC OnLine AP 904; Sri. Konaseema Cooperative
Central Bank Ltd. v. N. Seetharama Raju, AIR 1990 AP 171; Kanwar
Amninder Singh v. High Court of Uttarakhand, 2018 SCC OnLine UTT
1026). Neither should Judgments be read as statutes. (Sri Konaseema
Cooperative Central Bank Ltd. v. N. Seetharama Raju, AIR 1990 AP
171; Kanwar Amninder Singh v. High Court of Uttarakhand and
another, 2018 SCC OnLine UTT 1026), nor should a stray sentence in a
judgement be read out of context. (GUVNL V. GERC: APPEAL NO. 371
OF 2023 DATED 09.11.2023). A word here or a word there should not be
made the basis for inferring inconsistency or conflict of opinion. Law does
not develop in a casual manner. It develops by conscious, considered
steps. (SKCC Bank Limited v. N Seetharama Raju, 1990 SCC OnLine
AP 32).

M. CROSS SUBSIDY SURCHARGE IS LIABLE TO BE PAID EVEN

WHERE ELECTRICITY IS SUPPLIED BY A GENERATOR TO A
CONSUMER:

Section 2(8) of the Electricity Act defines a “Captive generating plant”

to mean a power plant set up by any person to generate electricity primarily
for his own use. Section 9 (1) relates to captive generation and, under sub
section (1) thereof, notwithstanding anything contained in the Electricity
Act, a person may construct, maintain or operate a captive generating plant
and dedicated transmission lines. Section 2(16) defines “dedicated

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transmission lines" to mean any electric supply-line for point-to-point
transmission which are required for the purpose of connecting electric lines
or electric plants of a captive generating plant referred to in Section 9, or a
generating station referred to in Section 10, to any transmission lines or
sub-stations or generating stations, or the load centre, as the case may be.
Section 10 relates to the duties of generating companies and, under sub
section (1) thereof, subject to the provisions of the Electricity Act, the duties
of a generating company shall be to establish, operate and maintain
generating stations, tie-lines, sub-stations and dedicated transmission lines
connected therewith in accordance with the provisions of the Electricity Act
or the rules or regulations made thereunder. Section 10(2) enables a
generating company to supply electricity to any licensee in accordance with
the Electricity Act and the rules and regulations made thereunder and may,
subject to the regulations made under Section 42(2), supply electricity to
any consumer.

While supply of electricity by a captive generating plant to its

constituent units is, in terms of Section 9, notwithstanding anything
contained in the Electricity Act, Section 10(2) makes supply of electricity, by
a generating company to a consumer, subject to regulations made under
Section 42(2) which, as noted hereinabove, also includes provisions for
cross subsidy surcharge. Even in cases where electricity is supplied by a
generating company to a consumer, payment of cross subsidy surcharge
cannot be avoided.

N.OBLIGATIONS OF A DISTRIBUTION LICENSEE:

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 Rule 4 of the Electricity Rules, 2005 defines “Distribution system” to
mean the distribution system of a distribution licensee in terms of sub-
section (19) of Section 2 of the Act, and shall also include electric line, sub-
station and electrical plant that are primarily maintained for the purpose of
distributing electricity in the area of supply of such distribution licensee
notwithstanding that such line, sub-station or electrical plant are high
pressure cables or overhead lines or associated with such high pressure
cables or overhead lines; or used incidentally for the purposes of
transmitting electricity for others.

In Orissa Power Transmission Corporation Limited v. Orissa

Electricity Regulatory Commission, 2012 SCC OnLine APTEL 206, this
Tribunal held that the last mile connection is a line in between the delivery
point on the transmission line and point of connection on the consumer's
premises and is primarily used for distribution of electricity to such
consumer; it, therefore, qualifies to be part of the distribution network; for a
line to be a transmission line, that line must be transmitting electricity;
supply to a consumer cannot be treated as transmission of electricity;
supply of electricity to a consumer is a universal service obligation cast
upon the distribution licensee under Section 43 of the Act; accordingly,
supply to a consumer is distribution; it cannot be termed as transmission of
electricity; the last mile connection is part of the distribution network; unlike
a transmission licensee which is obligated under the Electricity Act only to
maintain transmission lines (lines other than those used for distribution),
the obligation of a distribution licensee is not only to operate and maintain a
system or wires and associated facilities, but also to supply electricity,
through such a system, to the consumers within its area of supply.

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 In Chandu Khamaru v. Nayan Malik, (2011) 12 SCC 314, the
Supreme Court held Sections 42(1) and 43(1) of the Electricity Act, 2003
make it amply clear that a distribution licensee has a statutory duty to
supply electricity to an owner or occupier of any premises located in the
area of supply of electricity of the distribution licensee, if such owner or
occupier of the premises applies for it, and correspondingly every owner or
occupier of any premises has a statutory right to apply for and obtain such
electric supply from the distribution licensee; and the Electricity Act, 2003
contains provisions to enable the distribution licensee to carry out works for
the purpose of supplying electricity to the owners or the occupiers of
premises in his area of supply ie Section 67 of the Electricity Act, 2003.

In the absence of sale, mere conveyance of electricity cannot be

treated as supply of electricity. While supply of electricity was no doubt a
licenced activity under the 1910 Act, the Electricity Act, 2003 has
specifically made generation a de-licenced activity. Unlike a specific
provision under Section 7 of the Electricity Act, 2003 making generation a
de-licenced activity, there is no specific provision in the said Act treating
supply of electricity as a delicenced activity. What is specifically granted by
the said Act is the freedom to a consumer to procure electricity, from its
chosen source through open access, subject however to the condition that
additional surcharge/cross subsidy surcharge is paid by them to their
distribution licensee.

Part IV of the Electricity Act relates to licensees. The heading of

Section 12 is “Authorised persons to transmit, supply, etc., electricity”.
While the word ‘transmit’ in the heading is referable to Section 12(a) which
relates to transmission of electricity, the word ‘supply’ in the heading of

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Section 12 relates to distribution of electricity referred to in clause (b) of
Section 12. Distribution of electricity cannot be undertaken dehors supply.
Section 24(1)(a) confers power on the Appropriate Commission, if it is of
the opinion that a distribution licensee has persistently failed to maintain
uninterrupted supply of electricity conforming to standards regarding quality
of electricity to the consumers, to suspend for a period of one year the
licence of a distribution licensee. This provision also shows that a
distribution licensee has an obligation to maintain interrupted supply of
electricity to its consumers.

O. JUDGEMENT RELIED UPON BY BOTH SIDES:

In Srijan Realty (P) Ltd. v. CCE, 2019 SCC OnLine Cal 9139, on
which reliance is placed on behalf of the Respondents, the petitioner had
sought a declaration that, supply of electricity by them to the occupiers of
“Galaxy Mall”, a commercial complex, was not a service exigible to tax
under the Finance Act, 1994; the Commercial Complex had various
occupants; to effect electric supply to the commercial complex, the
petitioner had entered into an agreement with the distribution licensee to
provide electric supply through an 11KV sub-station installed at the
commercial premises; the licensee raises a single consolidated electricity
bill upon the petitioner; the petitioner on receipt of electric supply re-
distributes the same to the occupiers of the commercial complex; the
petitioner had installed sub-meters for the respective occupiers; based on
the readings of such sub-meters, the petitioner raised bills upon such
occupiers. Upon objections being raised by the some of the occupiers, the

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petitioner consulted the Superintendent of Service Tax, S.T. II
Commissionerate for determining whether such re-distribution of electricity
was exigible to Service Tax. The Superintendent of Service Tax held that
such a service is exigible to tax.

Before the Calcutta High Court, the petitioner contended that the
entire transaction of supplying electricity, from the point of its generation to
the point of its consumption, should be treated as being part of a sale of
goods; absence of any authorisation to supply electricity does not change
the nature and character of the sale; at best, unauthorised supply of
electricity may invite penalties under the Electricity Act, 2003; however,
even if such penalties are imposed, the transaction will not lose the
character of a sale; re-distribution of electricity, such as that undertaken by
the petitioner, fell within the scope of sale/trading activity; and such a
transaction is not exigible to Service Tax.

It is in this context that the Calcutta High Court held that, under the
definitions as obtaining in the Electricity Act, 2003, the petitioner cannot be
said to be a generating company; it cannot also be said that the petitioner
is engaged in the supply or trading of electricity as the definition of ‘supply’
and ‘trading’ do not allow the petitioner to come within the same; the
petitioner is not a person authorised to transmit, supply, distribute or
undertake trading in electricity in view of the definitions as obtaining in the
Electricity Act, 2003; therefore, the petitioner cannot be said to be
distributing or selling or trading in electricity, when it is receiving high-
tension supply from Indian Power Corporation Ltd and providing low-
tension electricity to the occupants of the commercial complex; sale,
trading and distribution being taken out of the contention, the only other

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thing that remained to describe the activity, undertaken by the petitioner,
was service; any other interpretation would render the steps taken by the
petitioner in receiving high-tension electric supply and making over low-
tension electric supply to the occupants, violative of the provisions of the
Electricity Act, 2003; and such an interpretation should be avoided.

As reliance is placed on behalf of the Railways, on K. Raheja

Corporation Pvt. Ltd.v. Maharashtra Electricity Regulatory
Commission & Anr (2011 ELR (APTEL) 1170), and DLF Utilities Ltd Vs
Haryana Electricity Regulatory Commission & Anr., (Order in Appeal
No.193 of 2011 dated 03.10. 2012), to contend to the contrary, it is
necessary to consider these judgements also.

In K. Raheja Corporation Pvt. Ltd, this Tribunal held that, if a

consumer charges different amounts from different end users according to
the nature of consumption for such users residing in a complex either as
tenants, occupier or lessee or in any other capacity whatsoever to the
exclusion of being a consumer within the definition of the Act, then such
realization of the amount which is not accounted for before a distribution
licensee, and such consumption by different occupiers at the behest of a
consumer behind the knowledge of the distribution licensee, are unknown
to law; a consumer may mean a person, and a person may mean a
company or a body corporate or association or body of individuals whether
incorporated or not or artificial juridical person, but the concept of consumer
does not extend to a situation where number of end users each living
separately in a building and connected to consumer or owner of a building
are conjoined together; a body of individuals is comprised within the
definition of ‘person’, but such body of individuals cannot be construed to

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mean a countless number of independent end users who do not form a
body of individuals; a consumer does not include a group of consumers in
terms of the definition; if a consumer, upon receipt of electrical energy,
distributes such energy to different end users according to their need, and if
such end users are not consumers within the meaning of the Act and they
are charged tariff or fee for such consumption of electrical energy with
which a distribution licensee is not concerned, then the question may arise
whether such distribution of power to different end users within a complex
in lieu of a tariff or fee charged by a consumer would amount to
unauthorized sale of electricity; a consumer receives electricity only “for his
own use”, and this excludes a situation where a consumer can, on receipt
of electrical energy, sell a part of that energy or the entire energy itself to
different people for their respective consumption; it is only for HT VI
category consumers, namely, Group Housing Society where perhaps such
single point supply is permitted; a consumer cannot have his own
distribution system for distribution of electrical energy in turn to his
tenants/occupiers/users etc; and single point supply, in the context in which
the parties have understood the matter, should be done away with for all
times to come by making proper arrangements.

On the question whether the building owners can, in turn, supply

electricity to individual occupants/owners of the apartments in that building
without any license or a franchise to distribute or supply electricity, this
Tribunal, in DLF Utilities Ltd, held that it is the individual occupants of the
buildings who occupy different spaces in the apartments to promote their
commercial ventures, and they receive electricity from the building owners
in lieu of payment made to them, who in turn have entered into the

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agreements with the appellant for the purpose; this is distribution beyond
the load centre which does not come within the purview of a dedicated
transmission line; and what is objected to is supply to numerous persons in
the name of dedicated transmission line, but beyond the same in
furtherance of commercial interest of the building owners who let out their
spaces to their tenants / lessees.

It is un-necessary for us to delve into the aspects, referred to in the

afore-said judgements, since Railways, (apart from certain associated
services - which shall be examined later in this Order), uses the distribution
installations, erected, maintained and operated by it, only to convey
electricity from the traction sub-stations/non-traction
substations/switchyards (where it receives electricity from the grid) to its
different units of consumption, including the Railway locomotives. In view of
the non-obstante clause in Section 11(g) & (h) of the Electricity Act, such
conveyance/redistribution of electricity, by Railways to its different
consumption points, may not attract the bar, laid down in K. Raheja
Corporation Pvt. Ltd and DLF Utilities Ltd, of a consumer having its own
distribution installation for re-distribution of electrical energy to its
consumption points/constituent units. However as no “supply”, ie sale of
electricity, is involved in this process, such act of conveyance/ re-
distribution of electricity would not constitute distribution of electricity under
the Electricity Act, much less as distribution by a distribution licensee.

P. PARLIAMENTARY STANDING COMMITTEE REPORT: ITS

RELEVANCE:

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 As reliance is placed on behalf of the Respondents, on the 31st
Report of the Standing Committee on Energy, Ministry of Power, on
Electricity produced, to the Lok Sabha and Rajya Sabha on 19.12.2002, to
submit that it is apparent therefrom that Railways is not a deemed
distribution licensee, and was never intended to be so, it is useful to note its
contents, more so as the Parliamentary Standing Committee report, or any
Parliamentary Committee report, can be taken judicial notice of and
regarded as admissible in evidence; aid can be take of such reports for
the purpose of interpretation of a statutory provision wherever it is so
necessary; and such reports can be taken note of, as existence of a
historical fact. Judicial notice can be taken of the Parliamentary Standing
Committee report under Section 57(4) of the Evidence Act and it is
admissible- as evidence under Section 74 of the said Act. In a litigation, the
Court can take on record the report of the Parliamentary Standing
Committee. However, the report cannot be impinged or challenged in a
court of law. (Kalpana Mehta v. Union of India, (2018) 7 SCC 1).

Q. CONTENTS OF THE 31ST REPORT OF THE PARLIAMENTARY

STANDING COMMITTEE ON ENERGY:

Chapter –XX, of the 31st Report of the Standing Committee on

Energy dated 19.12.2002, relates to exemption from the Electricity Act. It is
stated thereunder that Clauses 168 and 179 of the Electricity Bill, 2001
provide for exemption of some Acts/Ministries/Departments from the
purview of the Bill; Clause 169 of the Bill gives an overriding authority to
the Bill over the provisions in other Acts/Laws except those provided in
Clause 168 viz. the Consumer Protection Act, 1986 and the Atomic Energy
Act, 1962; Clauses 168 and 169 are based on the provisions contained in

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Clauses 49 and 52 of the Electricity Regulatory Commissions Act, 1998
respectively; Clause 168 of the Bill provides that “ Nothing contained in this
Act or any rule or regulation made thereunder or any instrument having
effect by virtue of this Act, rule or regulation shall have effect so far as it is
inconsistent with any other provisions of the Consumer Protection Act,
1986 or the Atomic Energy Act, 1962; Clause 179 of the Electricity Bill,
2001 is a new provision incorporated in the Bill without any corresponding
provision in the Acts of 1910, 1948 and 1998; and Clause 179 of the Bill
stipulates that “ The provisions of this act shall not apply to the Ministry or
Department of the Central Government dealing with Defence, Atomic
Energy or such other similar Ministries or Departments or undertakings or
Boards or institutions under the control of such Ministries or Departments
as may be notified by the Central Government.

The report then records that some organisations/Ministries like the

Ministry of Railways, and the Damodar Valley Corporation (DVC), had
requested for exemption from the Act citing peculiar/sensitive/specialised
jobs they are carrying out on the ground; the Ministry of Railways (Railway
Board) had suggested that, along with Defence and Atomic Energy,
Railways should also be inserted in Clause 179; they had stated that the
Railways had an important role to perform during the time of war for the
security and defence of the country and, as such, the provisions of this Act
should not be applicable to the Ministry of Railways; the Ministry of
Railways (Railway Board) had also requested for exemption/concession
under Clauses 12, 42, 47, 67, 68 and 169 of the Bill; and when asked to
give their views on the request of the Ministry of Railways for exemption

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under Clause 179, the Ministry of Power, in a post-evidence reply, had
stated that the provision contained in the Clause is adequate.

The report thereafter records that the Damodar Valley Corporation

(DVC) had stated that their activities in the non-power area were statutorily
mandated objectives of the Corporation; the activities in the non-power
area had, therefore, to be cross-subsidized by the power surplus on year to
year basis; a special responsibility had also been cast on the Corporation
to supply bulk power to the major core sector industries in the Damodar
Valley area such as Coal, Mines & Minerals, Steel and Railways, etc; by
meeting its commitment of supplying quality power to the core sector
industries, DVC has contributed substantially to industrial growth and
general development of the Valley as well as of the country; concurrent
with the special responsibility attached to the DVC with regard to the
general development of the Valley, its industries and the socio-economic
conditions, the DVC Act, in recognition of such onerous responsibility has
assigned special statutory protection through Section 58 of the DVC Act; so
far, no legislation has overlooked this special status and statutory
protection; the impact of Clause 169 of the Electricity Bill, 2001 would be to
do away with the special status; this will go against the mandated role of
the DVC; DVC had therefore proposed to the Ministry of Power that the
status and responsibility be protected as per the already assigned role and
responsibility through inclusion of DVC in the saving provision of Section
168 of the Electricity Bill, 2001; and DVC had also stated that the Indian
Electricity Acts enacted so far had not been allowed to be passed in
derogation of or to override the special provisions of the DVC Act in due
consideration of the special responsibilities attached to the DVC.

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 The report then states that Section 169 provides that the provision of
the Electricity Bill, 2001 shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being in force
or any instrument having effect by virtue of any law other than the
Electricity Bill, 2001; on the other hand, Section 58 of the DVC Act, 1948
gives effect to the provisions of this Act “notwithstanding anything
contained in any enactment other than this Act or any instrument having
effect by virtue of any enactment other than this Act”; thus, DVC has
argued that the provision of Section 58 of the DVC Act and Section 169 of
the Electricity Bill, 2001 are contradictory to each other; DVC had also
stated that the provisions of the proposed Electricity Bill, 2001 would, if
passed in its present shape without reconciliation, have serious
repercussion on the functioning of DVC; the special status of DVC, as
accorded by the DVC Act, 1948 by virtue of Section 58, needed to be
protected so that the Corporation can fulfil its statutory mandate in the
valley area; and DVC had suggested that the DVC Act, 1948 should be
included in Clause 168 of the Electricity Bill, 2001 along with the Consumer
Protection Act, 1986 and the Atomic Energy Act, 1962 in order to avoid any
confusion regarding the effect of the proposed Bill on the provisions of the
DVC Act, 1948.

The Committee then noted that Clauses 168 and 179 of the Electricity
Bill, 2001 granted exemption to certain Acts viz. the Consumer Protection
Act, 1986 and the Atomic Energy Act, 1962 and the Ministry, Department,
undertaking, etc. dealing with Defence and Atomic Energy; they had been
requested by the Ministry of Railways and the Damodar Valley Corporation
(DVC) for exemption from the scope of the Bill; the Ministry of Railways had

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argued that as they had an important role to perform during the time of
national emergencies, they may be exempted under Clause 179 of the Bill;
DVC had argued that the Bill, if passed in its present shape, would have
serious repercussion on the functioning of the Corporation; and DVC had
suggested that the DVC Act, 1948 should be included in Clause 168 of the
Bill. After considering the arguments of these organisations, the Committee
felt that DVC has a strong case for exemption from the Bill and,
accordingly, recommended that DVC should be exempted from the Bill
under Clause 168 or any other similar Clause.

The report further states that the Committee had taken note of the
request of the Ministry of Railways for exemption from the provisions
contained in Clauses 12, 42, 47, 67, 68 and 179; the Committee desired
that the Ministry of Railways be exempted from licensing for erecting,
maintaining and transmission of electricity, subject to the condition that the
transmission network was outside the grid and erected for their own use,
and the licence would be insisted upon for grid operation.

Consequently they recommended that amendments be made to

Clause 168, which related to Inconsistency in laws, by inserting, after the
words ”Atomic Energy Act, 1952”, the words “or the Railways Act, 1989”.
After the motion was adopted, Clause 168, as amended, was added to the
Bill.

To understand which provisions of the Electricity Act, Railways had

sought exemption from, it is useful to compare clauses 12, 42, 47, 67, 68,
168, 169 and 179 of the Electricity Bill, 2001 with the corresponding
provisions of the Electricity Act, 2003. The relevant clauses and the
corresponding provisions are detailed hereunder in a tabular form:

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 Electricity Bill, 2001 Electricity Act, 2003

12. Authorised persons to 12. Authorised persons to

transmit, supply, etc., transmit, supply, etc.,
electricity.-- No person shall-- electricity.-- No person
(a) transmit electricity; or shall—
(b) distribute electricity; or
(c) undertake trading in electricity, (a) transmit electricity; or
unless he is authorised to do so (b) distribute electricity; or
by a licence issued under section (c) undertake trading in
14, or is exempt under section 13 electricity,
unless he is authorised to do so
by a licence issued under
section 14, or is exempt under
section 13.

42. Duties of distribution 42. Duties of distribution

licensees.— licensees and open
access-
(1) It shall be the duty of a
(1) It shall be the duty of a
distribution licensee to develop
distribution licensee to develop
and maintain an efficient,
and maintain an efficient, co-
coordinated and economical
ordinated and economical
distribution system in his area of
distribution system in his area
supply and to supply electricity in
of supply and to supply
accordance with the provisions
electricity in accordance with
contained in this Act.
the provisions contained in this
(2) Where any person, whose Act.
premises are situated within the
area of supply of a distribution (2) The State Commission shall
licensee, requires a supply of introduce open access in such
electricity from a generating phases and subject to such
company or any licensee other conditions, (including the cross

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than such distribution licensee, subsidies, and other operational
such person may, by notice, constraints) as may be
require the distribution licensee specified within one year of the
for wheeling such electricity in appointed date by it and in
accordance with regulations made specifying the extent of open
by the State Commission and the access in successive phases
duties of the distribution licensee and in determining the charges
with respect to such supply shall for wheeling, it shall have due
be of a common carrier providing regard to all relevant factors
non-discriminatory open access to including such cross subsidies,
its distribution system: and other operational
constraints:
Provided that the open
access shall be introduced in
such phases and subject to such Provided that1[such open
conditions, including the cross access shall be allowed on
subsidies, and other operational payment of a surcharge in
constraints, as may be specified addition to the charges] for
by the State Commission and in wheeling as may be determined
specifying the extent of open by the State Commission:
access in successive phases and
in determining the charge for Provided further that such
wheeling, the State Commission surcharge shall be utilised to
shall have due regard to all meet the requirements of
relevant factors including such current level of cross subsidy
cross subsidies, and other within the area of supply of the
operational constraints: distribution license

Provided further that such Provided also that such

open access may be allowed surcharge and cross subsidies
before the cross subsidies are shall be progressively
eliminated, on payment of a reduced2*** in the manner as
surcharge in addition to the may be specified by the State
charges for wheeling as may be

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determined by the State Commission:
Commission:

Provided also that such

Provided also that such surcharge shall not be leviable
surcharge shall be utilised to in case open access is provided
meet the requirements of current to a person who has
level of cross subsidy within the established a captive
area of supply of the distribution generating plant for carrying the
licensee: electricity to the destination of
his own use:
Provided also that such 3
[Provided also that the State
surcharge and cross subsidies Commission shall, not later than
shall be progressively reduced five years from the date of
and eliminated in the manner as commencement of the
may be specified by the State Electricity (Amendment) Act,
Commission, 2003, by regulations, provide
such open access to all
consumers who require a
(3) Where the State Commission supply of electricity where the
permits a consumer or class of maximum power to be made
consumers to receive supply of available at any time exceeds
electricity from a person other one megawatt.]
than the distribution licensee of
his area of supply, such consumer
shall be liable to pay an additional (3) Where any person, whose
surcharge on the charges of premises are situated within the
wheeling, as may be specified by area of supply of a distribution
the State Commission, to meet licensee, (not being a local
the fixed cost of such distribution authority engaged in the
licensee arising out of his business of distribution of
obligation to supply. electricity before the appointed
date) requires a supply of
(4) Every distribution licensee electricity from a generating
shall, within six months from the company or any licensee other

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appointed date or date of grant of than such distribution licensee,
licence, whichever is earlier, such person may, by notice,
establish a forum for redressal of require the distribution licensee
grievances of the consumers in for wheeling such electricity in
accordance with the guidelines as accordance with regulations
may be specified by the State made by the State Commission
Commission. and the duties of the distribution
licensee with respect to such
supply shall be of a common
carrier providing non-
discriminatory open access.

(4) Where the State

Commission permits a
consumer or class of
consumers to receive supply of
electricity from a person other
than the distribution licensee of
his area of supply, such
consumer shall be liable to pay
an additional surcharge on the
charges of wheeling, as may be
specified by the State
Commission, to meet the fixed
cost of such distribution
licensee arising out of his
obligation to supply.

(5) Every distribution licensee

shall, within six months from the
appointed date or date of grant
of licence, whichever is earlier,
establish a forum for redressal

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 of grievances of the consumers
in accordance with the
guidelines as may be specified
by the State Commission.

(6) Any consumer, who is

aggrieved by non-redressal of
his grievances under sub-
section(5), may make a
representation for the redressal
of his grievance to an authority
to be known as Ombudsman to
be appointed or designated by
the State Commission.

(7) The Ombudsman shall settle

the grievance of the consumer
within such time and in such
manner as may be specified by
the State Commission.

(8) The provisions of sub-

sections(5),(6)and(7)shall be
without prejudice to right
which the consumer may
have apart from the rights
conferred upon him by those
sub-sections.
47. Power to require security.-- 47. Power to require
(1) Subject to the provisions of security.—
this section, a distribution licensee (1) Subject to the provisions of
may require any person, who this section, a distribution

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requires a supply of electricity in licensee may require any
pursuance of section 43, to give person, who requires a supply
him reasonable security, as may of electricity in pursuance of
be determined by regulations, for section 43, to give him
the payment to him of all monies reasonable security, as may be
which may become due to him-- determined by regulations, for
the payment to him of all
(a) in respect of the electricity monies which may become due
supplied to such person; or to him--
(b) where any electric line or
electrical plant or electric meter is (a) in respect of the electricity
to be provided for supplying supplied to such persons; or
electricity to such person, in (b) where any electric line or
respect of the provision of such electrical plant or electric meter
line or plant or meter, is to be provided for supplying
electricity to such person, in
and if that person fails to give respect of the provision of such
such security, the distribution line or plant or meter,
licensee may, if he thinks fit,
refuse to give the supply of and if that person fails to give
electricity or to provide the line such security, the distribution
or plant or meter for the period licensee may, if he thinks fit,
during which the failure continues. refuse to give the supply of
electricity or to provide the line
or plant or meter for the period
(2) Where any person has not during which the failure
given such security as is continues.
mentioned in sub- section (7) or
the security given by any person
(2) Where any person has not
has become invalid or insufficient,
given such security as is
the distribution licensee may, by
mentioned in sub-section(1)or
notice, require that person, within
the security given by any
thirty days after the service of the
person has become invalid or
notice, to give him reasonable
insufficient, the distribution
security for the payment of all

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monies which may become due to licensee may, by notice, require
him in respect of the supply of that person, within thirty days
electricity or provision of such line after the service of the notice, to
or plant or meter. give him reasonable security for
(3) If the person referred to in the payment of all monies which
sub-section (2) fails to give such may become due to him in
security, the distribution licensee respect of the supply of
may, if he thinks fit, discontinue electricity or provision of such
the supply of electricity for the line or plant or meter.
period during which the failure (3) If the person referred to in
continues. sub-section(2)fails to give such
(4) The distribution licensee security, the distribution
shall pay interest equivalent to the licensee may, if he thinks fit,
bank rale or more, as may be discontinue the supply of
specified by the concerned State electricity for the period during
Commission, on the security which the failure continues.
referred to in subsection (1) and
refund such security on the
request of the person who gave (4) The distribution licensee
such security. shall pay interest equivalent to
the bank rate or more, as may
be specified by the concerned
(5) A distribution licensee shall
State Commission, on the
not be enlitled to require security
security referred to in sub-
in pursuance of clause (a) of sub-
section(1)and refund such
section (1) if the person requiring
security on the request of the
the supply is prepared to take the
person who gave such security.
supply through a pre-payment
meter.
(5) A distribution licensee shall
not be entitled to require
security in pursuance of
clause(a)of sub-section(1)if the
person requiring the supply is
prepared to take the supply

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 through a pre-payment meter.

67. Provision as to opening up 67. Provision as to opening

of streets, railways etc.-- (1) A up of streets, railways etc.—
licensee may. from time to time (1) A licensee may, from time to
but subject always to the terms time but subject always to the
and conditions of his licence, terms and conditions of his
within his area of supply or licence, within his area of
transmission or when permitted supply or transmission or when
by the terms of his licence to lay permitted by the terms of his
down or place electric supply lines licence to lay down or place
without the area of supply, without electric supply lines without the
that area carry out works such as area of supply, without that area
-- carry out works such as--

(a) to open and break up the

(a) to open and break up the soil
soil and pavement of any street,
and pavemenl of any street,
railway or tramway;
railway or tram way;

(b) to open and break up any

(b) to open and break up any sewer,
sewer, drain or tunnel in or
drain or lunnel in or under any
under any street, railway or
street, railway or tramway;
tramway;

(c) to alter the position of any line or

(c) to alter the position of any
works or pipes, other than a main
line or works or pipes, other
sewer pipe:
than a main sewer pipe;
(d) to lay down and place electric
lines, electrical plant and other
works: (d) to lay down and place
electric lines, electrical plant

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(e) to repair, alter or remove the and other works;
same; (e) to repair, alter or remove the
same;
(f) to do all other acts necessary for
transmission or supply of (f) to do all other acts necessary
electricity. for transmission or supply of
(2) The Appropriate Government electricity.
may, by rules made by it in this
behalf, specify,--
(2) The Appropriate
Government may, by rules
(a) the cases and circumstances in
made by it in this behalf,
which the consent in writing of the
specify,--
appropriate Government, local
authority, owner or occupier, as
the case may be, shall be (a) the cases and
required for carrying out works; circumstances in which the
consent in writing of the
(b) the authority which may grant appropriate Government, local
permission in the circumstances authority, owner or occupier, as
where the owner or occupier the case may be, shall be
objects to the carrying out of required for carrying out works;
works;
(c) the nature and period of notice to (b) the authority which may
be given by the licensee before grant permission in the
carrying out works: circumstances where the owner
or occupier objects to the
(d) the procedure and manner of carrying out of works;
consideration of objections and
suggestions received in (c) the nature and period of
accordance with the notice notice to be given by the
referred to in clause (c); licensee before carrying out
works;
(e) the determination and payment of

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 compensation or rent to the (d) the procedure and manner
persons affected by works under of consideration of objections
this section; and suggestion received in
accordance with the notice
(f) the repairs and works to be referred to in clause(c);
carried out when emergency
exists; (e) the determination and
payment of compensation or
(g) the right of the owner or rent to the persons affected by
occupier to carry out certain works under this section;
works under this section and the
payment of
(f) the repairs and works to be
expenses therefor;
carried out when emergency
exists;
(h) the procedure for carrying out
other works near sewers, pipes or
other electric lines or works; (g) the right of the owner or
occupier to carry out certain
works under this section and
(i) the procedure for alteration of the payment of expenses
the position of pipes, electric therefor;
lines, electrical plant, telegraph
lines, sewer lines, tunnels, drains,
etc.; (h) the procedure for carrying
out other works near sewers,
pipes or other electric lines or
(j) the procedure for fencing,
works;
guarding, lighting and other safety
measures relating to works on
streets, railways, tramways, (i) the procedure for alteration
sewers, drains or tunnels and of the position of pipes, electric
immediate reinstatemenl thereof; lines, electrical plant, telegraph
lines, sewer lines, tunnels,
(k) the avoidance of public nuisance, drains, etc.;
environmental damage and

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 unnecessary damage to the
public and private property by (j) the procedure for fencing,
such works; guarding, lighting and other
safety measures relating to
(l) the procedure for undertaking works on streets, railways,
works which are not reparable by tramways, sewers, drains or
the Appropriate Government, tunnels and immediate
licensee or local authority; reinstatement thereof;
(m) the manner of deposit of
amount required for restoration of (k) the avoidance of public
any railways, Iramways. nuisance, environmental
waterways, etc.; damage and unnecessary
damage to the public and
(n) the manner of restoration of private property by such works;
property affected by such works
and maintenance thereof;
(l) the procedure for
(o) the procedure for deposit of
undertaking works which are
compensation payable by the
not reparable by the
licensee and furnishing of
Appropriate Government,
security; and
licensee or local authority;
(m) the manner of deposit of
(p) such other matters as are
amount required for restoration
incidental or consequential to the
of any railways, tramways,
construction and maintenance of
waterways, etc.;
works under this section.
(n) the manner of restoration of
property affected by such works
(3) A licensee shall, in exercise
and maintenance thereof;
of any of the powers conferred by
or under this section and the rules
made thereunder, cause as little (o) the procedure for deposit of
damage, detriment and compensation payable by the
inconvenience as may be, and licensee and furnishing of
shall make full compensation for security; and

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any damage, detriment or
inconvenience caused by him or (p) such other matters as are
by any one employed by him. incidental or consequential to
(4) Where any difference or the construction and
dispute arises under this section, maintenance of works under
the matter shall be determined by this section.
the Appropriate Commission.

(3) A licensee shall, in exercise

of any of the powers conferred
by or under this section and the
rules made thereunder, cause
as little damage, detriment and
inconvenience as may be, and
shall make full compensation
for any damage, detriment or
inconvenience caused by him
or by any one employed by him.

(4) Where any difference or

dispute [including amount of
compensation under sub-
section(3)] arises under this
section, the matter shall be
determined by the Appropriate
Commission.

(5) The Appropriate

Commission, while determining
any difference or dispute arising
under this section in addition to
any compensation under sub-
section(3), may impose a
penalty not exceeding the

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 amount of compensation
payable under that sub-section.

68. Overhead lines.-- (1) An 68. Overhead lines.— (1) An

overhead line shall, with prior overhead line shall, with prior
approval of the Appropriate approval of the Appropriate
Government, be installed Government, be installed
or kept installed above ground in or kept installed above ground
accordance with the provisions of in accordance with the
sub-section (2). provisions of sub-section(2).

(2) The provisions contained in

(2) The provisions contained in sub-section(1)shall not apply--
sub-section (1) shall not apply--
(a) in relation to an electric line
(a) in relation to an electric line which has a nominal voltage not
which has a nominal voltage not exceeding 11 kilovolts and is
exceeding 11 kilovolts and is used or intended to be used for
used or intended to be used for supplying to a single consumer;
supplying to a single consumer;
(b) in relation to so much of an
(b) in relation to so much of an electric line as is or will be
electric line as is or will be within within premises in the
premises in the occupation or occupation or control of the
control of the person responsible person responsible for its
for its installation; or installation; or

(c) in such other cases, as may be

(c) in such other cases, as may
prescribed.
be prescribed.

(3) The Appropriate

(3) The Appropriate
Government shall, while granting

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approval under sub- section (1), Government shall, while
impose such conditions (including granting approval under sub-
conditions as to the ownership section (1), impose such
and operation of the line) as conditions (including conditions
appear to it to be necessary. as to the ownership and
operation of the line) as appear
to it to be necessary.
(4) The Appropriate
Government may vary or revoke
the approval at any time after the (4) The Appropriate
end of such period as may be Government may vary or
stipulated in the approval granted revoke the approval at any time
by it. after the end of such period as
may be stipulated in the
approval granted by it.
(5) Where any tree standing or
lying near an overhead line or
where any structure or other (5) Where any tree standing or
object which has been placed or lying near an overhead line or
has fallen near an overhead line where any structure or other
subsequent to the placing of such object which has been placed
line, interrupts or interferes with, or has fallen near an overhead
or is likely to interrupt or interfere line subsequent to the placing
with, the conveyance or of such line, interrupts or
transmission of electricity or the interferes with, or is likely to
accessibility of any works, an interrupt or interfere with, the
Executive Magistrale or authority conveyance or transmission of
specified by the Appropriate electricity or the accessibility of
Government may, on the any works, an Executive
application of the licensee, cause Magistrate or authority specified
the tree, structure or object to be by the Appropriate Government
removed or otherwise dealt with may, on the application of the
as he or il thinks fit. licensee, cause the tree,
(6) When disposing of an structure or object to be
application under sub-section (5), removed or otherwise dealt with
an Executive Magistrale or

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authority specified under that sub- as he or it thinks fit.
section shall, in the case of any
tree in existence before the (6) When disposing of an
placing of the overhead line, application under sub-
award to the person interested in section(5), an Executive
the tree such compensation as he Magistrate or authority specified
thinks reasonable, and such under that sub-section shall, in
person may recover the same the case of any tree in
from the licensee. existence before the placing of
the overhead line, award to the
person interested in the tree
Explanation.--For the such compensation as he thinks
purposes of this section, the reasonable, and such person
expression "tree" shall be deemed may recover the same from the
to include any shrub, hedge, licensee.
jungle growth or other plant.

Explanation.--For the purposes

of this section, the expression
"tree" shall be deemed to
include any shrub, hedge,
jungle growth or other plant.
168. Inconsistency in laws.-- 173. Inconsistency in laws.--
Nothing contained in this Act or Nothing contained in this Act or
any rule or regulation made any rule or regulation made
thereunder or any instrument thereunder or any instrument
having effect by virtue of this Act, having effect by virtue of this
rule or regulation shall have effect Act, rule or regulation shall
in so far as it is inconsistent with have effect in so far as it is
any other provisions of the inconsistent with any other
Consumer Protection Act, 1986 provisions of the Consumer
(68 of 1986) or the Atomic Energy Protection Act, 1986 (68 of
Act, 1962 (33 of 1962). 1986) or the Atomic Energy Act,
1962 (33 of 1962) or the

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 Railways Act, 1989 (24 of 1989)

169. Act to have overriding 174. Act to have overriding

effect.-- Save as otherwise effect.—
provided in section 168, the Save as otherwise provided in
provisions of this Act shall have section 173, the provisions of
effect notwithstanding anything this Act shall have effect
inconsistent therewith contained in notwithstanding anything
any other law for the time being in inconsistent therewith contained
force or in any instrument having in any other law for the time
effect by virtue of any law other being in force or in any
than this Act. instrument having effect by
virtue of any law other than this
Act.
184. Provisions of Act not to
179. Provisions of Act not to
apply in certain cases.—
apply in certain cases.-- The
The provisions of this Act shall
provisions of this Act shall not
not apply to the Ministry or
apply to the Ministry or
Department of the Central
Department of the Central
Government dealing with
Government dealing with
Defence, Atomic Energy or
Defence, Atomic Energy or such
such other similar Ministries or
other similar Ministries or
Departments or undertakings or
Departments or undertakings or
Boards or institutions under the
Boards or institutions under the
control of such Ministries or
control of such Ministries or
Departments as may be notified
Departments as may be notified
by the Central Government.
by the Central Government.

Clause 12 of the Electricity Bill related to Authorised persons to transmit,

supply, etc. of electricity, and corresponds to Section 12 of the Electricity

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Act, 2003. Clause 42 of the Electricity Bill related to duties of distribution
licensees, and largely corresponds to Section 42 of the Electricity Act.
Clause 47 of the Electricity Bill, 2001 related to the power to require
security, and corresponds to Section 47 of the Electricity Act, 2003.
Clause 67 of the Electricity Bill related to provision as to opening up of
streets, railways etc and corresponds to Section 67 of the Electricity Act.
Clause 68, which related to Overhead lines, corresponds to Section 68.
Clause 168 of the Bill related to Inconsistency in laws and,
thereunder, nothing contained in this Act or any rule or regulation made
thereunder or any instrument having effect by virtue of this Act, rule or
regulation shall have effect in so far as it is inconsistent with any other
provisions of the Consumer Protection Act, 1986 (68 of 1986) or the Atomic
Energy Act, 1962 (33 of 1962). Section 173 of the Electricity Act is in pari-
materia with Clause 168 except that, in addition to the Consumer
Protection Act, 1986 (68 of 1986) or the Atomic Energy Act, 1962 (33 of
1962), the Railways Act, 1989 (Act 24 of 1989) has been included in the
said provision. Clause 169 of the Electricity Bill, 2001 provided for the Act
to have overriding effect, and corresponds to Section 173 of the Electricity
Act. Clause 179, which made the provisions of Act not to apply in certain
cases, corresponds to Section 184 of the Electricity Act.
In effect, Railways sought to be exempted from the obligations of
distribution licensees not only under Sections 42 and 47, but also of
obtaining a license under Section 12, of the Electricity Act. After taking note
of such a request from the Ministry of Railways (which as noted
hereinabove did not find favour with the Ministry of Power), the
Parliamentary Standing Committee Report records that the Committee
desired that the Ministry of Railways be exempted from licensing for
Page 310 of 387
erecting, maintaining and transmission of electricity, subject to the condition
that the transmission network was outside the grid and erected for their
own use, and licence would be insisted upon for grid operation.

The request of the Railways to be exempted from certain provisions

of the Electricity Act, relating to distribution licensees, was not acceded to
by the Parliamentary Standing Committee, and they were only exempted
from obtaining a transmission license provided the transmission network
was outside the grid and was erected for their own use. While making it
clear that Railways would require a licence for grid operations, the
Committee included the Railways Act, 1989 as, one among the three
enactments, which would prevail notwithstanding anything contained in the
Electricity Act.

That Railways sought to be exempted, from the aforesaid provisions

of the Electricity Act, would itself go to show that they were themselves of
the view that Sections 2(31)(c) read with 11(g) & (h) of the Railways Act,
1989 did not enable them to avoid obtaining a distribution license, and from
discharging the obligations placed on a distribution licensee under the
Electricity Act. Their request for exemption from the aforesaid provisions,
including to be exempted under Section 184 from the applicability of the
Electricity Act, was neither acceded to by the Parliamentary Standing
Committee, nor did Parliament, in enacting the law, exempt them from the
rigours of the aforesaid provisions. The submission, urged on behalf of the
Railways, that the provisions of the Electricity Act, relating to distribution
licensees and their obligations, does not apply to them, therefore,
necessitates rejection.

R. CONCLUSION:

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 On issues 6, 7 and 11, we conclude holding that (1) distribution,
which is a licensed activity under Section 12 read with Section 14 of the
Electricity Act, 2003, is not confined just to the operation and maintenance
of a distribution installation (ie the system of wires and associated
facilities), but also includes supply of electricity to consumers; (2)
establishment of a distribution installation by the Indian Railways, without
supply (ie sale) of electricity to consumers, is not sufficient to qualify them
as a deemed distribution licensee under the third proviso to Section 14 of
the Electricity Act, 2003; (3) sale of electricity to a consumer is the sine
qua non for distribution of electricity by a distribution licensee, deemed or
otherwise, under the Electricity Act; (4) in terms of the provisions of the
Electricity Act, 2003, the status of a Distribution Licensee cannot be
claimed when electricity is primarily or otherwise consumed by the
Licensee itself without its being supplied (sold) to consumers; (5) self-
consumption of electricity, albeit upon conveying the same to multiple
locations, does not constitute distribution of electricity as contemplated
under the Electricity Act, 2003; (6) actual supply (ie sale) of electricity by an
Appropriate Government to consumers, in addition to establishment of a
distribution installation (ie the system of wires and associated facilities), is
the sine qua non for qualifying as a deemed distribution licensee under the
third proviso to Section 14 of the Electricity Act, 2003; and (7) the law laid
down by the Supreme Court, in Sesa Sterlite Limited -v- Orrisa
Electricity Regulatory Commission & Others, (2014) 8 SCC 444, is that
a deemed distribution licensee status cannot be claimed when there is no
sale of electricity to consumers/end users, and electricity is predominantly
consumed by the Distribution Licensee itself.

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 XI. ISSUE 8:

A. Whether the electricity provided by Railways to vendors, contractors,

agencies and other entities in the area of operation of Railways is not
supply of electricity but is only use of electricity by Railway Administration
itself?

B. Whether supply of electricity by Indian Railways to parties in jural

relationships, illustratively agents, sub-contractors, service providers,
lessees and vendors etc. constitutes ‘distribution’ of electricity and
consequently, qualifies as distribution for the purposes of the deeming
provision in the third proviso to Section 14 of the Electricity Act, 2003?

A. SUBMISSION ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that there are third parties to whom
electricity is supplied/sold by Railways as detailed in IA No. 654 of 2023
dated 03.04.2023, and the Annexures enclosed therewith; the contention of
the respondents, that there is only a ‘jural relationship’, and there is
therefore no sale to such consumers to whom electricity is made available
within the area of operation of the Railways, is misplaced; ‘jural
relationship’ means the legal relationship between two entities, i.e., any
relationship that can be created by agreement between the parties; the
contract between the Railways and contractors/vendors are on a principal-
to-principal basis with regards activities undertaken by the
contractors/vendors, and not as an agent of the Railways; the businesses
carried on in such bookstalls, restaurants, or even by IRCTC are accounted
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as their respective businesses, and not in the business of Railways/Railway
Administration; the statement of revenue and expenditure, incurred by such
businesses of the contractors/vendors, are independently accounted for, for
all purposes; supply of electricity, by Railways to such contractors/vendors,
is supply to such contractors/vendors within the scope of Section 2(70) of
the Electricity Act, 2003; the charges paid by them (irrespective of the
method of calculation) is the consideration paid by such
contractors/vendors to the Railways; the consumption/end use of electricity,
in the area of operation of Railways, by itself or by vendors, contractors or
others, are not in any manner undertaken by the supply of electricity
through the Distribution System of any other person, other than the
distribution system of the Railways itself; the distribution licensee of the
adjoining area cannot lay down the electric supply line or distribution
system for effecting supply either to the Railways or others at the different
end use/consumption points in the area of operations of the Railways; for
example, a distribution licensee of the adjoining area cannot say that it will
extend its electric supply line in the form of overhead line along the railway
traction to allow the locomotives to draw power or to provide electric supply
at the signaling points or railway yards or railways sidings or to the vendors
in the Station or any other service providers or contractors in the area of
the operation of the Railways; and the provision of electricity, at each of the
points of consumption in the area of operations of the Railways, can only
be by the Railways, and not by the Distribution Licensee of the adjoining
area.

B.SUBMISSIONS OF RESPONDENTS:

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 It is submitted, on behalf of the Respondents, that conveyance/
internal branching out of electricity to agents, sub-contractors, service
providers, lessees and vendors etc does not constitute ‘distribution of
electricity’, and does not constitute ‘distribution’ for the purposes of the
deeming provision in the third proviso to Section 14 of the Electricity Act;
the said activity does not even constitute ‘supply of electricity’ due to
absence of both sale and consumer; such entities are only an alter ego of
the Railways itself, that work strictly for the purpose of and in connection
with the Railways; they provide a service on behalf of the Railways to the
passengers of the Railways; in I.A. No. 654/2023, filed by the Railways to
place additional documents, it has been contended that, in some of the
stations, electricity is also received as separate connection through a single
point supply maintained by the Railways, thereafter such electricity is
‘distributed’ for various purposes for maintaining the station and facilities
therein, and the entire distribution of electricity within the area of operation
of the Railways, throughout the country, is mostly undertaken by the
distribution system owned, operated and maintained by the Railways, and
not any other distribution licensee; Railways has admitted that the extent of
its authorization, and authority of undertaking the activities, is principally
governed by the activities being undertaken “for the purposes of, or in
connection with, a Railway”; they have contended that these include
distribution of electricity from the traction sub-stations and other one point
supply to various places in the operation of Railways, and consumers of
such distribution services being provided by the Railways include the
station, conveniences in the station, railways sidings, maintenance
services, Railways Catering and Tourism Company Limited (“IRCTC”),
RailTel Corporation of India Limited (“RailTel”), Kendriya Vidyalaya,

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Railway Quarters, social welfare organizations for Railways, Railway
institutes, community halls, clubs, hospitals owned and managed by
Railways etc; the above contention of the Railways is flawed for the
following reasons: (a) Railways has admitted that the distribution licensees
operate the system of 11KV/ 33KV etc and not at 25 KV voltage; this is
because 25 KV voltage is exclusive to the usage of traction overhead lines
of Railways; no other system can operate on 25 KV voltage; such a line
cannot be used to supply electricity to any other consumer, as none of the
equipment, except those relating to the traction overhead lines, operate at
25 KV voltage; (b) admittedly, Railways has constructed traction sub-
stations (“TSS”) at several places along the traction lines to source
electricity from others; electricity is delivered at such TSS at the voltage at
which the grid system in the area operates; electricity is then stepped down
by the Railways to 25 KV voltage on which their operations are carried out
through overhead wires for traction purposes; this electricity cannot be
used anywhere else except Railway overhead lines; this cannot be used for
any other purpose including offices, warehouses, workshops, running
rooms, rest houses, institutes, hospitals, water works, water supply
installations, conveniences etc; (c) further, on a perusal of the terms of the
bilateral agreement for procurement of temporary electrical connection, it is
clear that the terms and conditions of the contract are decided exclusively
by the Railways, i.e., the use of such electricity as determined in the
contract awarded, the energy consumption charges, and the service
connection charges, continuity of supply are all determined by the
Railways; Clause 6 of the Terms & Conditions shows that the Railways are
entitled to cut off supply at any time without any reason; all the above
conditions for connection are against Section 42 of the Electricity Act,

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which provides for the duties of a distribution licensee and includes that the
distribution licensee shall have a universal supply obligation towards its
consumers; executing such bilateral agreements, and cutting-off supply at
any point of time without any reason, is in clear violation of Section 42 of
the Electricity Act; and, apart from availing the rights of the DISCOMs, the
Railways are not distributing electricity as a distribution licensee as
contemplated in Section 14 of the Electricity Act.

On the contention, that the electricity being conveyed by the Railways

to the vendors and service providers of the Railways is not due to existence
of a jural relationship, it is submitted on behalf of the Respondents that the
act of re-distribution of electricity inside the railway premises, to bookshops,
canteens, vendors, etc, cannot be construed as distribution of electricity to
a third party as it is being provided as a service by the Railways in the
railway premises for the purposes of Railways or in connection with the
working of the Railways as contemplated under Section 2(31) of the
Railways Act; Railways convey electricity to the aforementioned entities in
view of a jural relationship, as the above entities are carrying out important
functions of Railways for the purpose of and in connection with the
Railways; electricity to such establishments situated on the railway
platform, for the purpose of and in connection with the Railways, is in fact
an act of re-distribution by Railways, after obtaining bulk supply from a
distribution company or a generating company as the case may be;
Railways obtain electricity in bulk, which is internally branched out by them
for their own purposes; and the activity of branching out electricity within
the premises of the Railways, for its own consumption, is not ‘distribution of
electricity’ within the meaning of the Electricity Act.

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 It is further submitted, on behalf of the Respondents, that the
provision of electricity, electricity consumption and related items for
catering units etc managed by IRCTC (Annexure 7 of I.A. No. 654/2023)
states that only electrical energy cost shall be charged to IRCTC for static
units managed by IRCTC (not by their licensees); the expenses, if any,
incurred on security deposit, augmentation charges and connection
charges, etc by the Railways should be provided from passenger amenity
plan head; the Railways charge 10% service charge to IRCTC apart from
the cost of power; there is also a provision for obtaining a No Objection
Certificate (“NOC”) for availing supply directly from the DISCOM; further,
electricity is provided by the Railways to IRCTC for fixed purposes only ie
for the services being availed by the Railways from the IRCTC; such power
cannot be used for any other purpose other than ‘for the purposes of and in
connection with the Railways’; none of the above conditions can be
dictated by a distribution licensee for supplying electricity to a consumer
under the Electricity Act; all the other charges to be levied on IRCTC are
being funded from the Railway budget, as the services being provided by
such establishments are for the purposes of Railways only; such
establishments, as long as they provide the concerned services being
availed by the Railways, are covered within the definition of ‘Railways’ and
are not distinct from it; similarly, for the food plazas or the open-air
restaurants where the load requirement of electricity is not met by the
Railways, an NOC is given by the Railways to procure electricity from the
distribution companies; there are multiple instances in I.A. No. 654/2023
itself, where the activities are controlled by the Railways and are for the
purposes of the Railways or in connection therewith; Railways has
formulated a uniform policy in respect of recovery of electricity charges

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from teachers, staff of Kendriya Vidyalayas, Railway Institutes, Community
Halls, etc. (Annexure 10 of I.A. No. 654/2023) which has only extended the
employer-employee relationship i.e., a jural relationship to the teachers
who are availing the Railway quarters; the teachers are merely occupiers
of the Railway premises, and are paying service charges for the use of
such premises and the electricity therein; such establishments are once
again being maintained and operated by the Railways for its own purpose,
and in connection with the Railways; such establishments are also
undeniably covered within the ambit and scope of Railways, and are not
distinct from it; electricity to such establishments situated on the Platform,
for the purpose of and in connection with the Railways, are supplied
electricity by way of a single point delivery by obtaining the same from the
distribution companies; the electricity provider provides electricity to the
Railways, which is internally branched out by the Railways for its own
purposes, and in connection with the Railways; electricity is distributed to
the Railways at its meter in the General-Purpose Service Category, which
is then extended by the Railways within its premises on an internal
arrangement; the above activity, of branching out of electricity within the
premises of the Railways for its own consumption, can be done internally
by the Railways; the mere act of installation of equipment does not amount
to carrying on distribution activities under the Electricity Act; no electricity is
being distributed by the Railways as envisaged under the Electricity Act;
the above activities can, at best, be considered as provision of service for
fulfilment of the jural relationship existing between the mentioned
establishments and the Railways for the purposes of and in connection with
the Railways; such activities cannot be deemed to be ‘distribution of
electricity’ to a consumer as provided in the Electricity Act; and there is also

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 no sale of electricity in any of the above circumstances for the same to
qualify as ‘supply’ under the Electricity Act.

It is submitted, on behalf of the Respondents, that provision of

electricity to the Railway Station premises, including various service
providers like vendors, shopkeepers etc., is self-consumption by the
Railways as the said vendors have a jural relationship with the Railways,
and are providing services for and on behalf of the Railways for the benefit
of passengers; this position is amply clear from Regulation 28 of the “Rail
Land Development Authority (Development of Land and other works)
Regulations, 2012” which relates to the purposes of use of Land; similar
provisions, indicating the control of Railways on all such activities of the
Lessees, can be found in Sub Regulations (1), (2) and (3) of Regulation 29;
Regulation 33, which relates to the rights of a sub-lessee on termination or
expiry of Lease, also indicates such a jural relationship; therefore, such
vendors and service providers cannot be equated to a consumer as
understood under the provisions of the Electricity Act (Section 2(15)) in
whose case, the Distribution Licensee has no say in the business or other
activities of the consumers; Section 21 to 23 of the Railways Act deals with
opening of Railways after sanction by the Central Government, and such
sanction is to be given after considering the report of the Commissioner;
Section 23(d) provides for applicability of those provisions to the
introduction of electric traction, thereby considering distribution installation
to be part of the electric traction; and, therefore, one cannot read into
Section 11(g) or 11(h) anything beyond the same, including authorization
for distribution of electricity to vendors, service providers etc.

C. ANALYSIS:

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 The definition of “railway”, under Section 2(31)(b) and (d) of the
Railways Act, brings within its ambit railway lines, sidings, yards,
branches used for the purposes of, or in connection with, a railway; all
rolling stock, stations, offices, warehouses, wharves, workshops,
manufactories, fixed plant and machinery, roads and streets, running
rooms, rest houses, institutes, hospitals, water works and water supply
installations, staff dwellings and any other works constructed for the
purpose of, or in connection with, the railway. Since rest houses, hospitals
etc also fall within the definition of railway, conveyance of electricity,
through the “electric traction equipment” and “power supply and distribution
installation”, to these places is conveyance of electricity by the railways to
itself, and not to a third-party consumer. Further, any other works would
also fall within the definition of the railway, so long as construction of such
works, and its maintenance and operation are for the purpose of or in
connection with the Railway, which means the Railway or any portion of the
Railway for the public carriage of passengers and goods.

Section 11(d) of the Railways Act confers power on the railway

administration, for the purposes of construction or maintenance of the
railway, to erect and construct such houses, ware houses, offices and other
buildings and such yards, stations, wharves, engines, machinery apparatus
and other works and conveniences as the railway administration thinks
proper. “Convenience” means to make easy, facility. Erection and
construction of “conveniences”, for the purpose of construction or
maintaining a railway, also falls within the ambit of Section 11 with respect
to which the railway administration has exclusive power, notwithstanding
anything contained in any other law for the time being in force. All the

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entities to whom Railways claim to be supplying electricity are those
entities which exist for the convenience, ie ease of or to facilitate the public
carriage of passengers and goods by the Railways, and are therefore
‘conveniences’ provided to the Railways itself. Conveyance of electricity,
from the “electric traction equipment” and “power supply and distribution
installation” of the Railways, to the entities established for the convenience
of public carriage of passengers and goods must be held to be conveyance
of electricity to the railways itself, and not to third party consumers
attracting the definition of a “distribution licensee” under Section 2(17) of
the Electricity Act. Even otherwise, Railways has a jural relationship with
each of these entities.

D. DOES PROVIDING ELECTRICITY TO VENDORS IN STATIONS

MAKE RAILWAYS A DEEMED DISTRIBUTION LICENSEE?

The contention, urged before the Regulatory Commissions on behalf

of the Railways, was that consumption of electricity, distributed by the
railways to itself, would not come in the way of their being held to be a
deemed distribution licensee. The plea, regarding electricity being supplied
by Railways to its vendors etc constituting the activity undertaken by a
distribution licensee, has been raised for the first time during the course of
final hearing of these appeals, and was not urged in the original
proceedings before the Regulatory Commissions against whose orders the
appeals, forming part of this batch, were filed.

In examining these aspects, it is useful to take note of certain

provisions of the Railways Act, 1989 and the Regulations made thereunder.

E.RELEVANT PROVISIONS OF THE RAILWAYS ACT:

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 Chapter II-A of the Railways Act relates to the Rail Land
Development Authority. Section 4-A enables the Central Government, by
notification, to establish an authority to be called the Rail Land
Development Authority to exercise the powers and discharge the functions
conferred on it by or under the Railways Act. Under Section 4-D(1) thereof,
the Authority shall discharge such functions and exercise such powers of
the Central Government in relation to the development of railway land, and
as are specifically assigned to it by the Central Government. Section 4-
D(2) enables the Central Government to assign to the Authority all or any of
the following functions, namely, (i) to prepare scheme or schemes for use
of railway land in conformity with the provisions of the Act; (ii) to develop
railway land for commercial use as may be entrusted by the Central
Government for the purpose of generating revenue by non-tariff measures;
(iii) to develop and provide consultancy, construction or management
services, and undertake operations in India in relation to the development
of land and property; (iv) to carry out any other work or function as may be
entrusted to it by the Central Government, by order in writing.

Section 4-E stipulates that, subject to such directions as may be

given to it by the Central Government, the Authority shall be empowered to
enter into agreements on behalf of the Central Government and execute
contracts. Section 4-F provides that the Authority shall have power to
regulate, by means of Regulations made by it, its own procedure, and the
conduct of all business to be transacted by it, and to perform the duties of
the Authority. Section 4-I relates to the power of the Authority to make
regulations and, under sub-section (1) thereof, the Authority may, with the
previous approval of the Central Government, make regulations, consistent

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with the Act and the rules made there-under, for carrying out the provisions
of this Chapter.

Section 21 of the Railways Act stipulates that no railway shall be

opened for the public carriage of passengers until the Central Government
has, by order, sanctioned the opening thereof for that purpose. Section
22(1) obligates the Central Government, before giving its sanction to the
opening of a railway under Section 21, to obtain a report from the
Commissioner that – (a) he has made a careful inspection of the railway
and the rolling stock that may be used thereon; (b) the moving and fixed
dimensions as laid down by the Central Government have not been
infringed; (c) the structure of lines of rails, strength of bridges, general
structural character of the works and the size of, and maximum gross load
upon the axles of any rolling stock, comply with the requirements laid down
by the Central Government; and (d) in his opinion, the railway can be
opened for the public carriage of passengers without any danger to the
public using it.

Section 22(3) enables the Central Government, after considering the

report of the Commissioner, to sanction the opening of a railway under
Section 21 as such, or subject to such conditions as may be considered
necessary by it, for the safety of the public. Section 23 makes the
provisions of Sections 21 and 22 applicable to the opening of the works
mentioned thereunder i.e. (a) opening of additional lines of railway and
deviation lines; (b) opening of stations, junctions and level crossings; (c) re-
modelling of yards and rebuilding of bridges; (d) introduction of electric
traction; and (e) any alteration or reconstruction materially affecting the

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structural character of any work to which the provisions of Sections 21 and
22 apply or are extended by this Section.

F. RAIL LAND DEVELOPMENT AUTHORITY REGULATIONS, 2012:

In exercise of the powers conferred by Section 4-I (1) read with

Section 4-F of the Railways Act, the Rail Land Development Authority, with
the previous approval of the Central Government, made the Rail Land
Development Authority (Development of Land and Other Works)
Regulations, 2012 (“the 2012 Regulations” for short). Regulation 3 provides
for the manner of development of Railway Land, and stipulates that, subject
to directions as may be given by the Central Government in this behalf from
time to time, the development of any railway land shall be effected by (a)
grant of lease of the railway land to developers who shall bear the cost of
the development; or (b) developing built-up area at the Authority’s own cost
and leasing the same.

Chapter-II of the 2012 Regulations relates to identification and

entrustment of Railway Land. Regulation 5 stipulates that vacant railway
land, with potential for development, shall be entrusted by the Central
Government to the Authority. Under the proviso thereto, the Authority may
from time to time, in consultation with the concerned Railway
Administration, identify railway land and send a proposal to the Central
Government for considering its entrustment to the Authority in terms of the
Act.

Chapter-III relates to the terms and conditions of development of

Railway Land. Regulation 7 stipulates that the usage of railway land, under
these Regulations, shall be permitted only after a written agreement is

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executed between the Authority and the lessee, on the terms and
conditions as determined by the Authority under these regulations.
Regulation 8(1) stipulates that the ownership or title of the railway land
shall continue to vest with the Railway Administration at all times, and only
the lease rights for the use of the land or the structures built on it shall be
transferred by the Authority. Regulation 8(2) provides that mortgage of
railway land shall not be permitted at any time, and the land shall be
incapable of conversion from leasehold to freehold. Regulation 8(3)
provides that the transfer of ownership of railway land shall not be allowed
at any time unless it is specifically instructed by the Central Government.
Regulation 12 relates to the period of lease, and provides that, based on
the feasibility study and market survey, the Authority may decide the period
of lease for each railway land, subject to the direction issued by the Central
Government in this regard.

Regulation 13 relates to return of railway land to the Railway

Administration and thereunder, unless the Authority decides to offer the
railway land and the buildings or structures existing on it on a fresh lease,
on expiry or termination of the lease period, as the case may be, the entire
railway land together with the buildings or structures existing thereon shall
revert and vest upon the Railway Administration. Regulation 14 provides for
the types of development. Regulation 14(1) stipulates that, subject to
directions from the Central Government, railway land can be developed for
any purpose including but not limited to residential, commercial,
institutional, hospitality, entertainment consisting of developments including
but not limited to offices, shops, hotels, shopping malls, theatres, etc. as
may be decided by the Authority based on the feasibility and market study.

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 Regulation 19 relates to the manner of payment. Regulation 19(1)
provides that the selected developer or lessee or sub-lessee should make
payments to the Authority in consideration of the lease rights on the land as
may be specified in the payment schedule in the tender documents or
incorporated in the agreement with the Authority, as the case may be.
Regulation 19(2) prescribes different modes of payments. Regulation 20(2)
provides that each lessee, for the due fulfillment of its obligations contained
in the agreement, shall deposit a performance guarantee towards fulfillment
of obligations of the agreement including successful completion of the
development and payment of all dues. Regulation 20(4) requires each
lessee or sub-lessee, for the due fulfillment of its obligations contained in
the agreement, to deposit a security deposit towards payment of annual
rent or percentage revenue share as may be determined by the Authority.

Regulation 28 relates to the purposes of use of land, and stipulates

that the lessee or sub-lessee shall not use the railway land and the built-up
area on the railway land for any purpose not permitted in the agreement or
lease agreement and, if at any time the lessee or sub-lessee is found
violating this, the agreement or lease agreement shall be liable to be
terminated by the Authority. Regulation 29 relates to usage within the
railway station premises and, under Regulation 29(1), the lessees and sub-
lessees of a railway land, situated within a railway station premises, shall
comply with the extant policies of the Central Government and Railway
Administration with regard to maintaining cleanliness, hygiene, quality of
food or beverages being sold, crowd control and public order. Regulation
29(2) enables the authorized representatives of the Railway Administration,
from time to time, to inspect the areas under the control of the lessee or

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sub-lessee, and issue instructions if any violation is observed. Regulation
29(3) requires the lessee or sub-lessee concerned to comply with such
instructions within a reasonable time, and advise the Railway
Administration of the action taken and refusal to comply with such
instructions, or repeated violations, shall be considered as a default on the
part of the lessee or sub-lessee, and action may be initiated by the
Authority for termination of the lease or sub-lease.

Regulation 30(1) provides that the lessee shall be responsible for

maintenance and upkeep of the railway land, and the buildings or
structures developed on it, at all times during the period of lease. Section
31 relates to termination of lease. Section 31(1)(a) provides that a lease
agreement may be terminated by the Authority (i) in case of default by the
lessee in fulfilling the specified obligations as provided in the Agreement; or
(ii) if the Railway Land is required by the Railway Administration for
operational purposes. Regulation 33 relates to the rights of sub-lessee on
termination or expiry of lease. Regulation 33(1) stipulates that all sub-lease
agreements shall be co-terminus with the lease agreement. Regulation
33(2) stipulates that, unless otherwise specified by the Authority, in the
event of termination of the lease agreement by the Authority, all sub-lease
agreements shall stand terminated. Regulation 33(3) provides that, in case
of termination of lease agreement resulting in premature termination of the
sub-lease, a sub-lessee shall be entitled to refund of payment of rent made
to the lessee in terms of the lease agreement for the period of sub-lease
not availed by it.

G. CONTENTS OF IA NO. 654 of 2023 FILED BY THE RAILWAYS:

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 In IA No. 654 of 2023, filed by them on 03.04.2023, Railways have
given particulars of entities to whom they supply electricity other than
themselves. They include lighting and other electricity requirements on the
7308 stations maintained by the Railways; for conveyance of electricity on
station platforms namely restaurants/snack bars, food courts, book stalls,
Banks/ATMs, booths for sale of goods including food items, milk booth and
other packaged food vendors, retiring rooms, lounges, advertisement sites
and hoardings, booths for taxis, state tourism desks etc. It is stated that
Indian Railways raises regular bills on such persons, and a sample copy of
such a bill is enclosed along with the IA.

Reference is made in the said I.A. to the railway sidings to which

electricity is provided by the Railways from the distribution installations
erected, operated and maintained by the Railways, and a list of private
sidings in the State of Maharashtra is attached. Reference is also made to
the agreements entered into by the Railways for procurement cum
maintenance services by third parties, to the electricity bill raised by the
Railways on Madhepura Electric Locomotive Private Limited, a Joint
Venture of Indian Railways and M/s. Alstom.

It is stated that IRCTC, a Government of India entity, has been

authorised to undertake catering services, ticketing, supply of packaged
drinking water and to manage hospitality services such as retiring rooms
and lounges; RailTel Corporation of India Limited is also a Government of
India undertaking which is an ICT provider, and one of the largest neutral
telecom infrastructure providers in the country owning a Pan-India optic
fibre network with operations in the area of operation of the Indian
Railways, and undertaking communication facilities through the Indian

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Railway lines and systems; the communication requirements of Indian
Railways are also undertaken by RailTel; the electricity requirement of
RailTel’s activities, in the area of operation of the Railways, is provided by
the Railways; Indian Railways also supplies electricity to its Kendriya
Vidyalas, Railway Quarters, Social Welfare organisations of Railways,
Railways Institutes, Community Halls, Clubs, etc; Railways also supplies
electricity to hospitals operated and managed by Indian Railways, as also
to facilities provided for the convenience of such hospitals which are
outsourced activity such as canteens, chemists, etc; and these activities
constitute supply of electricity to others which would make the Railways a
deemed distribution licensee.

H.DOCUMENTS ENCLOSED TO THE I.A. :

Along with IA No. 654 of 2023, Railways have enclosed the Railway
Year Book of 2021-2022 which contains data on various aspects. Details of
vendors at the New Delhi Railway Station and the type of connection
provided to each of them (three phase or single phase), the list of vendors
at Chatrapati Shivaji Maharaj Terminal with the load in respect of each of
such vendors, and the list of vendors at certain other places, is enclosed.
Also enclosed with the I.A. is Bill dated 30.03.2023 issued to M/s. Vyoma
Technologies Pvt. Ltd. which is a bill for temporary electricity connection to
outside parties. The purpose, referred to therein, is for augmentation of
LCD screens for dual display system at CSTM booking office. While the
meter reading as well as the amount charged is detailed therein, the basis
on which such electricity charges were determined, or the source of power
to fix such charges, is not reflected therein.

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 Also enclosed is the allotment letter issued to M/s. Amey Vikrama
Industries Pvt. Ltd. on 12.12.2022 by the Northern Railway; and the
correspondence between the Railways and M/s Amey Vikrama Industries
Pvt. Ltd on 12.01.2023, 17.01.2023, and 23.01.2023. The said allotment
letter dated 12.12.2022 records that the Railway Administration was
allotting the contract for “creation and operation of Gaming Zone at New
Delhi, Hazrat Nizamuddin and Anand Vihar Terminal Railway Station over
Delhi Division” for a period of one year at Rs.37,00,000/- per annum plus
GST on the license fee, and the advance license fee for the first year
stands accepted by the competent authority as license fee for one year.
The terms and conditions, referred to therein, include security deposit of
10% of the annual license fee.

By its letter dated 12.01.2023, Amey Vikrama Industries furnished

details of the electric load requirements of gaming machines and air
conditioners to operate the Gaming Zone at the New Delhi Railway Station.
The letter of Railways dated 17.01.2023 shows that the temporary electric
connection given to M/s Amey Vikrama Industries Pvt. Ltd. was at the
ground floor of the station building at New Delhi Railway Station. The letter
of the Railways dated 23.01.2023 relates to provision of temporary electric
connection of 25 KW Load three phase to M/s Amey Vikrama Industries
Pvt. Ltd for creation and operation of a Gaming Zone at New Delhi at
THRD. The said letter records that the said company had deposited
certain amounts towards three phase 25 KW connection.

A copy of the bilateral agreement entered into between the Railways

and M/s Amey Vikrama Industries Pvt. Ltd. is also enclosed. The said
bilateral agreement is for temporary electrical connection. Clause 2 of the

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terms and conditions requires all wiring to be carried out by the party
concerned at its own cost, and that connection will be given only after
inspection, of the installation and its connection, by the representative of
the electricity department; and it complies with the provision of the Indian
Electricity Act & Indian Electricity Rules. Clause 3 stipulates that the party
shall pay energy consumption charges as well as service connection
charges at the rate fixed by the Railways. Clause 4 requires the party to
observe all rules and regulations as per the Indian Electricity Act & Indian
Electricity Rules. Clause 5 stipulates that the supply so given should be
utilized only in connection with the particular contract awarded by the
Railways. Clause 6 confers power on the Railways to cut off electric supply
at any time without assigning any reason. Clause 7 makes it clear that
continuity of supply is not guaranteed, and the party shall indemnify the
Railway against any claims arising out of interruptions thereto. Clause 8
stipulates, among others, that Railways have all the rights to disconnect
supply after the specified period.

The letter addressed by the Railway Board to the General Managers

of all Indian Railways on 02.11.2006 is on the subject of provision of
electricity, electrical consumption charges and related items for catering
units etc managed by IRCTC. Clause 3 thereof stipulates that only
electrical energy cost plus 10% service charge shall be charged to IRCTC
for static units managed by their licensees. Clause 5 stipulates that for
stand-alone units, like budget hotels, mega-base kitchens, launderettes,
Yatri Niwas, administrative offices of IRCTC etc., NOC may be given by the
Railways on a case-to-case basis to avail direct power supply from
DISCOMs, otherwise connection charges, augmentation charges and

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security deposit would be leviable as per the extant rules and electricity
consumption charges would be as per Paras 2 and 3 of the said letter.
Clause 5 stipulates that stand alone units are those units which are not
embedded in the railway system, these are not located in restricted areas
for bona fide railway passengers/ customers, and they do not endanger
their safety. Clause 6 provides that, for food plazas and open-air
restaurants, which are embedded in the station building / circulating area,
electricity supply would be normally arranged by Railway, however,
wherever the electric load requirement is substantial and cannot be met by
Railway, NOC would be given by the Railways.

The letter addressed by the Railway Board to the General Managers

on 13.12.1993 refers to recovery of electricity charges from teachers/ staff
of Kendriya Vidyalayas/ Government schools/ Departments etc. It is stated
therein that the staff/ teachers of Kendriya Vidyalayas, Govt.
Schools/Departments/Undertakings occupying Railway quarters
authorizedly may be charged at the rates applicable to Railway employees;
Social Welfare Organizations of Railways such as Railway Institutes,
Community Hall etc may also be charged at the rates applicable to Railway
employees subject to the maximum limit of consumption decided by the
Chief Electrical Engineers; and excess consumption, over the limit fixed,
may be charged at outsiders’ rates. It is also stated that these rates should
be charged with the stipulation that, if the rates on the Railways are revised
upwards retrospectively, the same would also be payable by the said staff
and institutions.

Thereafter, by letter dated 11.02.1994, the General Managers were

informed that Kendriya Vidyalaya buildings/premises located at Rail Coach

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Factory premises, Kapurthala may be charged for the electricity
consumption at the same rate as charged by the respective State Electricity
Boards for similar buildings/premises, in the vicinity subject to an upper
limit of consumption fixed by the Chief Electrical Engineer; and excess
consumption, over the limit, may be charged at Government Department
rates.

I.REPLY FILED BY THE RESPONDENTS TO I.A.NO.654 OF 2023:

In the reply, filed to IA No. 654 of 2023, the Respondents submit that,
while permission was granted by this Tribunal on 28.03.2023 to file an
additional affidavit to place on record certain facts which did not form part
of the pleadings before the Commission, no permission was granted to file
additional documents; the additional documents filed along with the said
I.A. cannot be received by this Tribunal unless the tests prescribed in Order
41 Rule 27 CPC are fulfilled; and the additional documents filed along with
the IA should, therefore, not be taken into consideration.

It is stated that, while the distribution licensees operate the

distribution system at 11 kV/33kV, Railways use 25 kV voltage at the
traction overhead lines; such lines cannot be used to supply electricity to
any other consumer, as no other equipment operates at 25 kV voltage;
Railways have constructed traction substations, at several places along the
traction lines, to source electricity from others; the electricity, delivered at
such traction sub-stations, is then stepped down by the Railways to 25kV
voltage; this electricity cannot be used for any other purpose including at
the offices, warehouses, workshops, rest rooms, institutes, hospitals etc;
distribution licensees have entered into separate agreements with the
Railways for supply of electricity at the platform and at the traction sub-

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station; two separate lines are availed by the Railways; the 25 kV voltage
maintained by the Railways cannot be used for distribution purposes, much
less by a third party consumer; establishments, located on the railway
platforms, are supplied electricity by way of a single point delivery,
obtaining the same from distribution licensees; the electricity so provided,
by the DISCOMs to the Railways, is then internally branched out by the
Railways for its own purposes, and in connection with the railways; the
electricity distributed to the railways, at its meter in the general purpose
service category, is then extended by the Railways within its premises by
way of an internal arrangement; the rate charged by the Railways from
such entities is not the rate approved/determined by the appropriate
Commission; and Railways has not provided details of deposit of duty
charges collected by it.

It is further stated that this methodology is not independent to

Railways; the airport authority also procures electricity on a single point
delivery method in a similar manner; airports also consist of various shops
and establishments to whom electricity is internally allotted by the
administration; this activity undertaken by the airport authority does not
make it a distribution licensee; Rourkela Steel Plant also collects electricity
on a single point delivery method from the distribution licensee, and
thereafter branches out the same to various establishments within its
premises; and this act of the Rourkela Steel Plant does not also constitute
distribution of electricity.

It is submitted that a sample copy of the documents signed at the

time of grant of connection by the Railways at New Delhi Railway Station,
and a copy of the bilateral Agreement Form for temporary electricity

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connection with the contractor notarised on 14.01.2023, are enclosed along
with the IA; Para 2 of the Agreement states that connection will be given
only after inspection, of the installation and its connection, by
representatives of the Electricity Department to ensure that it complies with
the Indian Electricity Act and the Indian Electricity Rules; this letter is an
acknowledgement that, even in January 2023, Railways required
inspection, of its installation and its connection, by representatives of the
State Electricity Department/Boards; no such inspection is required from
the Electricity Department with respect to a distribution licensee; and the
Electricity Act does not recognize the Electricity Department of the
Railways; Para 3 of the letter dated 02.11.2006 states that electricity plus
10% service charge will be charged to IRCTC for static units managed by
their licensees; the electrical energy cost is the cost of obtaining the
electricity from DISCOMs; Para 5 of the said letter records that stand-alone
units have the option of availing direct power supply from DISCOMs; Para
6 states that, for food plazas and open air restaurants which are embedded
in the station building/circulating area, electricity supply would normally be
arranged by Railways; however, wherever the electric load requirement is
substantial and cannot be met by the Railways, NOC will be given by the
Railways; Railways has itself used the word ‘arranged’, in Para 6 of the
letter dated 02.11.2006, and not distribute; this letter also falls foul of the
Universal Supply Obligation under Section 43 of the Electricity Act in terms
of which a distribution licensee has a duty to supply electricity at request;
the electricity rates, charged for teachers/staff relate to Kendriya
Vidyalayas/ Government schools/ Departments/ Undertakings/ Railway
Quarters/ Social Welfare Organizations etc, which were all set up on
railway land; no details have been furnished disclosing the basis on which

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such rates are charged; there is no provision for determination of the tariff
to be charged by the Railways from its consumers; Railways has not
approached the Appropriate Commission seeking adoption/fixation of the
rates; and the rates to be charged by distribution licensees is determined
by the concerned State Regulatory Commissions.

J. JURAL RELATIONSHIP: ITS SCOPE:

The term “jural” means “legal” or “pertaining to rights and obligations”.

“Jural relationship between parties” means legal relationship between
parties with reference to their rights and obligations. (Prabhakaran v. M.
Azhagiri Pillai, (2006) 4 SCC 484).

In Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti,

1983 SCC OnLine All 638 : AIR 1984 All 46, a Full Bench of the
Allahabad High Court held that a joint writ petition is maintainable if there is
a legally subsisting jural relationship, of association of persons, between
the parties. In Prabhakaran v. M. Azhagiri Pillai, (2006) 4 SCC 484, the
Supreme Court held that, in a mortgage, both the mortgagor and the
mortgagee have a jural relationship ie certain rights and obligations against
each other; and the mortgagor's right of redemption is co-extensive with the
mortgagee's right of sale or foreclosure (where such right is recognized in
law).

In the context of Section 18 of the Limitation Act, the Supreme Court,

in Food Corpn. of India v. Assam State Coop. Marketing & Consumer
Federation Ltd., (2004) 12 SCC 360, observed that the words used in the
acknowledgement must indicate the existence of jural relationship between
the parties such as that of debtor and creditor; the intention to attempt such

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jural relationship must be apparent; a clear statement containing
acknowledgement of liability can imply the intention to admit jural
relationship of debtor and creditor; so long as the statement amounts to an
admission, acknowledging the jural relationship and existence of liability, it
is immaterial that the admission is accompanied by an assertion that
nothing would be found due from the person making the admission; the
letters, indicating that the amount of two crores was by way of advance or
deposit against paddy procurement, was an admission of jural relationship
of buyer and seller which stood converted into a relationship of creditor and
debtor on the failure of the principal transaction.

A similar view was taken in J.C. Budhraja v. Chairman, Orissa

Mining Corpn. Ltd., (2008) 2 SCC 444; Lakshmirattan Cotton Mills Co.
Ltd. v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67l; Agni Aviation
Consultants v. State of Telangana, 2020 SCC OnLine TS 1462; and
Shapoor Freedom Mazda v. Durga Prosad Chamaria :AIR 1961 SC
1236.

The Railways receives electricity at its traction substation/non-traction

substation/switchyard and, in turn, makes available the electricity so
received to the book shops, canteens, vendors on the Railway Platforms
etc. Such activity would, at best, constitute conveyance / re-distribution of
electricity within the Railways, and to entities with which it has a jural
relationship, and would not constitute distribution of electricity to third party
consumers.

All the entities referred to in the afore-said I.A, to whom electricity is

provided, are those with whom Railways have entered into agreements in

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terms of the provisions of the Railways Act and the 2012 Regulations. As
detailed hereinabove, while Regulation 14(1) of the 2012 Regulations
enables railway land to be developed for any purpose, including residential,
commercial, institutional, hospitality, entertainment, offices, shops, hotels,
shopping malls, theatres, etc, Regulation 7 permits usage of railway land
only after a written agreement is executed between the authority and the
lessee, on the terms and conditions as determined by the Authority. Under
Regulation 8(1), ownership of railway land continues to vest with the
Railway Administration, and only the lease rights, for use of the land or the
structures built on it, is transferred. Unless a fresh lease is offered,
Regulation 13 requires the entire railway land together with the buildings or
structures existing thereon to revert and vest upon the Railway
Administration on completion of the period of lease. Regulation 19(1)
requires the selected developer or lessee or sub-lessee to make payment
as specified in the tender documents or incorporated in the agreement.
Regulations 20(2) & (4) require each lessee, for the due fulfillment of its
obligations under the agreement, to deposit a performance guarantee and
a security deposit towards fulfillment of the obligations under the
agreement including successful completion of the development, payment of
all dues and annual rent.

Regulation 28 of the 2012 Regulations prohibits the lessee or sub-

lessee from using railway land, and the built-up area thereon, for any
purpose not permitted in the agreement or lease agreement and, if the
lessee or sub-lessee is found to have violated them, the agreement or
lease agreement can be terminated. Regulation 29(1) requires such
lessees and sub-lessees to comply with the policies of the Central

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Government and Railway Administration with regard to maintaining
cleanliness, hygiene, quality of food or beverages being sold, crowd control
and public order. Regulation 29(2) confers power on the Railway
Administration to inspect and issue instructions if any violation is observed.
Regulation 29(3) confers power on the authority to terminate the lease or
sub-lease in case of refusal to comply with such instructions, or for
repeated violations.

The aforesaid provisions of the 2012 Regulations emphasise the

jural relationship between Railways and the various entities to whom
electricity is made available by the Railways. These provisions also show
that Railways exercises over-arching control over such entities which
provide facilities for carriage of passengers and goods in connection with
and for the purposes of the Railways. Conveyance of electricity by the
Railways to them is only to enable these entities to discharge their
obligations under the agreement with the Railways. It is also relevant to
note that the tariff, for such provision of electricity by the Railways to these
entities, is not determined by the Regulatory Commissions in terms of
Section 45(2)(a) read with Section 62(1)(d) and Section 62(2) of the
Electricity Act.

It is evident therefore that, unlike consumers falling within the area of

supply of a distribution licensee, Railways has a jural relationship with the
aforesaid entities in terms of the Railways Act,1989 and the 2012
Regulations, and such entities are permitted to carry on their activities only
in connection with and to facilitate carriage of passengers and goods by the

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Railways and, unlike consumers of electricity under the Electricity Act,
function under the overall control and supervision of the Railway
Administration.

While the business carried on by these entities, and the revenue they
generate, may not be monitored by the Railways, the fact remains that
such entities are permitted to carry on business either in terms of a licence
or under an agreement which they have entered into with the Railways
under the provisions of the Railways Act,1989 and the 2012 Regulations.
These contractors and vendors undertake activities and carry on business
only in connection with and for the purposes of the Railways, and not
otherwise. Since they carry on activities only to facilitate carriage of
passengers and goods by the Railways, these entities do not function
independent of the Railways. The contracts entered into by the Railways
with these entities is not on a principal-to-principal basis. While it is true
that no other distribution licensee can supply electricity within the Railway
area covered under Section 11(a) read with Section 18 of the Railways Act,
that, by itself, does not make the Railways a deemed distribution licensee,
more so since the electricity provided by the Railways to these entities
does not constitute supply (ie sale) of electricity as defined in Section 2(70)
of the Electricity Act.

As the power to erect, operate, maintain or repair “electric traction

equipment” and “power supply and distribution installation”, in connection
with the working of the Railways, is conferred exclusively on the Railway
administration under Section 11(g) of the Railways Act which provision
would prevail notwithstanding anything contained in any other law,
conveyance of electricity, through these equipment and installations, falls

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within the exclusive domain of the Railways. After power is supplied by the
distribution licensees at the Railway traction sub-station/non-traction sub-
station/switchyard, delivery of electricity from there onwards, to its various
consumption points, is undertaken by the Railways to the exclusion of all
others including distribution licensees. As no element of sale is involved in
this process, such conveyance would not constitute distribution of electricity
by the Railways.

The bilateral agreements, enclosed along with the IA, establish that
the terms and conditions stipulated therein are determined exclusively by
the Railways. The energy consumption charges, the service connection
charges, continuous supply provided to such entities are all determined by
the Railways, and the stipulated terms and conditions confer power on the
Railways to cut off supply at any time without assigning reasons. Such
conditions are contrary to the obligations of a distribution licensee under
Part VI of the Electricity Act including Sections 42, 43 and 45 thereof. The
power conferred on a distribution licensee to recover expenditure and
require security from the consumer under Section 46 and 47 of the
Electricity Act, which are subject to the regulations made by the State
Commission, are also not adhered to by the Railways while providing
electricity to these entities.

In addition to the actual cost of electricity provided to them, Railways

also collects an additional sum of 10% as service charges from these
entities including IRCTC, all of which are alien to what is stipulated under
the Electricity Act. The bilateral agreements also contain provisions
requiring these entities to obtain no objection certificates from the Railways
for availing supply directly from the Discoms, which again falls foul of the

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freedom extended to a consumer, under the Electricity Act, to procure
electricity from whichever source it chooses. The electricity provided to
these entities is only because these entities provide services which are
availed by the Railways for transportation (ie carriage) of passengers and
goods by the Railway trains. All these services fall within the definition of
“Railways” under Section 2(31), and form part of the powers of a railway
administration under Section 11 of the Railways Act. Such activities do not
constitute distribution of electricity to a consumer under the Electricity Act.

K. CONCLUSION:

On Issue No.8, we conclude holding that electricity provided by the

Railways within its area, to vendors, contractors, agencies and other
entities, is not “supply” of electricity but is only use of electricity by or on
behalf of the Railway Administration; and supply of electricity by Indian
Railways to parties in jural relationships, illustratively agents, sub-
contractors, service providers, lessees and vendors etc neither constitutes
‘distribution’ of electricity nor does it qualify as “distribution” for the
purposes of the deeming provision in the third proviso to Section 14 of the
Electricity Act, 2003.

XII. ISSUE 9:

Whether the expressions ‘supply’ of electricity, ‘consumers’ and other

expressions connected thereto used in different provisions of the Electricity
Act, 2003 is to be a given the meaning defined in Section 2 or can be given
contextual meaning in different provisions based on the scheme, objective
and purpose?

A. SUBMISSIONS ON BEHALF OF RAILWAYS:

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 Sri M.G. Ramachandran, Learned Senior Counsel appearing on
behalf of the Railways, would submit that the Electricity Act, 2003 uses the
expression ‘supply’ at different places, and in different contexts; applying
the definition in Section 2(17), defining supply, to all provisions of the Act
would lead to anomalous results; it is therefore necessary to give effect to
the opening part of Section 2 of the Electricity Act, 2003 providing for
‘unless the context otherwise requires’; this position has been recognised
by the Supreme Court in Tata Power Co. Ltd. -v- Reliance Energy
Limited, (2009) 16 SCC 659; even with regards the 1st proviso to Section
14 of the Electricity Act, 2003 (dealing with licensees who were in operation
before the enactment of the Electricity Act, 2003), the decision of the
Supreme Court is that the term ‘supply’ therein should be read as
‘distribution of electricity’; similarly, the Supreme Court, in Jiyajeerao
Cotton Mills v. State of Madhya Pradesh AIR 1963 SC 414, considered
the item “Taxes on the consumption or sale of electricity” in Entry 53 of List
II of the Constitution; the Supreme Court did not accept the contention
regarding consumption of electricity by persons other than producers, and
held that, both in the Government of India Act and under the Constitution,
the word “consumption” must be deemed to have been used in the same
sense; it was held that the Acts in question dealt only with a certain aspect
of the topic “electricity”, and not with all of them; therefore, in those Acts,
the word “consumption” may have a limited meaning; but the word
“consumption” has a wider meaning; it also means “use up”, “spend” etc;
the mere fact that a series of laws were concerned only with a certain kind
of use of electricity, that is consumption of electricity by persons other than
producers, cannot justify the conclusion that British Parliament, in using the
word “consumption” in Entry 48-B and the Constituent Assembly in Entry

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53 of List II, wanted to limit the meaning of “consumption” in the same way;
the contextual interpretation of Section 2(17) stating “for supplying
electricity to the consumers in his area of supply” means that the
distribution system enables the supply of electricity to consumers by any
means, and not necessarily only by the distribution licensee; further, when
read with Sections 42(1) and 43(1), it means the obligation of the
distribution licensee to supply if demanded by the consumer; and, if the
consumer wishes to take electricity entirely from other sources, the
distribution licensee cannot compel him to take electricity only from him.

B.SUBMISSIONS ON BEHALF OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the terms and

phrases defined under a law must be given the assigned meaning unless
the context suggests otherwise; while it cannot be denied that a particular
word can have different meanings under a statute as per the context in
which it has been incorporated, the said contextual meaning cannot be
ascribed to defeat the overall purpose and object of the governing
legislation; in so far as the definitions of ‘consumer’, ‘distribution licensee’
and ‘supply’ under Section 2(15), 2(17) and 2(70) are concerned, the
following arises for consideration: (a) a person/entity which is supplied with
electricity is necessarily a ‘consumer’; for the purpose of receiving such
supply, a consumer is connected to a licensee, including a distribution
licensee; (b) only a distribution licensee maintains a distribution system for
the purpose of supplying power to consumers within its ‘area of supply’; (c)
while a ‘consumer’ can ‘avail’ open access from a distribution licensee,

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such a distribution licensee is under an obligation to provide open access,
as well as to supply electricity to the consumers upon request; in order to
appreciate the intent of the Electricity Act as a whole to decipher the role of
‘consumer’, viz. ‘licensee’ has been provided; it can be seen that the
dominant characteristics of both a consumer and a distribution licensee
enshrined under the Electricity Act, are as follows: (a) predominantly, the
person who receives supply of electricity, i.e., the recipient of supply, is a
consumer; whereas, the dominant nature of a licensee, i.e., to be a service
provider, is to supply electricity to such a consumer, within its area of
supply; (b) furthermore, to achieve the intended purpose by nature, a
distribution licensee is statutorily obligated to maintain a distribution
system; (c) a distribution licensee is obligated to provide open access,
whereas a consumer avails the same; this open access is subject to the
Regulations framed by Appropriate SERCs; (d) further, a distribution
licensee is under a mandatory obligation to supply electricity to a consumer
upon request, and failure to supply on request may lead to suspension of
the license in terms of Section 24 of Electricity Act; juxtaposing the above
position, with the position of the Appellant in the instant case, the inevitable
conclusion is that the Railways, by nature, has the predominant
characteristics of a ‘consumer’ rather than a distribution licensee, in as
much as: (a) Railways is admittedly taking supply of electricity from the
distribution licensees, (b) Railways is, admittedly, consuming electricity at
various consumption points within its area of supply, (c) the said
consumption of electricity, within the area of supply of Railways, cannot, in
any manner, constitute ‘supply’ within the meaning of Section 2(70) of the
Act since there is no ‘sale’ of electricity to consumers by the Railways; (d)
Railways is seeking to avail open access in the capacity of a deemed

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distribution licensee, which can only be granted under the Electricity Act
since no such corresponding provision is present under the Railways Act,
(e.) the Railways, unlike a Licensee, does not discharge any obligation to
the consumers within its so-called area of supply; (f) when, factually,
complex activities are being undertaken, or mixed or composite
functions/activities are being carried out, it is the predominant nature of the
said activities that is required to be considered for the purpose of
examination as to under which classification, under the governing statute,
will such activities be covered; in other words, it is not the ancillary or
incidental actions, but the main action which must be considered in case of
complex or mixed or composite activities in terms of the scheme of the
governing statute; the said test of ascertaining the main activity or
predominant nature of activities being carried out, is referred to as the
‘Predominant Nature Test’ and has been applied by the Supreme Court in
a catena of cases. In this regard, reliance is placed on behalf of the
Respondents upon the following Judgments: (a) Precision Steel &
Engineering Works & Anr. v. Prem Deva Niranjan Deva Tayal, [(2003) 2
SCC 236], wherein the Supreme Court has held that, in case of composite
or mixed activities, it is the main or dominant purpose of the activities that is
to be considered and not the incidental or ancillary activities; (b) in
Bangalore Water Supply & Sewage Board v. A. Rajappa & Ors., [(1978)
2 SCC 213], the Supreme Court again considered the Predominant Nature
Test, to distinguish between an ‘institution’ and an ‘industry’, and held that,
in case of complex activities some of which qualify for exemption under law
and others do not, the predominant nature of the activities will have to be
seen; and therefore even though the Railways, by virtue of its existing
operation, maintains an analytical system akin to a distribution main,

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however, by virtue of its inherent activity, it is not a distribution licensee but
is a consumer who is consuming electricity either from existing licensees or
through Open Access.

C.ANALYSIS:

It is true that the definition clause, in Section 2 of the Electricity Act,

commences with the words “In this Act, unless the context otherwise
requires”. The definitions of various words and expressions, in clauses (1)
to (77) of Section 2, must be given the meaning in terms of the definition,
unless a meaning contrary thereto arises in the context of the provision
under consideration.

D.CONTEXTUAL INTERPRETATION:

While the golden rule of interpretation of statutes is to give the words

in a Statute a literal meaning, other aids of construction, including a
contextual interpretation, can be resorted to where the words used in a
statute are capable of bearing more than one meaning. What is contextual
interpretation?

Interpretation must depend on the text and the context. They are the
basis of interpretation. The text is the texture, and context is what gives the
colour. Neither can be ignored. Both are important. That interpretation is
best which makes the textual interpretation match the contextual. No part of
a statute and no word of a statute can be construed in isolation. Statutes
have to be construed so that every word has a place and everything is in its
place. (RBI v. Peerless General Finance & Investment Co. Ltd., (1987) 1
SCC 424). When a question arises as to the meaning of a certain provision
in a statute, it is not only legitimate but proper to read that provision in its
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context. The context means the statute as a whole, the previous state of
the law, other statutes in pari materia, the general scope of the statute and
the mischief that it was intended to remedy. (Union of India v.
Elphinstone Spg. and Wvg. Co. Ltd., (2001) 4 SCC 139). To ascertain
the legislative intent, all the constituent parts of a statute should be taken
together and each word, phrase or sentence should be considered in the
light of the general purpose and object of the Act itself. (Poppatlal Shah v.
State of Madras, (1953) 1 SCC 492).

In examining the question whether a different meaning should be

given to the word “supply” in the context of certain provisions of the
Electricity Act, it is necessary to understand what the words “unless the
context otherwise requires” used in Section 2 of the Electricity Act mean.

E.‘UNLESS THE CONTEXT OTHERWISE REQUIRES’ IN THE

DEFINITION CLAUSE OF A STATUTE: ITS MEANING:

A definition clause, in any statute, does not necessarily apply in all

possible contexts in which the word, which is defined, may be found
therein. The opening clause of Section 2 of the principal Act itself, by the
use of the words “in this Act, unless the context otherwise requires”,
suggests that any expression defined in that Section should be given the
meaning assigned to it therein unless the context otherwise requires. (K.
Balakrishna Rao v. Haji Abdulla Sait, (1980) 1 SCC 321; K.V. Muthu v.
Angamuthu Ammal, (1997) 2 SCC 53). This implies that a definition, like
any other word in a statute, has to be read in the light of the context and
scheme of the Act as also the object for which the Act was made by the
legislature. Where the definition or expression is preceded by the words

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“unless the context otherwise requires”, the said definition set out in the
section is to be applied and given effect to but this rule, which is the normal
rule, may be departed from if there be something in the context to show
that the definition could not be applied. (K.V. Muthu v. Angamuthu
Ammal, (1997) 2 SCC 53).

While interpreting a definition, it has to be borne in mind that the

interpretation placed on it should not only be not repugnant to the context, it
should also be such as would aid the achievement of the purpose which is
sought to be served by the Act. A construction which would defeat or is
likely to defeat the purpose of the Act has to be ignored and not accepted.
(K.V. Muthu v. Angamuthu Ammal, (1997) 2 SCC 53). The phrase
“Unless the context otherwise requires” is meant to prevent a person from
falling into the whirlpool of “definitions”, and not to look to other provisions
of the Act which, necessarily, has to be done as the meaning ascribed to a
“definition” can be adopted only if the context does not otherwise require.
(Whirlpool Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1). The
test to be ordinarily applied is that the meaning given in the definition
should be considered as the meaning of the said word or expression
wherever it is used in the Electricity Act. It is only as an exception that a
contrary meaning can be given to the said words and expressions, that too
only if it is so required in the context of the provision under interpretation.

As reliance is placed on behalf of Railways, on Jiyajeerao Cotton Mills

Ltd. v. State of M.P., 1962 Supp (1) SCR 282: AIR 1963 SC 414, and
Tata Power Co. Ltd. v. Reliance Energy Ltd., (2009) 16 SCC 659, to
contend that a different meaning should be given to the word “supply”,

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other than in terms of its definition under Section 2(70) of the Electricity Act,
it is useful to take note of the law declared in the said judgements.

F.JUDGEMENTS RELIED ON BEHALF OF THE RAILWAYS:

The appellant, in Jiyajeerao Cotton Mills Ltd. v. State of M.P., 1962

Supp (1) SCR 282 : AIR 1963 SC 414, was a textile mill at Gwalior
generating electricity for the purpose of running its mills and for other
purposes connected therewith; it did not sell electrical energy to any
person; under the provisions of the Central Provinces and Berar Electricity
Duty Act, 1949, as amended by the Madhya Pradesh Taxation Law
Amendment Act, 1956, the Government of Madhya Pradesh levied upon
the appellant electricity duty for a certain period which was challenged on
two grounds, the first of which was that, upon a proper construction of
Section 3 of the 1949 Act as amended, the appellant would not be liable to
pay any duty.

It is in this context that the Supreme Court, after referring to

Section 2(a) of the Act which defines “consumer”, and ‘producer’ as
defined in Section 2 (d-1) of the Act, held that Section 3 was the charging
section; ‘Consumer’ means any person who consumes electrical energy
sold or supplied by a distributor of electrical energy or a producer…”, and
“a person who generates electrical energy at a voltage exceeding hundred
volts for his own consumption or for supplying to others”; if the two
definitions were read together, ‘consumer’ would include “any person who
consumes electrical energy supplied by a person who generates electrical
energy for his own consumption”; under Section 3, a person who generates
electrical energy over hundred volts for his own consumption is liable to

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pay duty on the units of electrical energy consumed by himself; a producer
consuming the electrical energy generated by him is also a consumer, that
is to say, he is a person who consumes electrical energy supplied by
himself; the table prescribes rates of duty payable with respect to electrical
energy supplied for consumption; and, therefore, the levy on the appellant
fell squarely within the table under Section 3 of the Act.

The law laid down by the Supreme Court, in Jiyajeerao Cotton Mills
Ltd. v. State of M.P., 1962 Supp (1) SCR 282 : AIR 1963 SC 414, was in
the context of the Central Provinces and Berar Electricity Duty Act, 1949,
as amended by the Madhya Pradesh Taxation Law Amendment Act, 1956,
and ought not to be applied while interpreting the provisions of the
Electricity Act, 2003. Even otherwise the Supreme Court has, in the said
judgement, held that ‘Consumer’ means any person who consumes
electrical energy sold or supplied by a distributor of electrical energy or a
producer”; and a producer, consuming the electrical energy generated by
him, is also a consumer, that is to say, he is a person who consumes
electrical energy supplied by himself. Irrespective of whether supply of
electrical energy is by a distributor or a producer, the person who
consumes energy, so sold or supplied to him, is a consumer. In the present
case, Railways does not sell electricity to others. On the other hand, it
consumes the electricity supplied/sold to it by the Distribution Licensees at
the traction sub-station/non-traction substation/switchyard. Reliance
placed, on behalf of the Railways, on the judgement of the Supreme Court,
in Jiyajeerao Cotton Mills Ltd, is therefore of no avail.

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 Section 23 of the Electricity Act, which bears the heading “Directions to
licensees”, stipulates that, if the appropriate Commission is of the opinion
that it is necessary or expedient so to do for maintaining the efficient
supply, securing the equitable distribution of electricity and promoting
competition, it may, by order, provide for regulating supply, distribution,
consumption or use thereof.

While examining the scope of Section 23, the Supreme Court, in Tata
Power Co. Ltd. v. Reliance Energy Ltd., (2009) 16 SCC 659 observed
that, although a broad meaning may be assigned to the word “supply”, the
same must be held to be “subject to the context”; the word “supply” used in
Section 23, for bringing in efficient supply, would mean regulate and,
consequently, licensing in respect of the generating company; for the
aforementioned purpose it cannot be given a general or popular meaning
denoting supplier and receiver; once it is held that, by reason thereof,
Parliament aimed at ensuring supply, the purported object it sought to
achieve by enacting Section 7 would lose its purpose; it does not mean that
Section 23 itself becomes unworkable as it would not be possible to secure
equitable distribution and supply; as the distribution agreement (PPA) is
subject to approval, the Commission would have the power to approve an
MoU which subserves public interest; while granting such approval, the
Commission may also take into consideration the question as to whether
the terms to be agreed are fair and just; by its very nature, supply would
have a supplier and a receiver and any direction, which is aimed at
ensuring or regulating supply, by its very nature would have to be directed
to both the supplier and the receiver; however, when the question arises as
to the meaning of a certain provision in a statute, it is not only legitimate but

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proper to read that provision in its context; the legal principle is that all
statutory definitions have to be read subject to the qualification variously
expressed in the. definition clause which created them; it may be that, even
where the definition is exhaustive inasmuch as the word defined is said to
mean a certain thing, it is possible for the word to have a different meaning
in different sections of the Act, depending upon the subject or context; that
is why all definitions in statutes generally begin with the qualifying words
“unless there is anything repugnant to the subject or context” (Whirlpool
Corpn. v. Registrar of Trade Marks: (1998) 8 SCC 1, Garhwal Mandal
Vikas Nigam Ltd. v. Krishna Travel Agency: (2008) 6 SCC 741;
and National Insurance Co. Ltd. v. Deepa Devi [(2008) 1 SCC 414); the
word “supply” refers to “supply to consumers only” in the context of Section
23, and not to supply to licensees; on the other hand, in Section 86(1)(a)
“supply” refers to both consumers and licensees; in Section 10(2) the word
“supply” is used in two parts of the said Section to mean two different
things; in the first part it means “supply to a licensee only”, and in the
second part “supply to a consumer only”; in the first proviso to Section 14,
the word “supply” has been used specifically to mean “distribution of
electricity”; and in Section 62(2) the word “supply” has been used to refer to
“supply of electricity by a trader”; and to assign the same meaning to the
word “supply” in Section 23 of the Act, as is assigned in the interpretation
section, it would be necessary to take recourse to the doctrine of
harmonious construction and read the statute as a whole.

The Supreme Court concluded holding that, as almost all the

Sections preceding Section 23 as also Section 24, talk about licensees nd
licensees alone, the word “supply”, if given its statutorily defined meaning

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as contained in Section 2(70) of the Act, would lead to an anomalous
situation as, by reason thereof, supply of electrical energy by the
generating company to consumers directly in terms of Section 12(2) of the
Act, as also by transmission companies to consumers, would also come
within its purview; in a case of this nature the principle of exclusion of the
definition of a Section by resorting to “unless the context otherwise
requires” should be resorted to; Section 86(1)(a) of the 2003 Act clearly
shows the parameters of supply for the purpose of regulation viz. supply of
electricity by the distribution company to the consumer; generating
companies have the freedom to enter into contract and in particular long-
term contracts with a distribution company subject to the regulatory
provisions contained in the 2003 Act; and Section 86(1)(b) of the 2003 Act
clearly shows that the generating company indirectly comes within the
purview of the regulatory jurisdiction as and when directions are issued to
the distributing companies by the appropriate Commission, but the same
would not mean that, while exercising the said jurisdiction, the Commission
will bring within its umbrage the generating company also for the purpose
of issuance of separate directions.

In Tata Power Co. Ltd. v. Reliance Energy Ltd., (2009) 16 SCC

659, the Supreme Court has held that, in the first proviso to Section 14, the
word “supply” has been used specifically to mean “distribution of
electricity”; and Section 86(1)(a) of the 2003 Act shows the parameters of
supply for the purpose of regulation viz. supply of electricity by the
distribution company to the consumer. The first proviso to Section 14 of the
Electricity Act stipulates that any person engaged in the business of
transmission or supply of electricity under the provisions of the repealed

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laws, or any Act specified in the schedule, on or before the appointed date,
shall be deemed to be a licensee under the Electricity Act for such period
as may be stipulated in the license.

G.FIRST AND THIRD PROVISOS TO SECTION 14: ITS SCOPE:

The first proviso to Section 14 of the Electricity Act is applicable to a

peson engaged in the business of transmission or supply of electricity
under the provisions of the laws (i.e. the Indian Electricity Act 1910, the
Electricity Supply Act, 1948 and the Electricity Regulatory Commission Act,
1998) which stood repealed by Section 185 of the Electricity Act, 2003.
The enactments, referred to in the Schedule to the Electricity Act, are
various Electricity Reforms Acts hitherto enacted by different State
Legislatures. Such a person, referred to in the first proviso to Section 14,
which is engaged in the business of transmission or supply of electricity on
or before the appointed date (which, in terms of Section 2(2) means such
date as the Central Government may, by notification, appoint i.e.
10.06.2003) shall be deemed to be a licensee under the Electricity Act,
2003 for such period as may be stipulated in the license.

The first proviso makes a distinction between a person engaged in

the business of transmission of electricity and a person engaged in the
business of supply of electricity. Reference to the repealed laws, or to the
laws in the Schedule, in the first proviso to Section 14 is because such
persons were engaged in the afore-said activities in terms of those
enactments. In effect, the first proviso to Section 14 requires the person,
hitherto engaged in the supply of electricity, to be deemed, under the
Electricity Act, 2003, to be a licensee distributing electricity.

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 Like in the first proviso to Section 14, the deemed distribution
licensee status, under the third proviso to Section 14, can only be conferred
on the appropriate government which is supplying (selling) electricity to
consumers alone, and not merely by maintaining and operating a
distribution installation (a system of wires and associated facilities) through
which electricity can be supplied by others. Further, as held in Tata Power
Co. Ltd, “supply of electricity by the distribution company to the consumer”
is regulated by the State Commissions under Section 86(1)(a) of the
Electricity Act. As conveyance of electricity, by the Railways to its various
consumption units, is not regulated by the State Commissions, such
conveyance cannot be equated to distribution of electricity by a distribution
licensee under the Electricity Act.

As noted hereinabove, in Tata Power Company Limited vs.

Reliance Energy Limited [2009 16 SCC 659], the term ‘supply’ in the first
proviso to Section 14 has been construed as distribution of electricity.
Since supply of electricity is defined in Section 2(70) to mean the sale of
electricity to a licensee or a consumer, there is no reason why the word
‘supply’, used in the definition of a “distribution licensee” under Section
2(17), should be given a different meaning under the third proviso to
Section 14 of the Electricity Act.

Sri M.G. Ramachandran, Learned Senior Counsel, has not been able
to show why the word ‘supply’ in Section 2(70) should be construed as a
“distribution installation”, that too one which any person can use to supply
electricity to others, and not necessarily only by the distribution licensee.

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 In this context it is necessary to note that Railways sought open
access claiming to be a deemed distribution licensee under the third
proviso to Section 14, in terms of which a deemed distribution licensee is a
person which is required, in view of the legal fiction created by the third
proviso, to be presumed to be a distribution licensee. All that a deemed
licensee can claim is a status similar to that of a distribution licensee under
Section 14 without the concomitant obligation of having to obtain a license,
and nothing more. Since what is defined in Section 2(17) is a “distribution
licensee”, and the third proviso to Section 14 does not required a deemed
distribution licensee to obtain a license, a deemed distribution licensee
must be understood to be one who is authorised to operate and maintain a
distribution system (a system of wires and associated facilities) between
the delivery points on the transmission lines of the generating station
connection on the one hand and the point of connection to the installation
of the consumer on the other, in order to supply electricity (sale of
electricity) to the consumer (a person who is supplied electricity for his own
use) in his area of supply (the area within which a distribution licensee is
authorised to supply electricity).

While the Appropriate Commission is required, under Section 16, to

specify the general or special conditions which shall apply to a licensee or
class of licensees, which shall be deemed to be the conditions of such
license, the proviso to Section 16 requires the Appropriate Commission to
specify general or specific conditions applicable to deemed licensees,
among others, those which also fall under the third proviso to Section 14.
Even with respect to deemed licensees, the conditions (general or specific)

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applicable to them is required to be prescribed by the Appropriate
Commission.

While it is true that a consumer is free to procure electricity from any

source, and the distribution licensee cannot compel him to obtain electricity
only from them, the choice so exercised by the consumer to procure
electricity from a person other than its distribution licensee, is subject to
payment of cross subsidy surcharge/additional surcharge under Sections
42(2) and (4) of the Electricity Act. Unlike a consumer who has the
freedom to procure electricity from any available source subject to fulfilment
of the conditions stipulated, for grant of open access, under the provisions
of the Electricity Act, the distribution licensee has no choice but to supply
electricity to consumers within its area of supply as and when such supply
is sought by them.

The Electricity Act does not provide for a license to be granted merely
for erection, operation, maintenance, and repair of a distribution installation
which is capable of supplying electricity. A license is granted to a person to
operate and maintain a distribution system as also to supply electricity to
consumers in his area of supply, and not just the former. Since the Indian
Railways does not satisfy the requirements of being a deemed distribution
licensee, the electricity procured by it, from whatever be the source, can
only be as a “consumer” and not as a “licensee”.

While the submission urged on behalf of the Respondents, that on

application of the predominant nature test, Railways must be held to be a
consumer and not a distribution licensee, cannot be said to be without
merit, it is unnecessary for us to delve any further into this aspect, since,

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even on a literal reading of the applicable provisions of the Electricity Act, it
is evident that the Appellant does not satisfy the requirements of being a
deemed distribution licensee since it does not sell electricity to consumers
(third parties), much less does it fulfil any of the obligations fastened on a
distribution licensee under Part VI of the Electricity Act. It is unnecessary
for us, therefore, to examine the judgments relied on behalf of the
Respondents on the application of the “predominant nature test”.

H.CONCLUSION:

On Issue No. 9, we conclude holding that the expressions ‘supply’ of

electricity, ‘consumer’ and other expressions connected thereto used in the
provisions of the Electricity Act, 2003, applicable to the case on hand,
should be given the same meaning as is defined in Section 2(70) of the
Electricity Act, and no other meaning need be given thereto in the context
of the third proviso to Section 14 of the Electricity Act.

XIII. ISSUE 10:

Whether Railways is entitled to seek open access in terms of Sections

2(47), 38(2)(d)(i), 39(2)(d)(i), 40(c)(i) and 42(2) of the Electricity Act, 2003
for sourcing its electricity requirements from entities other than the
Distribution Licensee of area adjacent to the Railways’ area of operation for
the working of Railways under Section 11(g) and (h) of the Railways Act,
1989?

A. SUBMISSION ON BEHALF OF RAILWAYS:

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 Sri M.G.Ramachandran, Learned Senior Counsel appearing on
behalf of the Railways, would submit that Sections 38(2)(d), 39(2)(d), and
40(c) of the Electricity Act, 2003 deal with open access to the transmission
system of the CTU, STU and the transmission licensees respectively; the
said provisions are in two parts; open access can be sought by a licensee
or a generating company as per sub-clause (i), or by a consumer as per
sub-clause (ii) of the respective provisions; if the person is seeking open
access in the status of a licensee- he would fall under the first part, and if
open access is sought by a consumer- he would fall under the second part;
if Railways is authorised to distribute electricity or even transmit electricity
within the area of operation of the Railways, as specified under Section
11(g) of the Railways Act, 1989, open access is to be taken to have been
sought by Railways as a licensee, and not as a consumer; as mentioned
hereinabove, Railways is sourcing power from generating companies as
well as licensees, (such as a distribution licensee of the adjoining area of
supply), as a licensee and not as a consumer; Railways is therefore entitled
to seek open access in terms of Sections 2(47), 38(2)(d)(i), 39(2)(d)(i),
40(c)(i) of the Electricity Act, 2003 as a licensee; the said provisions are not
restricted to open access sought by the Distribution Licensee only; they
apply when open access is sought even by a transmission licensee or a
trading licensee; assuming for the sake of argument, but not admitting, that
Indian Railways is only a transmission licensee as contended by the
Respondents, and as held in impugned order dated 25.02.2020 passed by
the Orissa State Commission in Case No.55 of 2016 (impugned in Appeal
No.114 of 2020), even then Railways would fall under the above provisions
of open access being sought by a licensee; similarly, in the circumstances
where Railways require open access through the distribution system of the

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distribution licensee of the adjoining area, Railways is entitled to such open
access as a licensee under Section 42(2) of the Electricity Act, 2003; the
provisions of Sections 38(2)(d)(ii), 39(2)(d)(ii), 40(c)(ii) of the Electricity Act,
2003, dealing with open access by consumers, would apply if open access
is sought, for supplying electricity to a consumer of the area of supply of the
distribution licensee; these provisions will not apply, if the end use or
consumption of electricity is at a place outside the purview of the area of
supply of the distribution licensee; in other words, in the case of Railways,
the end use or consumption, being in the area of operation of the Railways
under Section 11(g) of the Railways Act, 1989, i.e. the end use or
consumption being not at a place within the area of supply of any
distribution licensee (other than Railways), such other distribution licensee
cannot claim that its consumer is seeking to get electricity from any other
source for consumption in its area of supply; and this fundamental aspect is
necessary to decide on the aspect of payment of cross subsidy surcharge
and additional surcharge under Sections 42(2) and (4) of the Electricity Act,
2003.

B.SUBMISSIONS OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the Railways is

entitled to seek open access under various provisions of the Electricity Act
from sources other than the distribution licensees in whose area the
Railway premises falls; however, the said open access has to be in terms
of the applicable regulations as may be prescribed by SERC for a
consumer of electricity under the Electricity Act; even in the Northern
Railways Judgment, the Supreme Court held that direct sale of power by a
generating company to a “consumer” is specifically permitted under the

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Electricity Act; alternatively, till date, Railways has been availing supply
from KSEB Ltd. at 110 KV for traction purposes as a bulk consumer; ‘bulk
consumer’ has been defined under Regulation 2(8) (“Bulk Consumer”
means a consumer who avails supply at voltage of 33 KV or above) of the
CEA (Technical Standards for Connectivity in the Grid) Regulations, 2007;
the term ‘open access customer’ is defined under Regulation 3(26) (“open
access customer” means a consumer, trader, distribution licensee or a
generating company who has been granted open access under these
regulations) of the KSERC (Connectivity and Intra-state Open Access)
Regulations, 2013 as stated above, a consumer granted open access
under KSERC Regulations is also an ‘open access customer’ under the
said Regulations; and thus, as per the provisions of the Electricity Act and
KSERC Regulations, for the purpose of open access, Railways is a
consumer situated in the distribution licensee’s area.

C.ANALYSIS:

Section 2(47) of the Electricity Act defines “open access” 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. Section 38(2)(d) of
the Electricity Act stipulates that the functions of the Central Transmission
Utility shall be to provide non-discriminatory open access to its
transmission system for use by (i) any licensee or generating company on
payment of the transmission charges; or (ii) any consumer as and when
such open access is provided by the State Commission under sub-section

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(2) of Section 42, on payment of the transmission charges and a surcharge
thereon, as may be specified by the Central Commission.

Section 39(2)(d) of the Electricity Act provides that the functions of the
State Transmission Utility shall be to provide non-discriminatory open
access to its transmission system for use by (i) any licensee or generating
company on payment of the transmission charges; or (ii) any consumer as
and when such open access is provided by the State Commission under
sub-section (2) of Section 42, on payment of the transmission charges and
a surcharge thereon, as may be specified by the State Commission.
Section 40(c) of the Electricity Act stipulates that it shall be the duty of a
transmission licensee to provide non-discriminatory open access to its
transmission system for use by (i) any licensee or generating company on
payment of the transmission charges; or (ii) any consumer as and when
such open access is provided by the State Commission under sub-section
(2) of Section 42, on payment of the transmission charges and a surcharge
thereon, as may be specified by the State Commission:

It is no doubt true that, if Railways is held to be a deemed distribution

licensee, it is then entitled to seek open access under clause (i) of Sections
38(2)(d), 39(2)(d) and 40(c) of the Electricity Act, without having to pay
additional surcharge/cross subsidy surcharge under Sections 42(2) and (4)
of the Electricity Act. If, on the other hand, they are held to be a consumer,
then they fall within the ambit of clause (ii) of Sections 38(2)(d), 39(2)(d)
and 40(c), in which event their entitlement for open access is only on
payment of transmission charges and, in addition, surcharge thereon.

We are not concerned, in the present batch of appeals, with the

question whether Railways is entitled to seek open access as a deemed

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transmission licensee, since the claim of the Railways herein is that they
are a deemed distribution licensee under the third proviso to Section 14 of
the Electricity Act. Since we are satisfied that the Railways cannot be held
to be a deemed distribution licensee under the third proviso to Section 14,
their entitlement to seek open access is only as a “consumer”, under clause
(ii) of Sections 38(2)(d), 39(2)(d) and 40(c), on payment of surcharge in
addition to transmission charges.

The end use or consumption of electricity by different constituents of

Railways is within the area of the Railways as a consumer. The “area of
supply” as defined in Section 2(3) is distinct from the area covered by
Sections 11(a) and 18 of the Railways Act, since the traction
substation/non-traction substation/switchyard of the Railways, which is the
point at which electricity is received by the Railways, is the point which falls
within the “area of supply” of the concerned distribution licensee. The
power conferred on the Railways under Section 11(g) of the Railways Act is
only to erect, maintain, operate and repair “electric traction equipment” and
“power supply and distribution installation”, that too in connection with the
working of the Railway. The power conferred by Section 11(h) to do all
other acts necessary for making, maintaining, altering or repairing and
using the Railway, does not bring with in its ambit the power to “supply”
electricity to “consumers” which is part of the obligation of a distribution
licensee under the provisions of the Electricity Act. At the cost of repetition,
it is reiterated that the “power supply and distribution installation”, referred
to in Section 2(31)(c) and Section 11(g) of the Railways Act, is not the
“distribution system” as defined in Section 2(19) of the Electricity Act, nor

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does Railways fall within the definition of “distribution Licensee” under
Section 2(17) of the Electricity Act.

In this light, it is unnecessary for us to examine whether a bulk

consumer of electricity is similar to that of an open access customer under
the Regulations framed by certain Regulatory Commissions. Suffice it to
hold that, as Railways is a consumer situated in the concerned distribution
licensee’s area of supply, their claim to fall within the third proviso to
Section 14 of the Electricity Act, and to be a deemed distribution licensee,
necessitates rejection.

D.CONCLUSION:

On Issue No. 10, we conclude holding that Railways is not entitled to

seek open access in terms of Sections 2(47), 38(2)(d)(i), 39(2)(d)(i), and
40(c)(i) of the Electricity Act, 2003 for sourcing its electricity requirements
from entities other than the Distribution Licensee of the area adjacent to the
area of working of the Railways under Section 11(g) and (h) of the
Railways Act, 1989 as it is not a deemed distribution licensee under the
third proviso to Section 14 of the Electricity Act. Its entitlement to source
electricity under open access is only as a consumer under Sections
38(2)(d)(ii), 39(2)(d)(ii) and 40(c)(ii) of the Electricity Act, 2003.

XIV. ISSUE 12:

Whether as per Sesa Sterlite Limited -v- Orrisa Electricity Regulatory

Commission & Others, (2014) 8 SCC 444, even a licensee is required to
pay the cross subsidy surcharge or additional surcharge in regard to the
electricity sourced through open access to the extent of own consumption?

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A.SUBMISSION ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that reliance placed by the
respondents on the decision of the Supreme Court, in SESA Sterlite, to
claim that Railways, consuming electricity for its own purposes, cannot
seek exemption/exclusion from payment of cross subsidy surcharge, is
misplaced for the following reasons: (i) SESA Sterlite Decision does not
decide that a deemed distribution licensee cannot be a primary end user of
the electricity being distributed by it; the facts of the case, as noted in para
2 of the decision, is that Sesa Sterlite is both the aluminium
plant/manufacturing unit and a developer of the SEZ; Sesa Sterlite itself
was to supply electricity to itself as developer; this itself establishes that
supply of electricity to a third party is not a necessary condition for deemed
distribution licensee status; similar is the case of Military Engineering
Services (‘MES’) where primary consumption is by the defence department
itself; MES has been a deemed distribution licensee under the third proviso
to Section 14 of the Electricity Act, 2003; (ii) besides the above, there are
important differentiation between a SEZ developer claiming Deemed
Licensee status as per the proviso to Section 14 of the Electricity Act, 2003
introduced in exercise of the powers conferred under Section 49 of SEZ
Act, 2005, and the Railways Act, 1989 applicable to Indian Railways; in the
case of SEZ, it is bound by the terms of the Electricity Act, 2003 and it has
not been exempted from the Electricity Act, 2003 nor has the SEZ Act,
2005 been given the status of superior law except to declare the developer
as a deemed licensee, whereas the Railways Act, 1989 has been given a
superior status by virtue of Section 11 of the Railways Act, 1989, and also

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by virtue of Section 173 of the Electricity Act, 2003; (iii) it is also relevant
that, while the decision of this Tribunal, referred to in Para 44.2 states that,
inspite of the Deemed Licensee status, the SEZ Developer has to apply for
grant of license, in Para 46 the Supreme Court specifically states that the
SEZ developer is exempted from applying for grant of licence; (iv) in the
context of the above, the decision in SESA Sterlite supports the case of
Indian Railways, and it is not against them as contented by the
respondents; and this aspect has also been considered by this Tribunal in
the interim order at paras 17 and 18 in Appeal No. 276 of 2015 dated
16.12.2015.

B.SUBMISSIONS OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the legislature, in

its wisdom, has not limited the scope of open access to consumption of
electricity; this is evident from a bare reading of the definition of Open
Access contained in Section 2(47) of the Electricity Act; from the phrase
‘use’ in Section 2(47) of the Electricity Act, it is clear that open access can
be availed for the purpose of consumption as well as effecting supply from
a generating company to a licensee; Sections 38(2)(d), 39(2)(d) and 40(c)
of the Electricity Act reveal that there are only the following scenarios
contemplated in respect of open access, which are as follows: (a) electricity
being transmitted by licensees; and (b) electricity being consumed by end
consumers; in terms of Section 38(2)(d) or 39(2)(d) or 40(c) of the
Electricity Act, non-discriminatory open access to its transmission system
can be granted either when: (a) the power is being sourced by a licensee or

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a generating company on payment of transmission charges under Section
38 (2)(d)(i), Section 39(2)(d)(i) and Section 40(c)(i) or (b) a consumer under
Section 38(2)(d)(ii), Section 39(2)(d)(ii) and Section 40(c)(ii) can avail
transmission open access after payment of charges under Section 42(2);
therefore, consumption is only related to Section 38(2)(d)(ii), Section 39
(2)(d)(ii) and Section 40(c)(ii); similarly, in so far as distribution open access
is concerned under Section 42 of the Act, the same can be availed subject
to payment of CSS in addition to the charges for wheeling, and such levy of
CSS is only exempted for CGPs in terms of Section 42(2) & (4); in other
words, the moment open access is availed for the purpose of supply to
consumers, the liability of CSS is triggered; in fact, even if the dedicated
transmission line is being utilized by a licensee, such as the Appellant, for
its own consumption through open access, CSS is payable; this is for the
reason that, if open access is availed under Section 38(2)(d)(i), 39(2)(d)(i)
and 40(c)(i) of the Electricity Act, then there is no need for compensating
the incumbent licensee, in as much as the incumbent licensee, in such a
scenario, would avail open access to bring electricity to its distribution area
and effect supply to the end consumer; thereby meaning that the existing
consumer base is not affected when open access under the aforesaid
provisions is being sought; as opposed to this, when open access for
consumption is being sought under Section 38(2)(d)(ii), 39(2)(d)(ii) and
40(c)(ii) of Electricity Act, then admittedly the consumer of the existing
licensee is availing such an open access, and hence is stepping out of the
existing consumer mix of the incumbent licensee; it is for this activity,
wherein the end consumer steps out or leaves the existing consumer base
of the incumbent distribution licensee, is CSS then paid to compensate for
such loss being suffered by the incumbent distribution licensee; in this

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regard, reliance is placed on para 31 and 36 of Sesa Sterlite Judgment;
the Supreme Court, in Sesa Sterlite Judgment, considered a situation
where a distribution licensee avails open access to take supply of
electricity, and such electricity is being used for its own consumption; in
fact, at para 30 of Sesa Sterlite Judgment, the Supreme Court specifically
dealt with such a scenario and held that, even if a distribution licensee is
taking power through open access and is using the same for its own
consumption, it will be liable to pay CSS; from a reading of the aforesaid
paras of Sesa Sterlite Judgment, it follows: (a) in terms of para 31 and 36,
even a Deemed Distribution Licensee connected to a transmission
Licensee is liable to pay CSS; (b) Railways, in its submissions, relies upon
Section 39(2) and 42(2) of Electricity Act to build a case that it will source
power and pay the necessary transmission charges; (c) this interpretation
is fundamentally flawed, because Railways is not a conventional licensee
who supplies power to end consumers, and hence does not fall under
Section 39(2)(d)(i) of the Electricity Act; the Railways is availing open
access to transmit power to its own area; further, consumption through
open access is relatable only to Section 39(2)(d)(ii) of the Electricity Act
which necessarily entails payment of CSS; (d) if the argument of the
Railways is to be accepted, then consumption would be required to be read
into Section 39(2)(d)(i) of the Electricity Act, which is impermissible; (e) it is
an admitted fact that the Railways is procuring power for self-consumption;
and, therefore, the Sesa Sterlite Judgment is squarely applicable to the
case at hand.

It is submitted, on behalf of the Respondents, that the intent of

imposition of CSS, which has been duly recognized by the Supreme Court,

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in Sesa Sterlite Judgment, can be summarized as under: (a) open access
is the freedom to procure power from any source; as per the Electricity Act,
it is the duty of the transmission utility/licensee to provide non-
discriminatory open access to its transmission system to every licensee
(including distribution licensee) and generating company; this would
gradually reduce the cost of generation/procurement and would generate
competition amongst sellers; (b) open access in distribution implies
freedom given to the consumer to obtain supply from any source of his
choice; through open access, the right of consumer to get supply of
electricity from a person other than the distribution licensee of his area of
supply, by using the distribution system of such distribution licensee, is
ensured; for the said purpose, the SERCs are required to specify
conditions; (c) the intent behind imposition of CSS is to compensate the
distribution licensee, who is bound to face adverse financial impact as a
consequence of a consumer opting to exit from its system and to avail
power through open access; this is due to the fact that such an exit will
hamper recovery of the fixed cost which such a licensee may have incurred
as part of his obligation to supply electricity; and (d) while providing
freedom of choice to the consumer, the provision for CSS creates a
balance with legitimate expectations/ interests of existing licensees.

It is further submitted, on behalf of the Respondents, that, in addition

to the above, Railways has, historically, been a consumer of TPCL-D; the
position has not changed even after MERC passed the Order dated
05.09.2019, and as on the date of filing the instant written submissions; the
Railways, in the present case, is attempting to take the benefit of the open
access system under the Electricity Act, while trying to evade the

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necessary obligations associated with it, claiming purported protection
under the Railways Act; the same is nothing but cherry picking of the
incentives given by legislature under both statutes as per its own
convenience; when historically there has been no change in the
predominant character of the Railways, there arises no occasion to exempt
them from the obligations that are associated with the said dominant
nature, being liability to pay CSS for open access being availed by the
Railways; additionally, the present issue has already been dealt with by
MERC in the impugned Judgment dated 05.09.2019 in Petition No. 145 of
2019; the Railways had contended before the MERC that the Railways Act
had overriding effect over the Electricity Act, and the distribution activity of
the Railways is governed by the Railways Act; the said contention of the
Railways has been dealt with by the MERC at Paras (6), (7), (8), (9), (10) &
(13) of the impugned order; thus MERC, while acknowledging the
authorization of Railways to undertake distribution of electricity under the
Railways Act, held that the Railways had to adhere to the various
requirements of the Electricity Act; for it to be considered as a deemed
distribution licensee under the Electricity Act, the licensee must undertake
distribution of electricity and power must be supplied to the consumers;
since it is an admitted fact that the Railways is consuming power for its own
use, and is not supplying/distributing electricity to consumers, it cannot be
considered as a deemed distribution licensee for seeking exemption of
CSS; MERC relied upon Sesa Sterlite Judgment, a perusal of which shows
that CSS is compensation payable to the distribution licensee irrespective
of the fact whether its line is used; open access consumers would pay tariff
applicable for supply which would include an element of CSS on certain
other categories; in terms of the 4th Proviso to Sections 38(2)(d), 39 (2)(d),

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40(c) and 42(2) of the Electricity Act, the only exemption granted from
levying CSS is where open access is provided to a person who has
established a captive generating plant for carrying electricity to the
destination of his own use; admittedly, in the present case, Railways is not
a captive user and is procuring power for self- consumption; from the
various provisions of the Railways Act and the Electricity Act, referred
above, it can be inferred as follows: (a) that Section 11 and 12 of the
Railways Act permits the Railways to undertake supply of electricity
(without prejudice and in alternate to other submissions); (b) the provisions
of the Electricity Act, in so far as it relates to distribution and supply of
electricity, is not in conflict with the provisions of the Railways Act; and (c)
Railways is procuring power for self-consumption, and self-consumption of
electricity cannot be said to be supply of electricity.

C.ANALYSIS:

As noted earlier in this order, we may not be justified in examining

whether Military Engineering Services is a deemed distribution licensee
under the 3rd proviso to Section 14, without sufficient material on record,
and that too behind their back. As the law declared by the Supreme Court,
in Sesa Sterlite, has also been extensively referred to earlier in this Order,
it is unnecessary to refer to them again under this head. Suffice it to note
that the Supreme Court, in Sesa Sterlite Ltd. v. Orissa Electricity
Regulatory Commission, (2014) 8 SCC 444, had affirmed the order of
this Tribunal, in “VEDANTA ALUMINIUM LTD VS OERC” (ORDER IN
APPEAL NO.206 of 2012 DATED 03.05.2013), holding that cross subsidy
surcharge is payable by the consumer to the distribution licensee of the
area, when it decides not to take supply from that licensee, but chooses to

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avail it from another distribution licensee; cross subsidy surcharge is a
compensation to the distribution licensee irrespective of the fact whether its
line is used or not, in view of the fact that, but for the open access, the
consumer would pay the tariff applicable for supply which would include an
element of cross-subsidy surcharge on certain other categories of
consumers; a consumer situated in an area is bound to contribute to
subsidising a low end consumer if he falls in the category of subsidising
consumer; once cross-subsidy surcharge is fixed for an area it is liable to
be paid, and such payment will be used for meeting the current levels of
cross-subsidy within the area; a fortiori, even a licensee which purchases
electricity for its own consumption, either through a “dedicated transmission
line” or through “open access”, would be liable to pay cross-subsidy
surcharge under the Electricity Act; cross-subsidy surcharge, broadly
speaking, is the charge payable by a consumer who opts to avail power
supply through open access from someone other than such distribution
licensee in whose area it is situated; and such surcharge is meant to
compensate such distribution licensee from the loss of cross-subsidy that
such distribution licensee would suffer by reason of the consumer taking
supply from someone other than such distribution licensee.
In holding that it was the only manner in which the two Acts (ie the
Electricity Act and the SEZ Act) could be harmoniously construed, the
Supreme Court, in Sesa Sterlite Ltd, expressed its agreement with the
rationale in the order of APTEL, in Vedanta Aluminium Ltd, that an entity
which utilises the entire quantum of electricity for its own consumption, and
does not have any other consumers, cannot be deemed to be a distribution
licensee, even by legal fiction; and the legal fiction cannot go further and

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make a person who does not distribute electricity to the consumers as a
distribution licensee.

While it is true that the SEZ has not been exempted from the
application of the Electricity Act, the fact remains that neither has the
Railways been exempted under Section 184 from the purview of the
Electricity Act. Since the Railways Act, 1989 is among the enactment
referred to in Section 173, it is only in case of inconsistency would the
provisions of the Railways Act prevail over provisions inconsistent therewith
under the Electricity Act, that too only to the extent of inconsistency and not
beyond.

The non obstante clause, used in Section 11 of the Railways Act,

would apply only in case of inconsistency between Section 11 of the
Railways Act and some provision of the Electricity Act, 2003. As the
Railways Act does not confer power on the Railways to distribute electricity
(ie sell electricity to consumers for a price), it cannot be said that the
provisions of the Electricity Act 2003, relating to distribution of electricity
and the obligations of distribution licensees, are contrary to and
inconsistent with any of the provisions of the Railways Act. It bears no
repetition that Section 2(31)(c) and clauses (a) to (h) of Section 11 of the
Railways Act do not deal with any matter distinct from and inconsistent with
what is provided in the Electricity Act. In the absence of any inconsistency,
Section 175 of the Electricity Act would require the provisions of the
Electricity Act to also apply to the Railways, in addition to the provisions of
the Railways Act, 1989.

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 In the light of the law declared in the aforesaid judgements of this
Tribunal in Vedanta Aluminium Ltd, and the Supreme Court in Sesa
Sterlite Ltd, and as Railways does not supply electricity to consumers, (ie
it does not sell electricity to unrelated third parties for a price), it needs no
re-iteration that the test of being a “distribution licensee” under Section
2(17) of the Electricity Act, as also the requirement of distributing electricity,
is not fulfilled by the Railways.

It is only a captive generation plant which is exempt from payment of

cross subsidy surcharge under Section 42 of the Electricity Act. While a
consumer can also avail distribution open access, it is subject to payment
of additional surcharge / cross subsidy surcharge under Sections 42(2) and
(4) of the Electricity Act, in addition to the charges for wheeling. It is
unnecessary for us to examine the question, whether a transmission
licensee is liable to pay cross subsidy surcharge on being granted open
access, in this batch of appeals, since what arises for consideration is only
whether Railways is a deemed distribution licensee and is entitled thereby
to seek open access without payment of additional surcharge / cross
subsidy surcharge.

As Railways does not supply electricity to consumers (ie sale of

electricity to 3rd parties), and consumes it itself, it cannot be held to be a
distribution licensee or a deemed distribution licensee under the 3rd proviso
to Section 14 of the Electricity Act.

D.INTERIM ORDERS ARE NOT BINDING:

It does not stand to reason that an order passed at the interlocutory

stage of an appeal would bind the Court/Tribunal when the main appeal, (in

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which the interlocutory order was passed earlier), is finally heard. An
interim order is passed by a Court on a prima facie appraisal of the facts
and circumstances of a particular case, and an interim order cannot
therefore be regarded as a precedent. (Bharat Coking Coal Limited v.
Chandrama Hard Coke Mfg. Co., 2005 SCC OnLine Cal 398). In order to
constitute a binding precedent, the decision to that effect must lay down
some ratio and, in that view of the matter, mere interim orders need not be
followed as a precedent. (Khattar & Company (Pvt.) Ltd. v. State of U.P.,
2001 SCC OnLine All 592).

The law declared by this Tribunal, in Vedanta Aluminium Limited v.

OERC & Ors. (2013 SCC OnLine APTEL 76), as affirmed by the Supreme
Court in Sesa Sterlite, is binding on this Tribunal. The interim order
passed by this Tribunal, in Appeal No. 276 of 2015 dated 16.12.2015, does
not have any finality attached to it and cannot be said to constitute a
precedent binding on this Tribunal when the main appeal No. 276 of 2015
(in which the interim order was passed earlier) is taken up for hearing.

E.CONCLUSION:

On Issue No,12 we conclude holding that, in the light of the law

declared by the Supreme Court, in Sesa Sterlite Limited -v- Orrisa
Electricity Regulatory Commission & Others, (2014) 8 SCC 444, and as
Railways consumes the entire electricity supplied to it (either directly or by
entities with which it has a jural relationship), it is obligated to pay cross
subsidy surcharge / additional surcharge for the electricity sourced by it
through open access.

XV.ISSUE 13:

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Whether the Central Commission has rightly exercised jurisdiction to
decide the Deemed Distribution Licensee status of Railways, for
adjudicating the aspects on the entitlement of Railways to seek open
access for the use of inter-state transmission system as defined under
Section 2(36) of the Electricity Act, 2003?

A.SUBMISSION ON BEHALF OF RAILWAYS:

Sri M.G. Ramachandran, Learned Senior Counsel appearing on

behalf of the Railways, would submit that the petition filed by Railways
before the CERC was not for grant of distribution license, or that Indian
Railways be declared as a Deemed Licensee; a perusal of the petition,
being Petition No.197/MP/2015 before the CERC, would show that the
petition was filed in the context of the State Transmission Utility not being
clear as to the Deemed Licensee status of Railways/Appropriate
Government statutorily provided for in Section 14- Third Proviso of the
Electricity Act, 2003; the requirement to approach the CERC arose
because the state utilities were raising issues on the grant of open access
of the inter-state transmission system to the Railways; in terms of Section
2(36) of the Electricity Act, 2003 read with Section 79(1)(c) and the
statutory Regulations, namely the Indian Electricity Grid Code notified
under Section 79(1)(h) and the Open Access Regulation to the inter-state
transmission system, wherein the CERC alone has jurisdiction to deal with
the matter; in this regard, the following Regulations have been notified by
the CERC, namely, (a) Indian Electricity Grid Code 2010 and (b) Central
Electricity Regulatory Commission (Grant of Connectivity, Long-Term
Access and Medium-Term Open Access in inter-state transmission and
related matters) Regulations, 2009 (Open Access Regulations); Regulation

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2(1)(b) of the Open Access Regulations provide that the applicant for grant
of open access can be a licensee or a consumer; accordingly, while
applying for open access, it is necessary to state whether the application is
by a licensee or by a consumer; in the context of the above, the Central
Commission has the authority to deal and settle the above aspect; and,
further, Regulation 32 of the Open Access Regulations provides for
redressal mechanism.

B.SUBMISSION OF RESPONDENTS:

It is submitted, on behalf of the Respondents, that the legislature, in

its wisdom, has not limited the scope of Open Access to consumption of
electricity; this is evident from a bare reading of the definition of Open
Access contained in Section 2(47) of the Electricity Act; therefore, by the
phrase ‘use’ under Section 2(47) of the Electricity Act, the concept of Open
Access can be availed for the purpose of consumption as well as effecting
supply from a generating company to a licensee; Sections 38(2)(d),
39(2)(d) and 40(c) of the Electricity Act reveal that there are only the
following scenarios contemplated in respect of Open Access, which are: (a)
electricity being transmitted by licensees; and (b) electricity being
consumed by end consumers; in terms of Section 38(2)(d) or 39(2)(d) or
40(c) of the Electricity Act, non-discriminatory Open Access to its
transmission system can be granted either when: (a) the power is being
sourced by a licensee or a generating company on payment of
transmission charges under Section 38(2)(d)(i), Section 39(2)(d)(i) and
Section 40(c)(i) or (b) a consumer under Section 38(2)(d)(ii), Section
39(2)(d)(ii) and Section 40(c)(ii) can avail transmission Open Access after
payment of charges under Section 42(2); therefore, consumption is only

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related to Section 38(2)(d)(ii), Section 39(2)(d)(ii) and Section 40(c)(ii);
similarly, in so far as Distribution Open Access is concerned under Section
42 of the Act, the same can be availed subject to payment of CSS in
addition to the charges for wheeling, and such levy of CSS is only
exempted for CGPs in terms of Section 42(2) & (4); in other words, the
moment Open Access is availed for the purpose of supply to consumers,
the liability of CSS is triggered; in fact, even if the dedicated transmission
line is being utilized by a licensee, such as the Appellant, for its own
consumption though open Access, CSS is payable; this is for the reason
that, if Open access is being availed under Section 38(2)(d)(i), 39(2)(d)(i)
and 40(c)(i) of the Electricity Act, then there is no need for compensating
the incumbent licensee, in as much as the incumbent licensee, in such a
scenario, would avail open access to bring electricity to its distribution area
and effect supply to the end consumer; thereby meaning that the existing
consumer base is not getting affected when open access under the
aforesaid provisions is being sought; as opposed to this, when open access
for consumption is being sought under Section 38(2)(d)(ii), 39(2)(d)(ii) and
40(c)(ii) of the Electricity Act, then admittedly the consumer of the existing
licensee is availing such an open access, and hence is stepping out of the
existing consumer mix of the incumbent licensee; it is for this activity,
wherein the end consumer steps out or leaves the existing consumer base
of the incumbent distribution licensee, is CSS then paid to compensate for
such loss being suffered by the incumbent distribution licensee; in this
regard, reliance is placed on para 31 and 36 of the Sesa Sterlite
Judgment; the Supreme Court, in Sesa Sterlite Judgment, considered a
situation where a distribution licensee avails open access to take supply of
electricity, and such electricity is being used for its own consumption; in

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fact, at para 30 of Sesa Sterlite Judgment, the Supreme Court specifically
dealt with such a scenario and held that, even if a distribution licensee is
taking power through open access and is using the same for its own
consumption, it will be liable to pay CSS; from a reading of the aforesaid
paras of Sesa Sterlite Judgment, it follows: (a) in terms of para 31 and 36,
even a Deemed Distribution Licensee, connected to a transmission
Licensee, is liable to pay CSS; (b) Railways, in its submissions, relies upon
Section 39(2) and 42(2) of Electricity Act to build a case that it will source
power and pay the necessary transmission charges; (c) this interpretation
is fundamentally flawed, because Railways is not a conventional licensee
who supplies power to end consumers, and hence does not fall under
Section 39(2)(d)(i) of the Electricity Act; the Railways is availing open
access to transmit power to its own area of supply; further, consumption
through open access is relatable only to Section 39(2)(d)(ii) of the
Electricity Act which necessarily entails payment of CSS; (d) if the
argument of the Railways is to be accepted, then consumption would be
required to be read into Section 39(2)(d)(i) of the Electricity Act, which is
impermissible; (e) it is an admitted fact that the Railways is procuring power
for self-consumption; and, therefore, the Sesa Sterlite Judgment is squarely
applicable to the case at hand.

It is submitted, on behalf of the Respondents, that the intent of

imposition of CSS, which has been duly recognized by the Supreme Court
in Sesa Sterlite Judgment, can be summarized as under: (a) open access
is the freedom to procure power from any source; as per the Electricity Act,
it is the duty of the transmission utility/licensee to provide non-
discriminatory open access to its transmission system to every licensee

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(including distribution licensee) and generating company; this would
gradually reduce the cost of generation/procurement and would generate
competition amongst sellers; (b) open access in distribution implies
freedom given to the consumer to obtain supply from any source of his
choice; through open access, the right of consumer to get supply of
electricity from a person other than the distribution licensee of his area of
supply, by using distribution system of such distribution licensee, is
ensured; for the said purpose, the SERCs are required to specify
conditions; (c) the intent behind imposition of CSS is to compensate the
distribution licensee, who is bound to face adverse financial impact as a
consequence of a consumer opting to exit from its system and to avail
power through open access; this is due to the fact that such an exit will
hamper recovery of the fixed cost which such a licensee may have incurred
as part of his obligation to supply electricity; and (d) while providing
freedom of choice to the consumer, the provision for CSS creates a
balance with legitimate expectations/ interests of existing licensees.

It is submitted, on behalf of the Respondents, that, in addition to the

above, the Railways, historically, has been a consumer of TPCL-D; the
position has not changed even after MERC passed the Order dated
05.09.2019, and as on the date of filing the instant written submissions; the
Railways, in the present case, is attempting to take the benefit of the open
access system under the Electricity Act, while trying to evade the
necessary obligations associated with it, claiming purported protection
under the Railways Act; the same is nothing but cherry picking of the
incentives given by legislature under both statutes as per its own
convenience; when historically there has been no change in the

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predominant character of the Railways, there arises no occasion to exempt
them from the obligations that are associated with the said dominant
nature, being liability to pay CSS for open access being availed by the
Railways; additionally, the present issue has already been dealt with by
MERC in the impugned Judgment dated 05.09.2019 in Petition No. 145 of
2019; the Railways had contended before the MERC that the Railways Act
had overriding effect over the Electricity Act, and the distribution activity of
the Railways is governed by the Railways Act; the said contention of the
Railways has been dealt with by the MERC at Paras (6), (7), (8), (9), (10) &
(13) of the impugned order; thus MERC, while acknowledging the
authorization of Railways to undertake distribution of electricity under the
Railways Act, held that the Railways had to adhere to the various
requirements of the Electricity Act; for it to be considered as a deemed
distribution licensee under the Electricity Act, the licensee must undertake
distribution of electricity and power must be supplied to the consumers’
since it is an admitted fact that the Railways is consuming power for its own
use, and is not supplying/distributing electricity to consumers, it cannot be
considered as a deemed distribution licensee for seeking exemption of
CSS; the MERC relied upon Sesa Sterlite Judgment, a perusal of which
shows that CSS is the compensation payable to the distribution licensee
irrespective of the fact whether its line is used; open access consumers
would pay the tariff, applicable for supply, which would include an element
of CSS on certain other categories; in terms of the 4th Proviso to Sections
38(2)(d), 39 (2)(d), 40(c) and 42(2) of the Electricity Act, the only exemption
granted from levying CSS is where open access is provided to a person
who has established a captive generating plant for carrying electricity to the
destination of his own use; admittedly, in the present case, Railways is not

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a captive user and is procuring power for self- consumption; from the
various provisions of the Railways Act and the Electricity Act, referred
above, it can be inferred as follows: (a) that Section 11 and 12 of the
Railways Act permits the Railways to undertake supply of electricity
(without prejudice and in alternate to other submissions); (b) the provisions
of the Electricity Act, in so far as it relates to distribution and supply of
electricity, is not in conflict with the provisions of the Railways Act; and (c)
Railways is procuring power for self-consumption, and self-consumption of
electricity cannot be said to be supply of electricity.

C. ANALYSIS:

It is true that the petition filed by the Railways before the CERC was
not for grant of a distribution licence or for them to be declared a
distribution license, and their petition was necessitated since their
entitlement for open access, without discharging their corresponding
obligation to pay cross subsidy surcharge, was doubted by the State
Transmission Utility. While Railways contend that the grant of open access
to the inter-State transmission system falls within the jurisdiction of the
CERC alone, necessitating their having to invoke its jurisdiction, the
submission, urged on behalf of the Respondents, is that, since open
access was sought by them as a deemed distribution licensee, it is only if
their status as a deemed distribution licensee is determined in the first
instance can it then seek to avail open access as a deemed distribution
licensee without having to pay cross subsidy surcharge; and the question,
whether or not Railways is a deemed distribution licensee, could only have
been examined by the State Commission under Section 86 of the Electricity
Act, and not the CERC.

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 It is unnecessary for us to examine this particular issue since we
have, ourselves, considered the issue whether or not the Railways is a
deemed distribution licensee, and have held that it does not; and that
Railways, as a consumer, can avail open access under clause (ii) of
Sections 38(2)(d), 39(2)(d) and 40(c) only on payment of cross subsidy
surcharge / additional surcharge.

The object sought to be achieved by Section 42, in imposing cross

subsidy surcharge where a consumer, within the area of supply of a
distribution licensee, seeks open access is to compensate the concerned
distribution licensee for the adverse financial impact caused to them as a
consequence of a consumer opting to avail electricity through a source
other than the said distribution licensee. The exit of a consumer, from
within its consumer base, would undoubtedly disable the distribution
licensee from recovering a part of its fixed cost which it was hitherto
recovering from the said consumer. It is evidently with a view to protect the
interests of the consumer in exercising his choice to procure electricity from
any source he chooses, while at the same time ensuring that the
distribution licensee does not suffer financial loss in the process, that this
requirement of payment of additional surcharge/cross subsidy surcharge
has been stipulated under Sections 42(2) and (4) of the Electricity Act.

D. CONCLUSION:

On Issue No. 13, we conclude holding that, since we have considered

the question whether or not Railways is a deemed distribution licensee, and
have held that it does not, it is unnecessary for us to examine this particular
issue as to whether or not the CERC had the jurisdiction to decide the

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Deemed Distribution Licensee status of the Railways, for adjudicating the
aspects on the entitlement of Railways to seek open access for the use of
inter-state transmission system as defined under Section 2(36) of the
Electricity Act, 2003.

XVI.CONCLUSION:

For the reasons afore-mentioned, it is held that Indian Railways is not

a deemed distribution licensee falling within the ambit of the third proviso to
Section 14 of the Electricity Act as it does not distribute/ supply electricity
(ie sell electricity to consumers for a price) as required of a distribution
licensee under the Electricity Act; and, even otherwise, as the entire
electricity which it receives from the Grid is completely consumed by it and
its constituents, it is required to pay additional/cross-subsidy surcharge to
different distribution licenses under Section 42 of the Electricity Act, if it
chooses to procure electricity from sources other than the concerned
distribution licensees within whose area of supply it is situated.

Appeal No. 276 of 2015, filed by the West Bengal State Electricity
Distribution Company Ltd against the Order passed by the Central
Electricity Regulatory Commission in Petition No. 197/MP/2015 dated
05.11.2015, and (2) Appeal No. 320 OF 2018 filed by the Punjab State
Power Corporation Ltd against the Order passed by the Punjab State
Electricity Regulatory Commission in Petition No. 3 of 2017 dated
28.02.2018, are allowed to the extent indicated in this Order.

Appeal No. 114 OF 2020 filed by Indian Railways against the Order
passed by the Odisha Electricity Regulatory Commission in Petition No. 55
of 2016 dated 25.02.2020, (2) Appeal No. 73 of 221 filed by Indian

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 Railways against the Order passed by the Kerela State Electricity
Regulatory Commission in OP.No. 31/19 dated 12.12.2019, (3) Appeal No.
213 of 2021 filed by Indian Railways against the order passed by the
Madhya Pradesh Electricity Regulatory Commission in Petition No. 11 of
2020 dated 05.05.2021, (4) Appeal No. 170 of 2019 filed by Indian
Railways against the order passed by the Rajasthan Electricity Regulatory
Commission in Petition No. RERC-1452/19 dated 23.04.2019, (5) Appeal
No. 343 of 2019 filed by Indian Railways against the order passed by the
Maharashtra Electricity Regulatory Commission in Petition No. 154 of 2019
dated 05.04.2019, and (6) Appeal No. 133 of 2020 filed by Indian
Railways against the order passed by the Haryana Electricity Regulatory
Commission in Petition No. HERC/PRO-11 of 2017 dated 17.06.2020, are
however dismissed to the extent indicated in this Order.

All the Appeals and other pending IAs are disposed of accordingly.

Pronounced in the open court on this 12th day of February, 2024.

(Sandesh Kumar Sharma) (Justice Ramesh Ranganathan)

Technical Member Chairperson

REPORTABLE/NON-REPORTABLE

tpd/mk

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