Supreme Court Holds UPERC Exceeded Scope in Ordering Probe of Distribution Franchisee; APTEL Order Set Aside

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by Torrent Power Limited against the Appellate Tribunal for Electricity’s July 28, 2016 judgment that had affirmed the Uttar Pradesh Electricity Regulatory Commission’s (UPERC) order of July 16, 2015 directing an investigation into the Distribution Franchisee Agreement (DFA) between Torrent Power and Dakshinanchal Vidyut Vitran Nigam Ltd. (DVVNL). The principal questions concerned whether a State Electricity Regulatory Commission could entertain a petition in “public interest” under Section 128 of the Electricity Act, 2003, and whether ERCs could review the functioning of a distribution licensee in respect of supply through a franchisee.

The Court allowed the appeal and set aside the APTEL order, holding that UPERC had erred in entertaining the petition and in constituting an Expert Committee to investigate the franchisee arrangements. The Court accepted that ERCs enjoyed regulatory and tariff-determination powers but emphasised statutory limits on their jurisdiction and the agency character of a franchisee relationship. The Appellate Tribunal’s observation that “this Appellate Tribunal does not have any power to entertain any public interest litigation under the Electricity Act, 2003” was noted by the Court, but the Court found the case before UPERC was not maintainable under Section 128. The Court, in its reasoning, observed: “Therefore, even an investigation under Section 128 can only happen in respect of a distribution licensee and not its franchisee. This is in consonance with the principle of agency. Any action of the franchisee is equivalent to such action having been committed by a distribution licensee. Therefore, only the distribution licensee can be questioned for any action that its agent commits.” The judgment further recorded that ERCs were “required to consider matters in public interest” in tariff and regulatory contexts but could not assume powers beyond the statute.

Background The dispute arose from Petition No. 816 of 2012 filed by Rama Shanker Awasthi (respondent no. 4) before UPERC, challenging the legality, validity and propriety of the DFA dated May 18, 2009 and a supplementary agreement of March 17, 2010 between Torrent Power (appellant) and DVVNL (respondent no. 3). The petitioner alleged the appointment of Torrent Power as franchisee and transfer of utility functions in Agra were effected without UPERC approval and that input rates agreed between DVVNL and Torrent Power were lower than bulk supply rates, potentially impacting consumers statewide.

UPERC overruled preliminary objections on jurisdiction and held the petition maintainable in public interest, directed formation of an Expert Committee to examine loss reduction, collection efficiency and whether benefits reached consumers, and sought data from DVVNL and Torrent Power. The Appellate Tribunal concluded the matter was not a public interest litigation but held the petition maintainable because regulatory oversight of distribution licensees could extend to the impact of franchisees on consumers and tariff. The Expert Committee report (Jan 9, 2017) found consumer appreciation of improved supply and service but observed slow reduction in distribution losses and recommended improvements and audit of arrears.

Torrent Power challenged the APTEL decision before the Supreme Court, contending that the Act confined regulatory jurisdiction to distribution licensees and that franchisees were agents not amenable to direct regulation under Section 128. The respondent contended that the petition sought investigation of licensees’ conduct and that any under-valuation of input rates affected tariff and therefore fell within UPERC’s regulatory remit.

The Supreme Court analysed relevant provisions (Sections 2, 12, 14, 61–66, 79, 82, 86, 111, 128–130, 181 and related regulations), noted that consumer grievance fora created under Section 42(5) excluded matters under Section 128, and applied principles that statutory bodies could only exercise powers conferred by statute. The Court held the petition under Section 128 did not meet the threshold of satisfaction required to direct an investigation and that UPERC’s constitution of an expert committee in the circumstances was erroneous. The appeal was allowed, the APTEL order was set aside, and the Expert Committee report was rendered insignificant. No costs were awarded.

Case Details: Case No.: CIVIL APPEAL NO. 23514 OF 2017 Case Title: Torrent Power Limited v. U.P. Electricity Regulatory Commission & Ors. Appearances: For the Petitioner(s): (Advocates not specified in the judgment excerpt) For the Respondent(s): Mr. Pradeep Misra (advocate mentioned for respondent UPPCL); other advocates not specified in the excerpt.