Allahabad High Court

Tirupati Cylinders (Pvt.) Ltd. ... vs State Of U.P. And 4 Ors. on 31 May, 2018

Bench: Sudhir Agarwal, Ajit Kumar




HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Judgment Reserved on :27.11.2017
 
Judgment Delivered on : 31.05.2018
 
Court No. - 34
 

 
Case :- WRIT - C No. - 17854 of 2015
 

 
Petitioner :- Tirupati Cylinders (Pvt.) Ltd. And 4 Ors.
 
Respondent :- State Of U.P. and 4 Ors.
 
Counsel for Petitioner :- Bidhan Chandra Rai
 
Counsel for Respondent :- C.S.C.,A.K. Saxena,Anadi Krishna Narayana,Nripendra Mishra,Shrawan Kumar Tripathi
 

 
Hon'ble Sudhir Agarwal,J.

Hon'ble Ajit Kumar,J.

(Delivered by : Hon'ble Ajit Kumar, J.)

1. Heard learned counsel for petitioners, Sri Ashok Mehta, learned Senior Advocate assisted by Sri Anshul Kumar Singhal for U.P. Power Corporation Ltd. (hereinafter to be referred as 'UPPCL') and Sri Nripendra Mishra, learned counsel for Paschimanchal Vidyut Vitaran Nigam Ltd. (hereinafter to be referred as 'PVVNL').

2. Petitioners before this Court are industrial entrepreneurs and are consumers of respondents for supply of electricity to industrial units being run by them. Grievance raised by petitioners is that they are running industrial units and entitled to uninterrupted power supply i.e. 24 x 7 from respondents as per policy of State Government and consequentially issued Government Order dated 21.09.2012. By order impugned, passed by third respondent, though in the form of communication, they are deprived of uninterrupted power supply and resultantly their industrial units are prejudiciously affected as consequentially issued order dated 30.01.2015 has reversed status of 11 KV Makhiali feeder from Industrial feeder to Rural feeder.

3. The contention of petitioners is that under Industrial Policy of 2012, those industrial consumers who are having supply from industrial feeder, catering more than 75% industrial load was exempted from power cut but in view of impugned directions issued by third respondent, exemption stands withdrawn and inaction on the part of first respondent on the representation of petitioners, has forced them to file present writ petition.

4. Before coming to the factual controversy with regard to grievance raised by petitioners, it is necessary to appreciate Industrial Investment Policy of State Government of the year 2012 and consequential action taken by State Government vide Government Order dated 21.09.2012 and other consequential actions in this regard by 4th and 5th respondents.

5. State Government with an objective to score 10% growth in Gross Domestic Product (GDP), introduced Infrastructure & Industrial Investment Policy, 2012 (hereinafter referred to as 'Industrial Policy') with a view to achieve all round development of State. Considering that a major contribution could be of secondary sector (Industrial), being a major sector for over all growth and development of State Economy, Government framed and created more infrastructural facilities for the said sector. The energy, being basic need in development towards growth of economy, State Government laid down a policy for uninterrupted power supply to Industries that are getting supply from 132/220 KV feeder. It further provided that those feeders who are having 75% industrial load, located at 33/11 KV sub-Station, shall be exempted from power cuts. The relevant paras 26.3 & 26.4 of Industrial Policy read as under:

"2.6.3- Efforts will be made for ensuring 24 hours uninterrupted power supply to the industries situated in all industrial areas of the State government. All the industries getting electricity supply from 132/220 KVA feeders, will be exempted from power cuts, until it is necessary for safety of the grid. For this purpose, generation and distribution systems will be adequately upgraded.

2.6.4- All such feeders of 33/11 KVA substations, which have more than 75 per cent industrial load, will be recognized as industrial feeders and exempted from power cuts. If consumers of other categories are connected to these feeders, then steps would be taken to separate them. Dedicated feeders constructed by the industries at their own cost will in no case be tapped for other purposes. It will be allowed only if, the industry concerned permits tapping by mutual agreement with any other industrial unit under the existing rules."

6. In order to translate above policy into effective action on the ground and to ensure that as contemplated and aimed in Industrial Policy, the infrastructure as far as energy is imposed, State Government issued a Government order on 21.09.2012. Industrial Investment Policy ensures that on priority basis action should be taken. This Government Order is addressed to Managing Director, UPPCL.

7. In view of aforesaid Government Order, Director, UPPCL issued letter to Managing Directors of all four Distribution Licensees including PVVNL for necessary action in this regard on priority basis. Accordingly, uninterrupted electricity supply was ensured to petitioners' industrial units which are getting supply from 33/11 KV substation Makhiali. Substation Makhiali was directed to be linked with 132 KV substation, Jauli, and substation Makhiali is converted into industrial feeder by higher authorities vide letters dated 06.08.2013 issued by Superintending Engineer, Electricity Distribution Circle, Muzaffarnagar in response to letter of Executive Engineer, Electricity Supply Division, Muzaffarnagar. With the recognition of feeder nos. 1 and 2 as industrial feeders of 11 KV in terms of policy. Vide office memo dated 15.10.2014 issued by Managing Director, PVVNL, State Government was also apprised. Thus, with the conversion of the otherwise rural feeders into industrial feeder, uninterrupted power supply i.e. 24 x 7 was ensured to petitioners. The concerned feeder stood exempted from power cuts under Industrial Policy and Government Order dated 21.12.2012.

8. Surprisingly enough, Managing Director, PVVNL sought some clarification vide letter dated 08.01.2015 from Director (Commercial) with regard to minutes of meeting relating to point no. 1 in which certain anomalies were pointed out for converting 11 KV feeders into industrial feeder so as to seek exemption from power cut. UPPCL is neither a transmission licensee nor distribution licensee, yet, its Director, instead of referring matter to competent authority, himself proceeded to give clarification vide letter dated 02.02.2015 annexing therewith a minutes of meeting dated 30.01.2014 of UPPCL. The clarification made by Director (Commercial) made a point of reversal from the stand of State Government under Government Order dated 21.09.2012 by stating that only those feeders who are having 24 hours supply and are having additional industrial load of more than 75% can be converted into industrial feeder.

9. We have carefully examined relevant clauses of Government Order dated 21.09.2012 which was issued as a consequential action to Industrial Policy, 2012 introduced by State Government. We do not find any such condition of "having already a schedule of 24 hours supply" for such feeders (33/11 KV feeders) to be converted into industrial feeder. Such a condition, as has been placed by way of clarification by Director (Commercial) is neither part of industrial policy nor, so provided under the said Government Order. Only condition was that 33/11 KV feeders having industrial load of more than 75% shall be converted into industrial feeder. This is also clear from letter of Superintending Engineer, Electricity Distribution Circle, Muzaffarnagar dated 06.08.2013 (Annexure No. 5 to the writ petition) wherein it has been categorically stated that 33/11 KV substation Makhiali and 33/11 KV sub station Nairana were tagged together for uninterrupted power supply as till then 33/11 KV Makhiali was having status of rural feeder and it was proposed to be converted into industrial feeder on the request made by Executive Engineer, Electricity Supply Division-1, Muzaffarnagar. This is also apparent from letter of Superintending Engineer dated 06.08.2013 in which new Bay was suggested to be prepared as Bay 'B' for the purposes of substation Makhiali so as to connect two feeders of 132/33 KV Jauli Road independently and with an object to avoid any breakdown in electricity supply and to fulfill objects as enshrined in the Industrial Policy, 2012.

10. Superintending Engineer, Electricity Distribution Circle, Muzaffarnagar in his report and proposal for giving uninterrupted electricity supply to industries situate at Bhopa Road, within the range of substation Makhiali, including petitioners, clearly demonstrated deficiency between supply and demand and accordingly suggested that all such substations that are having more than 75% industrial load should be converted into industrial feeders. Thus, it is clear that there was nothing like that as suggested by clarification letter of the Director dated 02.02.2015, inasmuch as, in view of Government order, exemption from power cut benefit has to be given to all those consumers who are having supply from such electricity feeders having more than 75% industrial load. No resolution of UPPCL can be to the contrary.

11. Further, Director (Commercial), UPPCL has no business to issue such direction even by way of clarification as has been done in the present case. We have also examined Minutes of Meeting and found that it was relating to tariff and not for rescheduling of status of feeders from industrial to rural. Director, we have no hesitation in saying, completely misread the resolution of meeting. The adverse effect of misplaced clarification made by Director (Commercial), UPPCL has been that Managing Director, PVVNL passed consequential order dated 03.03.2015 canceling office order dated 15.10.2014 whereby 11 KV Makhiali feeder was declared to be industrial feeder from rural feeder.

12. Having found action of Director (Commercial) to be absolutely without authority of law, we summoned Director (Commercial), UPPCL to explain his conduct in passing such order by transgressing his authority as Director (Commercial), UPPCL has nothing to do with transmission. The Director (Commercial), UPPCL, Shri Sanjay Kumar Singh, on being questioned in what capacity he has issued the said letter and what right he had to pass such order guiding distribution and supply of electricity to all Discoms, Sri Sanjay Kumar Singh admitted that had had no such authority to issue any such direction. However, hesitantly he added that impugned letter has been issued by him only in response to a query made by Managing Director, PVVNL. When we further put question how clarification has come in the last part of letter dated 02.02.2015 which is not in consonance with industrial policy or consequential Government Order, he expressed his regret for having issued such letter which was totally beyond his authority. Besides above, Sri Ashok Mehta, learned Senior Advocate assisted by Sri Anshul Kumar Singhal, appearing for UPPCL fairly stated that letter dated 02.02.2015 ought not to have been issued by Director (Commercial). He also admitted that UPPCL is neither a Transmission Licensee nor Distribution Licensee either when above letter was issued or even today and therefore, no such clarification by it, and so also, no such order could have been passed by respondent no. 4.

13. At this stage, we inquired from learned counsel for UPPCL as to in what capacity UPPCL is issuing regularly directions in the functioning of PVVNL, which is an independent entity, had its own license and is liable to function in its own capacity. He informed that PVVNL is a subsidiary company and its entire share holding is owned by UPPCL, thus, is a holding company and therefore, is controlling functioning of PVVNL. This assumption on the part of Holding company that it can run a subsidiary company like its own department, in our view, is thoroughly misconceived and contrary to law. Here, we may refer to relevant statutory provisions and examine status of UPPCL and PVVNL in the light of relevant statutes and other relevant documents.

14. In State of Uttar Pradesh, generation, distribution and transmission of electrical energy, initially, and in particular after 1975, was solely in the hands of the U.P. State Electricity Board ( in short ''UPSEB'), a statutory body constituted under Section 5 of Electricity (Supply) Act, 1948 (in short ''1948 Act'). With the expansion of generation units, a Government Company, namely, U.P. Rajya Vidyut Utpadan Nigam Limited (in short ''UPRVUNL') was incorporated under Companies Act, 1956 in 1980. It is wholly owned by State Government of Uttar Pradesh. Similarly, in 1985, another company, U.P. Jal Vidyut Nigam Limited (in short ''UPJVNL') was incorporated which was also wholly owned by State Government. A major power reform was brought into force in 1999 by State legislature enacting U.P. Reforms Act, 1999 which was assented to, by President of India on 23.6.1999 and published in U.P. Gazette (Extraordinary) on 7.7.1999. Section 13 of U.P. Reforms Act, 1999 provides for formation of a company namely UPPCL registered under Companies Act, 1956, which is required to undertake planning and co-ordination in regard to transmission, to determine electricity requirement in the State in consultation with the Generation Companies etc. and be a legal successor of UPSEB in relation to all power purchase and transmission agreements. Section 23(1) of U.P. Reforms Act, 1999 provides that on and from the date specified in Transfer Scheme, prepared by State Government to give effect to objectives of Act, all properties, interest, right and liabilities of UPSEB shall be vested in the State Government and, thereafter, shall re-vest in UPPCL and generating companies in accordance with Transfer Scheme so specified, on such terms and conditions as may be determined, by State Government.

15. State Government in exercise of powers under section 23 (1) & (2) of U.P. Reforms Act, 1999 published U.P. Electricity Reforms Transfer Scheme, 2000 (hereinafter referred to as 'Transfer Scheme, 2000'), which came into force on 14th January 2000. Under clause 4 and 5 of Transfer Scheme 2000, all thermal generating undertakings stood transferred to UPRVUNL, hydro generating undertakings transferred to UPJVNL and the undertakings forming part of transmission and distribution to UPPCL.

16. By another Transfer Scheme notified on 15.01.2000, assets, liabilities and personnel of Kanpur Electricity Supply Authority were transferred to another company namely, Kanpur Electricity Supply Company which was also registered as a "Government Company" under the Companies Act, 1956 (hereinafter referred to as the "1956 Act"). Since then, aforesaid companies started to operate and distribute electricity in State of U.P.

17. In the year 2003, State of U.P. felt need for further unbundling of UPPCL. Four new companies were formed namely, (1) Dakshinanchal Vidyut Vitran Nigam Limited (Meerut Discom), (2) Madhyanchal Vidyut Vitran Nigam Limited (Lucknow Discom) (3) Paschimanchal Vidyut Vitran Nigam Limited (Meerut Discom) and (4) Purvanchal Vidyut Vitran Nigam Limited (Varanasi Discom). With incorporation of aforesaid four companies, distribution of electrical energy in the territorial jurisdiction of aforesaid four companies got transferred to them w.e.f. 12.8.2003. Consequently, UPPCL ceases to be a distributing company then on in view of clauses 2(g) read with clause 3 of U.P. Power Sector Reforms (Transfer of Distribution Undertakings) Scheme, 2003 (hereinafter referred to as "Transfer Scheme, 2003") published in exercise of power under sub section (4) of Section 131 of Electricity Act, 2003 (hereinafter to be referred as Act, 2003) read with Section 23 (4) of 1999 Act.

18. Clause 2 (g) of Transfer Scheme, 2003 defines effective date of transfer as under :

"2 (g) "Effective date of transfer" means the date of publication of this Scheme in the Official Gazette;"

19. Clause 3 of said Scheme provides for classification and transfer of undertakings of UPPCL to the aforesaid four companies as under :

"3. Classification and Transfer of Undertakings.-(1) The existing business and undertakings of Uttar Pradesh Power Corporation Limited shall stand classified, namely as:-

(a) Zone-I Distribution Undertakings as set out in Schedule-A;

(b) Zone-II Distribution Undertakings as set out in Schedule-B;

(d) Zone-IV Distribution Undertakings as set out in Schedule-D;

(e) Transmission Undertakings and Residuary Undertakings as per clause 3(4) with the assets and liabilities as set out in Schedule-D1.

(2) On and with effect from the Effective Date of Transfer, without any further Act(s) or thing(s) to be done by the State Government, UPPCL, any distribution company, the personnel,their respective debtors or creditors, or any other person, the Distribution Undertakings related to Zone-I, Zone-II, Zone-III and Zone-IV and set out in Schedules A, B, C and D shall stand transferred to Meerut Discom, Lucknow Discom, Meerut Discom and Varanasi Discom respectively, subject however to terms and conditions specified in this Scheme.

(3) In consideration of the transfer of Distribution Undertakings related to Zone-I, Zone-II, Zone-III, and Zone-IV by UPPCL to Meerut Discom, Lucknow Discom, Meerut Discom and Varanasi Discom respectively in terms of the Transfer Scheme, Meerut Discom, Lucknow Discom, Meerut Discom and Varanasi Discom shall issue and allot equity shares and/or instruments to UPPCL as specified in Schedules A, B, C, D respectively.

(4) The transmission and residuary undertakings with the assets and liabilities specified in Schedule D1 and all proceedings, and personnel, other than those specified in sub-rule (2) as forming part of any Distribution Undertakings, shall continue to remain and belong to UPPCL.

(5) On the transfer and vesting of the Distribution Undertakings and except as otherwise provided in this Transfer Scheme, the relevant distribution company shall be responsible for all, or the relevant part of any contracts, tenders, rights, deeds, Schemes, bonds, agreements and other instruments of whatever nature relating to the Distribution Undertakings, which are subsisting or having effect on the Effective Date of Transfer, in the same manner as UPPCL was liable immediately before the Effective Date of Transfer and the same shall be in full force and effect against or in favour of the relevant distribution company and may be enforced as fully and effectively as if instead of UPPCL, the relevant distribution company had been a party thereto."

20. In respect to PVVNL, i.e., Meerut Discom, Schedule A of Transfer Scheme, 2003 contains the description of distribution assets, general assets/liabilities, other assets and miscellaneous items. Para V, Schedule A of Transfer Scheme, 2003 provides as under :

"V. The State Government may however, transfer any of the above assets, liabilities, proceedings etc. within one year from the effective date the State Government may consider appropriate to the UPPCL or any of the Distribution Companies."

21. It is not in dispute that till date, no assets, liabilities, proceedings etc. which stood transferred to PVVNL (Meerut Discom) has been transferred back to UPPCL or any other distribution company in exercise of power in para-V Schedule A of Transfer Scheme, 2003. Therefore, whatever stood transferred to PVVNL, i.e., Meerut Discom with effect from 12.08.2003 is continuing thereafter with PVVNL. UPPCL had ceased to be a Distribution Undertaking in respect to the said area over which PVVNL (Meerut Discom) is operating as a Distribution Undertaking. It would be useful to clarify at this very stage as to the area transferred to PVVNL and the meaning of the word "Distribution Undertaking". The term "Distribution Undertaking" has been defined in Clause 2(e) of Transfer Scheme, 2003 and reads as under :

"(e) "Distribution Undertakings" means,

(i) with respect to the Agra Discom, the distribution business and the assets, liabilities, proceedings and personnel specified in the Schedule "A";

(ii) with respect to Lucknow Discom, the distribution business and the asses, liabilities, proceedings and personnel specified in the Scheduled "B";

(iii) with respect to Meerut Discom, the distribution business and the assets, liabilities, proceedings and personnel specified in the Scheduled "C";

(iv) with respect to Varanasi Discom, the distribution business and the assets, liabilities, proceedings and personnel specified in the Schedule "D";

22. The term "Meerut Discom" has been defined in Clause 2(j), which reads as under :

"(j) "Meerut Discom" means the Dakshinanchal Vidyut Vitaran Nigam Limited, which is incorporated with the principal object of engaging in the business of distribution and supply of electricity in the areas under Zone-III as specified in Part III of Schedule-I of this Scheme;"

23. Part-III Schedule I provides for area of supply and distribution of Meerut Discom and reads as under :

"Part-III

The Meerut Discom shall have the area of supply as the following existing Distribution Zones of the UPPCL

(a) Meerut Zone

(b) Moradabad Zone

(d) Noda Circle"

24. There is another aspect. In view of Clause 3, though entire assets, liabilities, personnel etc. of UPPCL with respect to existing business and undertaking of distribution stood transferred with effect from 12.08.2003 to various Distribution Undertakings as defined under Clause 2(e) of Transfer Scheme, 2003, but Clause 4 read with 7 and 8 thereof provide that transfer is provisional at the first instance and liable to be finalized subsequently. As per Clause 7 and 8 of Transfer Scheme, 2003, provisionality of transfer was to continue for a period of 12 months, thereafter it shall be treated final but in view of amendments made thereunder in the year 2008, the period has been extended to five years, i.e., upto 12.08.2008.

25. In respect to PVVNL, majority shares are held by UPPCL and some smaller number of shares are held by certain individuals holding the position of Director, Managing Director and Chief General Manager in UPPCL or PVVNL.

26. Section 14 of Act, 2003 deals with grant of licence and relevant part thereof reads as under:

"14. Grant of licence.--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

in any area as may be specified in the licence:

--------------------

Provided also that the Government company or the company referred to in sub-section (2) of section 131 of this Act and the company or companies created in pursuance of the Acts specified in the Schedule, shall be deemed to be a licensee under this Act:

---------------------"

(emphasis added)

27. The term "licensee" has also been defined under Section 2(39) of Act, 2003 and reads as under:

"(39) "licensee" means a person who has been granted a licence under section 14;"

28. The relevant proviso of Section 14 with which we are concerned in this case, a perusal thereof clearly shows, that a Government company or a company referred to in sub-section 2 of Section 131 of Act, 2003 and the company or companies created in pursuant of Act specified in the schedule shall be deemed to be a 'licensee' under Act, 2003.

29. It is not in dispute that UPPCL is a company created in pursuance to Act specified in the schedule namely, 1999 Act. Though there is a dispute between the parties as to whether the four discoms namely, Meerut Discom, Meerut Discom, Lucknow Discom and Varanasi Discom which includes PVVNL also can be said to be the companies created pursuant to 1999 Act but there is no dispute between the parties that the aforesaid discoms are mainly owned by UPPCL which is a 'Government company'.

30. The term "Government company" is defined under Section 2(31) of the Act, 2003 and reads as under:

"2(31) "Government company" shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956)."

31. Section 617 of 1956 Act defines a "Government company" as under:

"617. Definition of "Government Company".-- For the purposes of this Act Government company means any company in which not less than fifty one per cent of the paid-up share capital is held by the Central Government, or by any State Government, or Governments, or partly by the Central Government, and partly by one or more State Governments, and includes a company which is a subsidiary of a Government Company as thus defined."

(emphasis added)

32. The definition of 'Government company' thus extends to a company which is subsidiary of a 'Government company'. The term "subsidiary company" has been defined under Section 2(47) read with Section 4 of 1956 Act which are reproduced as under:

"2(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of section 4;"

"4. Meaning of "holding company" and "subsidiary".-- (1) For the purpose of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,--

(a) that other controls the composition of its Board of Directors; or

(b) that other --

(i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;

(ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or

33. Thus, the holding company as well as subsidiary company both are Government companies. It is also not in dispute that earlier UPPCL was having license with respect to transmission and distribution but after creation of four Discoms, entire area in State of U.P. has been placed within jurisdiction of four Discoms separately as already discussed above and these four Discoms have been granted distribution license by U.P. Electricity Regulatory Commission. UPPCL has no distribution license at all. In the matter of distribution of electricity, PVVNL is an independent entity and is the only licensee within the area of its operation has to function independently and UPPCL has no authority to run PVVNL as its own department. Further with creation of a transmission Company, UPPCL has also ceased to be a transmission licensee. This fact is also not disputed by Respondents. Thus, UPPCL has no legal authority to regulate independent licensees in their functioning in regard of transmission and distribution of electricity in the State of U.P.

34. We hope so that authorities including Directors, Managing Directors and Chairman of UPPCL shall understand legal status of UPPCL and different Discoms and would act strictly within their limits instead of encroaching upon each others powers and authority.

35. In view of above, we find that letter dated 02.02.2015 issued by Director (Commercial), UPPCL, resolution and minute of meeting of UPPCL dated 30.01.2015, per-se non-est and void and so also consequential order passed by Managing Director, PVVNL. Hence, impugned order dated 02.02.2015, resolution dated 30.01.2015 of UPPCL and order dated 03.03.2015 passed by the Managing Director, PVVNL are hereby quashed and set aside.

36. Writ petition is allowed.

Order Date :- 31.05.2018

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