M/S. DAKSHIN GUJARAT VIJ COMPANY LIMITED v. M/S. GAYATRI SHAKTI PAPER AND BOARD LIMITED AND ANOTHER, ETC.

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(1) qualifying or excepting certain provisions from the main enactment: (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable: (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision.” Accordingly, the second proviso to Rule 3(1)(a) of the Rules is not case specific. It is to be treated as corollary to the interpretation embedded under Section 2(8) of the Act, that is, “primarily for its own use”. In order make the enactment under Section 2(8) of the Act workable in any instance where group captive users are not registered cooperative societies, the rule of proportionality under the second proviso to Rule 3(1)(a) of the Rules should be read as a mandatory condition.

63Copy pinpoint63. This Court in Monnet Ispat& Energy Ltd. And Othersv. Union of India and Others⁵⁶ held that the minimum electricity consumption requirement under paragraph (ii) to Rule 3(1)(a) of the Rules conforms with the requirement under Section 2(8) of the Act, that electricity generated by the CGP should be “primarily for its own use”. Thus itheld that Rule 3(1) (a) of the Rules cannot be said to be against the purposes of the Act. This Court in Monnet Ispat57observes: “14. In the light of what has been discussed by this Court in Global Energy Ltd. (supra) when we examine definition of Generating Plant in section 2(8) of the Act it emphasizes setting up primarily for his own use or in case of cooperative society for use by its members.

M/S. DAKSHIN GUJARAT VIJ COMPANY LTD. v. M/S. GAYATRI 391 SHAKTI PAPER AND BOARD LTD. [SANJIV KHANNA, J.]

When we consider Rule 3(1)(a)(ii) of the Rules of 2005, it is clear that it provides not less than 51% of aggregate electricity generated in such plant determined on annual basis is consumed for captive use. The rule conforms to the requirement of section 2(8) that primarily electricity should be generated by captive generating plant for his own use/members as the case may be. The provisions of Rule 3(1)(a)(ii) of the Rules of 2005 cannot be said to be against purposes of the Act. Rather it promotes rationale of the provision and essential qualifications laid down in the Act itself…” Similarly, the second proviso to Rule 3(1)(a) of the Rules is in furtherance of Section 2(8) of the Act.

64Copy pinpoint64. An association of companies or body corporates thus are required to comply with Rule 3(1)(a) read with the second proviso to Rule 3(1)(a). Equally, an association of companies, body corporates, or other persons that set up a SPV which owns, maintains, and operates a CGP is required to comply with Rule 3(1)(a) read with the second proviso to Rule 3(1)(a). A SPV in this regard may be company, but it also is also an association of persons in terms of the second proviso to Rule 3(1)(a).

65Copy pinpoint65. We cannot, in any manner, read Rule 3(1)(b) as overriding or prevailing over Rule 3(1)(a) of the Rules. To accept this argument would, in fact, be accepting that “gaming”, as described above, is permissible if a company is formed as a SPV for the purpose of generating and supplying electricity to its shareholders or other body corporates. For instance, a generating company established as an independent power producer being a shareholder of 98% shares in a plant can camouflage as a CGP by giving 2% shares to group captive users and allowing them to consume 98% of the electricity generated. The independent power producer may consume only 2% of the electricity generated despite holding 98% of the shares in the plant. This would be clearly contrary to Section 2(8), which uses the expression,“primarily for its own use”. To accept this submission would also be contrary to the object and purpose behind giving benefit to captive users who spend their money and invest in setting up a CGP. While interpreting a provision which is ambiguous or debatable, the court or the adjudicator must keep in mind the intent of the legislature and read the words in a manner that

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the object and purpose is promoted, rather than accepting an interpretation which would result in misuse or abuse.

66Copy pinpoint66. In view of the aforesaid reasoning, we hold that SPVs which own, operate and maintain CGPs are an “association of persons” in terms of the second proviso to Rule 3(1)(a) of the Rules. Companies, body corporates and other persons, who are shareholders and captive users of a CGP set up by a SPV, are required to comply with Rule 3(1)(a) of the Rules read with the second proviso of the Rules.

67Copy pinpoint67. We accordingly answer the three issues.

Headnotes prepared by: Issues answered. Divya Pandey