BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR

Suo- Motu Petition No. 1446 of 2014.

In the Matter of:

Initiation of Suo motu proceedings for issuance of the license under Section 14 of the Electricity Act, 2003 read with Sections 19, 20, and 28 of the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003 to the unbundled entities of erstwhile State Electricity Board viz, GEB.

Respondent No. 1 : Gujarat Energy Transmission Corp. Limited, Sardar Patel Vidyut Bhavan, Race Course Circle, Vadodara – 390007.

Represented By : Learned Advocate Shri M.G. Ramchandran and Ms. Venu Birappa.

Respondent No. 2 : Dakshin Gujarat Vij Company Limited, Corporate Office, Nana Varachha Road, Kapodara Char Rasta, Surat- 395 006.

Represented By : Shri B.C. Godhani.

Respondent No. 3 : Company Limited, Sardar Patel Vidyut Bhavan, Race Course Circle, Vadodara – 390007.

Represented By : Shri V.K. Gulati.

Respondent No. 4 : Company Limited, Off. Nana Mava Main Road, Laxmipura, Rajkot-360004.

Represented By : Learned Advocate Shri M.G. Ramchandran and Shri J.J. Gandhi.

1 Respondent No. 5 : Company Limited, Visnagar Road, Mehsana-384001.

Represented By : Nobody was present.

Respondent No. 6 : Kandla Port Trust, Business Development Cell, P.O.Box No. 50, Administrative Building Gandhidham, Kutch, Gujarat.

Represented By : Nobody was present.

Respondent No. 7 : MPSEZ Utilities Private Limited, Adani House, Near Mithakhali Circle, Navrangpura, Ahmedabad-380009, Gujarat, India.

Represented By : Shri Pratik Lunavia.

Respondent No. 8 : Aspen Infrastructures Limited, Survey No. 26, Village Pipaliya, Taluka: Waghodia, Dist.: Vadodara – 391760.

Represented By : S/Shri Ajay Puri and Jalpesh.

CORAM:

Shri K. M. Shringarpure, Member Dr. M. K. Iyer, Member Shri Pravinbhai Patel, Chairman

2 Date: 20/05/2015.

Daily Order

1) The matter was kept for hearing on 30.12.2014. On that day, learned advocate

Shri M.G. Ramchandran on behalf of the Respondent Nos. 1 to 5 submitted that

the Respondent No. 1 to 5 are the unbundled entities of erstwhile GEB, the State

Electricity Board. He submitted that as per the provisions of Section 131 of

Electricity Act, 2003, the erstwhile State Electricity Board viz, GEB was

unbundled by the Government of Gujarat and function of transmission was

entrusted to Respondent No. 1 Company while the distribution function was

entrusted to the Respondent No. 2 to 5 vide Government Notification No. GHU-

2003-58-GEB-3537 dated 24.10.2003. Thus, these companies are deemed

licensees as per the provisions of Section 131 of Electricity Act, 2003 read with

Section 14 of Electricity Act, 2003 and also Sections 19, 20 and 28 of Gujarat

Electricity Industry (Reorganization and Regulations) Act, 2003.

1.2. He further submitted that the issue of deemed licensees arose in Appeal No. 206

of 2012 filed by M/s. Vedanta Aluminum Limited and Hon’ble APTEL passed an

order dated 03.05.2013 in the aforesaid appeal. The decision of the Hon’ble

APTEL was challenged before the Hon’ble Supreme Court by filing a Civil Appeal

No. 5479 of 2013 in which the Hon’ble Supreme Court decided the matter vide

order dated 25.04.2014. In the aforesaid decision, the Hon’ble Supreme Court

3 decided that the SEZ developers in the SEZ area are deemed licensees as per the

provisions of the Section 14 of the Electricity Act, 2003. Therefore, no specific

application is required to be filed by the Respondent Nos. 1 to 5 for grant of

license, and as such they may be discharged from the Suo-motu proceedings.

1.3. He further submitted that as State Electricity Board, viz, GEB was a licensee in

terms of provisions of the Indian Electricity Act, 1910 and as there was no time

limit specified for the State Electricity Board’s (SEB) existence as licensees, it is

a perpetual licensees having no time limit for such licensee’s functions to be

carried out by the SEB.

2) On query by the Commission regarding the licensee’s area demarcation, he

submitted that the same is part of re-organization and re-structuring of SEB,

(erstwhile GEB) done by the State Government and the area of licensee is as per

the jurisdiction of the Zonal offices of the then SEB, and also approved in the

map by the State Government. He submitted that the map showing licensees’

area alongwith notification for re-organization and re-structuring of the SEB

(erstwhile GEB) will be submitted by Respondent Nos. 1 to 5, within 10 days for

consideration of the Commission.

3) Shri Pratik Lunavia, on behalf of the Respondent No. 7 MPSEZ Utilities Pvt.

Limited, submitted that they have filed License Application No. 06/2008 before

the Commission. In the said matter, the Commission passed an order dated

4 17.04.2010 allowing the applicant to withdraw the application as it is a deemed

licensee in terms of Ministry of Commerce & Industry, Department of

Commerce, Government of India Notification No. S.O. 528 (E) dated 03.03.2010

which specifies that all SEZ developers shall be deemed licensees for the

purpose of clause (b) of Section 14 of Electricity Act, 2003. Therefore, the

respondent is a deemed licensee as considered by the Commission in its order

dated 17.04.2010. Therefore, the petitioner is not required to submit any

separate application/details for licence as stated in the present Suo-motu

petition. He further submitted that the Hon’ble Supreme Court has in its

judgement dated 25.04.2014 in Civil Appeal No. 5479 of 2013 held that the SEZ

developers are deemed licensees as per the provisions of Electricity Act, 2003

read with provisions of SEZ Act, 2005 and rules and regulations framed under it.

3.1. On query by the Commission regarding the maps showing area of the licensee,

the respondent agreed to submit the same.

4) Shri Ajay Puri, on behalf of the Respondent No. 8, submitted that the respondent

had filed a Licence Application No. 4 of 2008 for issuance of distribution license.

In the said application, the Commission passed an order dated 16.12.2009 and

granted the distribution license to ASEPN Infrastructure Limited, formerly

known as Synefra Engineering & Construction Limited. Thus, the Commission

5 has already granted the distribution license to the Respondent No. 8. Hence, the

respondent is not required to file an application before the Commission again.

5) We have carefully considered the submissions made by the parties. We note that

the Respondent No. 1 to 5 are the unbundled entities of erstwhile GEB which

was a State Electricity Board, constituted under the Electricity (Supply) Act,

1948. It was also a licensee within the meaning of Indian Electricity Act, 1910.

The assets and liabilities of Transmission Department of erstwhile GEB were

transferred along with the transmission function to Respondent No. 1 by the

Government of Gujarat on unbundling of erstwhile GEB through Notification No.

GHU-2003-58-GEB-3537 dated 24.10.2003. So far as the function of distribution

of electricity in the State is concerned, the same was transferred along with

assets and liabilities of the Distribution Department of erstwhile GEB to the

Respondent No. 2 to 5 by Government of Gujarat vide Notification No. GHU-

2003-58-GEB-3537 dated 24.10.2003. The aforesaid unbundling was done by

Government of Gujarat under Section 131 of Electricity Act, 2003, which reads

as under:

“…………………… PART XIII

REORGANISATION OF BOARD

131. Vesting of property of Board in State Government

6 (1) With effect from the date on which a transfer scheme, prepared by the State Government to give effect to the objects and purposes of this Act, is published or such further date as may be stipulated by the State Government (hereafter in this Part referred to as the effective date), any property, interest in property, rights and liabilities which immediately before the effective date belonged to the State Electricity Board (hereinafter referred to as the Board) shall vest in the State Government on such terms as may be agreed between the State Government and the Board. (2) Any property, interest in property, rights and liabilities vested in the State Government under sub-section (1) shall be re-vested by the State Government in a Government company or in a company or companies, in accordance with the transfer scheme so published along with such other property, interest in property, rights and liabilities of the State Government as may be stipulated in such scheme, on such terms and conditions as may be agreed between the State Government and such company or companies being State Transmission Utility or generating company or transmission licensee or distribution licensee, as the case may be:

PROVIDED that the transfer value of any assets transferred hereunder shall be determined, as far as may be, based on the revenue potential of such assets at such terms and conditions as may be agreed between the State Government and the State Transmission Utility or generating company or transmission licensee or distribution licensee, as the case may be.

(3) Notwithstanding anything contained in this section, where,--

(a) the transfer scheme involves the transfer of any property or rights to any person or undertaking not wholly owned by the State Government, the scheme shall give effect to the transfer only for fair value to be paid by the transferee to the State Government;

(b) a transaction of any description is effected in pursuance of a transfer scheme, it shall be binding on all persons including third parties and even if such persons or third parties have not consented to it.

(4) The State Government may, after consulting the Government company or company or companies being State Transmission Utility or generating company or transmission licensee or distribution licensee, referred to in sub- section (2) (hereinafter referred to as the transferor), require such transferor to draw up a transfer scheme to vest in a transferee being any other generating

7 company or transmission licensee or distribution licensee, the property, interest in property, rights and liabilities which have been vested in the transferor under this section, and publish such scheme as statutory transfer scheme under this Act.

(5) A transfer scheme under this section may—

(a) provide for the formation of subsidiaries, joint venture companies or other schemes of division, amalgamation, merger, reconstruction or arrangements which shall promote the profitability and viability of the resulting entity, ensure economic efficiency, encourage competition and protect consumer interests;

(b) define the property, interest in property, rights and liabilities to be allocated—

(i) by specifying or describing the property, rights and liabilities in question; or (ii) by referring to all the property, interest in property, rights and liabilities comprised in a described part of the transferor's undertaking; or (iii) partly in one way and partly in the other;

(c) provide that any rights or liabilities stipulated or described in the scheme shall be enforceable by or against the transferor or the transferee;

(d) impose on the transferor an obligation to enter into such written agreements with or execute such other instruments in favour of any other subsequent transferee as may be stipulated in the scheme;

(e) mention the functions and duties of the transferee;

(f) make such supplemental, incidental and consequential provisions as the transferor considers appropriate including provision stipulating the order as taking effect; and (g) provide that the transfer shall be provisional for a stipulated period.

(6) All debts and obligations incurred, all contracts entered into and all matters and things engaged to be done by the Board, with the Board or for the Board, or the State Transmission Utility or generating company or transmission licensee or distribution licensee, before a transfer scheme becomes effective shall, to the extent specified in the relevant transfer scheme, be deemed to have been incurred, entered into or done by the Board, with the Board or for the State Government or the transferee and all suits or other legal proceedings

8 instituted by or against the Board or transferor, as the case may be, may be continued or instituted by or against the State Government or concerned transferee, as the case may be.

(7) The Board shall cease to be charged with and shall not perform the functions and duties with regard to transfers made on and after the effective date.

Explanation: For the purposes of this Part,--

(a) "Government Company" means a Government company formed and registered under the Companies Act, 1956 (1 of 1956);

(b) "Company" means a company to be formed and registered under the Companies Act, 1956 (1 of 1956) to undertake generation or transmission or Distribution in accordance with the scheme under this Part.

……………….”

6) It is necessary to refer first proviso of Section 14 of the Electricity Act, 2003

which reads as under:

“………………..

PROVIDED that any person engaged in the business of transmission or supply of electricity under the provisions of the repealed laws or any Act specified in the Schedule on or before the appointed date shall be deemed to be a licensee under this Act for such period as may be stipulated in the licence, clearance or approval granted to him under the repealed laws or such Act specified in the Schedule, and the provisions of the repealed laws or such Act specified in the Schedule in respect of such licence shall apply for a period of one year from the date of commencement of this Act or such earlier period as may be specified, at the request of the licensee, by the Appropriate Commission and thereafter the provisions of this Act shall apply to such business:

……………….”

9 As per the first proviso of Section 14 of the Electricity Act, 2003, the companies

who are assigned the functions of transmission or supply of the electricity

carried out by erstwhile State Electricity Board are deemed licensees. Thus, the

Respondent No. 1 who is assigned the functions of transmission and the

Respondent No. 2 to 5 who are assigned the function of distribution and supply

of electricity are deemed licensees as per the provisions of Electricity Act, 2003.

7) We also note that Section 19, 20 and 28 of Gujarat Act, 2003 also recognize that

the entities to whom function of the transmission and distribution and supply of

the electricity is transferred as part of restructuring and re-organisation of SEB

are deemed licensees as per the provisions of Electricity Act, 2003. Thus, the

provisions of the said Act which are not inconsistent with the provisions of

Electricity Act, 2003 are valid and legal. Therefore, the Respondent No. 1 to 5

are deemed licensees in terms of the provisions of Electricity Act, 2003 read

with Gujarat Act, 2003.

8) As far as the period of the licence of the Respondent No. 1 to 5 is concerned,

there is no period specified for continuation of the functions of generation,

transmission, and distribution of electricity by SEB in the Indian Electricity Act,

1910 read with Electricity (Supply) Act, 1948. Therefore, prior to deciding the

period of licence of the Respondent No. 1 to 5, the respondents are required to

substantiate their continuation of business in perpetuity. We also note that the

10 Respondent No. 1 to 5 came into existence after the State Electricity Board, as

part of restructuring and re-organisation of SEB carried out by the State

Government under Section 131 of Electricity Act, 2003, ceased to exist and the

functions of the transmission and distribution of electricity were assigned to the

respondents which are considered as transmission and distribution licensee.

Moreover, as per Section 15 (8) of Electricity Act, 2003, the licence period is

only 25 years. Therefore, whether the assignment or transfer of functions, to the

Respondent No. 1 to 5 as deemed licensees is for 25 years or perpetual is not

clear. The respondents are directed to make their submissions on the above

query within 15 days of receipt of this order so that the Commission may decide

the same.

9) During the hearing, learned advocate, on behalf of the Respondent Nos. 1 to 5,

submitted that he will provide the Government notification issued by the

Government of Gujarat alongwith the maps showing the area of licensees. The

respondents are directed to submit the same within 15 days from the receipt of

this order.

10) As regards the Respondent No. 6, the Chief Commissioner for Kutch, issued the

license for supply of electricity as per the Indian Electricity Act, 1910 and

Electricity (Supply) Act, 1948 on 12.04.1956 by Government of Kutch vide

Notification No. APP-133-55. The area of the license specified in the said license

is as under: 11 “………. 3. Area of Supply: The area within the supply of energy is authority by this licence hereinbefore and hereinafter referred to as the “area of supply” shall be the whole of the area bounded as follow:- North – by the United Salt works. South – by the Khari Creck. East – by the Kandla Creck. West – by the Kakti Creck. The boundaries where of are delineated in red colour in the deposited map. ………………”

As far as the period of the licence is concerned, there is no mention about the

same. Thus, it is a perpetual licence. We, therefore, decide that the Respondent

No. 6 is a deemed licensee within the meaning of the Section 14 of Electricity

Act, 2003 having the area as specified in the para above.

11) We note that Respondent No. 7 which is an SEZ developers is a deemed licensee

as per the provisions of Section 4 of the SEZ Act, 2005 read with

regulations/rules framed under it and Government of India Notification No. S.O.

528 (E) on 03.03.2010. The Hon’ble Supreme Court of India in its judgment

dated 25.04.2014 in Civil Appeal No. 5947 of 2013 decided in para 43 and 44 as

under:

“…………………….

12 43. We are in agreement with the aforesaid rationale in the impugned order of the Appellate Tribunal as that is the only manner in which the two Acts can be harmoniously construed. To recapitulate briefly, in the present case no doubt by virtue of the status of a developer in the SEZ area, the Appellant is also treated as deemed Distribution Licensee. However with this, it only gets exemption from specifically applying for licence under Section 14 of the Act. In order to avail further benefits under the Act, the Appellant is also required to show that it is in fact having distribution system and has number of consumers to whom it is supplying the electricity. That is not the case here. For its own plant only, it is getting the electricity from Sterlite Ltd. for which it has entered into PPA. We have to keep in mind the object and scheme of SEZ Act which envisages several units being set up in a SEZ area. This is evident from a collective reading of the various provisions of the SEZ Act viz. Section 2(g) (j)(za)(zc), Section 3, 4, 11, 12, 13 and 15.There can 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 03.03.2010 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 the SEZ only for itself.

44. Having regard to the aforesaid factual and legal aspects and keeping in mind the purpose for which CSS is payable, as explained in detail in the earlier part of this judgment, we are of the view that on the facts of this case it is not possible for the Appellant to avoid payment of CSS to WESCO. We, therefore, do not find any merit in this Appeal which is accordingly dismissed.

…………………..”

From the above, it is clear that the Respondent No. 7 is a deemed licensee under the provisions of the Section 14 of Electricity Act, 2003. We also note that the

Commission had in its order dated 17.04.2010 in Licence Application No. 06 of

2008 decided that the Respondent No. 7 is a deemed licensee as per the provisions of the Electricity Act, 2003. Therefore, we decide that the respondent is a distribution licensee within the meaning of the Electricity Act, 2003. We note that it is necessary to specify the area of the supply of distribution of

13 electricity in the map. The respondent has not submitted the map indicating the

area of supply stating the survey numbers of land which is shown as part of SEZ

notification issued by the Government of India for issuance of SEZ licence to the

respondent. We, therefore, direct the respondent to submit the map indicating

area of supply stating the land survey number which is the part of SEZ within 15

days from the receipt of this order.

12) We note that the Commission passed an order dated 16.12.2009 in Licence

Application No. 4 of 2008 declaring Synefra Engineering & Construction Limited

as a distribution licensee in SEZ area notified by the Government of India vide

Notification No. S.O. 11 1084 (E) dated 03.07.2007 and subsequent notification

dated 11.07.2008 and 21.05.2009. The Respondent No. 8 is the SEZ developer,

and hence, it is a deemed licensee within the meaning of the provisions of SEZ

Act, 2005 read with the provisions of Electricity Act, 2003. We also note that the

Respondent No. 8 failed to submit the area map for supply of electricity showing

the land survey numbers which are stated in SEZ Notification No. S.O. 11 1084

(E) dated 03.07.2007 and subsequent notification dated 11.07.2008 and

21.05.2009 issued by the Ministry of Commerce, Government of India. As the

map for area of supply is one of the important documents, the respondent is

directed to submit the same within 15 days from the receipt of this order.

14 13) The licensees are directed to submit the maps showing the survey numbers for

supply of electricity duly certified by land revenue authority or E & P

Department, Government of Gujarat and in case of entities unbundled under the

provisions of the Electricity Act, 2003 read with Gujarat Electricity Industry

(Reorganization and Regulations) Act, 2003, alongwith the government

notifications, within 15 days from the date of this order.

14) We order accordingly.

Sd/- Sd/- Sd/- SHRI K. M. SHRINGARPURE DR. M. K. IYER SHRI PRAVINBHAI PATEL MEMBER MEMBER CHAIRMAN

Place: Gandhinagar. Date: 20/05/2015.

15