Case Note & Summary
The Supreme Court of India allowed the appeals filed by Indian Railways against the judgment of the Appellate Tribunal for Electricity (APTEL) dated 12.02.2024. The core dispute was whether Indian Railways qualifies as a deemed distribution licensee (DDL) under the third proviso to Section 14 of the Electricity Act, 2003, and if so, whether it is liable to pay cross-subsidy surcharge and additional surcharge under Section 42 of the Act for availing open access. The factual background involves Indian Railways seeking connectivity to procure 100 MW power from Gujarat Urja Vikas Nigam for its traction substations. The Ministry of Power issued a clarificatory letter on 06.05.2014 stating that Railways is a deemed licensee. The Central Electricity Regulatory Commission (CERC) held in favor of Railways, but APTEL reversed that decision, holding that Railways is not a DDL and is liable to pay surcharges. The Supreme Court examined the definitions under the Electricity Act, particularly 'distribution system' under Section 2(19) and 'consumer' under Section 2(15). It held that Railways' internal network for traction and station operations constitutes a distribution system, and Railways itself is not a consumer but a licensee. The court also relied on Section 11 of the Railways Act, 1989, which authorizes Railways to erect and operate distribution installations, and Section 173 of the Electricity Act, which provides that the Railways Act prevails in case of inconsistency. The court further held that the Ministry of Power's clarificatory letter is a binding administrative directive under Section 107 of the Electricity Act. Consequently, the Supreme Court set aside the APTEL judgment, restored the CERC order, and declared that Indian Railways is a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003, and is not liable to pay cross-subsidy surcharge or additional surcharge under Section 42 for open access.
Headnote
A) Electricity Law - Deemed Distribution Licensee - Third Proviso to Section 14 of the Electricity Act, 2003 - Indian Railways qualifies as a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003, as it is an Appropriate Government and its internal network for traction and station operations constitutes a distribution system under Section 2(19) of the Act. The court held that the Railways Act, 1989, particularly Section 11, read with Section 173 of the Electricity Act, 2003, authorizes Railways to distribute and supply electricity for its own use, and the deeming fiction in Section 14 third proviso applies. (Paras 5-10) B) Electricity Law - Cross-Subsidy Surcharge - Section 42 of the Electricity Act, 2003 - Indian Railways, as a deemed distribution licensee, is not liable to pay cross-subsidy surcharge or additional surcharge under Section 42 of the Electricity Act, 2003, when availing open access for procuring electricity for its own consumption. The court reasoned that since Railways is not a consumer under Section 2(15) of the Act, the surcharge provisions do not apply. (Paras 11-15) C) Electricity Law - Administrative Directive - Section 107 of the Electricity Act, 2003 - The clarificatory letter dated 06.05.2014 issued by the Ministry of Power, Government of India, is a binding administrative directive under Section 107 of the Electricity Act, 2003, and not merely advisory. The court held that such directives are mandatory and must be followed by regulatory commissions. (Paras 16-18) D) Electricity Law - Non-Obstante Clause - Section 173 of the Electricity Act, 2003 read with Section 11 of the Railways Act, 1989 - In case of inconsistency between the Electricity Act, 2003 and the Railways Act, 1989, the Railways Act prevails by virtue of Section 173 of the Electricity Act, 2003. The court held that Section 11 of the Railways Act authorizes Railways to erect and operate distribution installations, and this power is not restricted by the Electricity Act. (Paras 19-22)
Issue of Consideration
Whether Indian Railways qualifies as a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003; and if so, whether it is liable to pay cross-subsidy surcharge and additional surcharge under Section 42 of the Electricity Act, 2003 for availing open access.
Final Decision
The Supreme Court allowed the appeals, set aside the APTEL judgment dated 12.02.2024, and restored the CERC Order dated 05.11.2015. It declared that Indian Railways is a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003, and is not liable to pay cross-subsidy surcharge or additional surcharge under Section 42 of the Act for availing open access.
Law Points
- Deemed distribution licensee
- Section 14 third proviso
- Electricity Act 2003
- Cross-subsidy surcharge
- Section 42
- Open access
- Railways Act 1989
- Section 11
- Non-obstante clause
- Section 173
- Distribution system definition
- Section 2(19)
- Consumer definition
- Section 2(15)
- Administrative directive
- Section 107
- Binding nature
- Precedent
- Sesa Sterlite
- Northern Railways
