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

Citation: [2023] 15 S.C.R. 344 · Decided: 09-10-2023 · Supreme Court of India · Bench: SANJIV KHANNA · Disposal: Reference answered

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Judgment (excerpt)

[2023] 15 S.C.R. 344 : 2023 INSC 886
344
CASE DETAILS
 M/S. DAKSHIN GUJARAT VIJ COMPANY LIMITED
v.
M/S. GAYATRI SHAKTI PAPER AND BOARD LIMITED AND 
ANOTHER, ETC.
(Civil Appeal Nos. 8527-8529 of 2009)
OCTOBER 09, 2023
[SANJIV KHANNA AND M. M. SUNDRESH, JJ.]
HEADNOTES
Issue for consideration: Eligibility criteria for a Captive Generating 
Plant (CGP)/captive user u/r.3(1)(a) of the Electricity Rules, 2005; 
Interpretation of the second proviso u/r.3(1)(a) of the Rules and the words 
“association of persons”; Whether a company set up as a Special Purpose 
Vehicle for generating electricity is an, “association of persons”, in terms 
of the second proviso to r.3(1)(a) of the Rules.
Electricity Act, 2003 – ss.2(8), 9 – Electricity Rules, 2005 – r.3 – 
Interpretation – Captive Generating Plant (CGP) and use of electricity 
by the captive users – Confl icting judgments of the APTEL:
Held: To qualify as a CGP u/s.9, r/w s.2(8) of the Act, the requirements 
of paragraphs (i) and (ii) to r.3(1)(a) of the Rules have to be satisfi ed – The 
defi nition of a CGP u/s.2(8) of the Act uses the words, “primarily for his 
own use” – This expression has been given statutory grail vide r.3 of the 
Rules – It incorporates two separate requirements- (i) that the captive user(s) 
should have not less than 26% of the ownership in the CGP – Lower limit 
or minimum of 26% ownership is prescribed – Upper limit of ownership is 
not prescribed – The second requirement relates to the minimum electricity 
consumption – 51% of aggregated or more of the generated electricity 
should be consumed by the user(s) who meets the ownership requirement 
– Proviso to clause (b) to Explanation 1 to r.3 states that consumption by 
a subsidiary, or holding company as defi ned in the Companies Act, 2013, 
when one of them is a captive user, shall be also admissible as captive 
consumption by the captive user – Clause (b) to Explanation 1 to r.3 states 
345
that captive user is the end user of the electricity – Captive user is the actual 
consumer who uses electricity for his own use – The fi rst proviso to r.3(1)
(a) applies in case of a CGP set up by a registered cooperative society – In 
such cases, the requirements under paragraphs (i) and (ii) to r.3(1)(a) are 
treated as satisfi ed collectively by the members of the cooperative society 
– The second proviso to r.3(1)(a) of the Rules applies in cases where the 
captive user(s) is an, “association of persons” –Clause (c) to Explanation 
1 to r.3 states that ownership in relation to the generating station or power 
plant set up by a company or body corporate means the equity capital with 
voting rights – In other cases, ownership means proprietary interest and 
control over the generating station or power plant – “person”, as defi ned 
u/s.2(49) includes, inter alia, body corporates and association or body of 
individuals, whether incorporated or not – Transfer of ownership in case of 
companies and association of persons is a normal occurrence and incidence 
of business – Interpretation and logic in Kadodara Power case of the APTEL 
agreed with – A CGP does not lose its captive status due to transfer of its 
ownership or any part of its ownership, provided that the transferee, that 
is, a new captive user, complies with eligibility criteria specifi ed u/r.3 – 
Dealing with the generation of electricity being vital for the economy of the 
country, a narrow interpretation will ignore realities, leading to irrational 
results – s.2(8) and s.9(2) to be read harmoniously with s.9(1) – A purposive 
interpretation would include a subsequent owner of the CGP, who is an owner 
as per clause (c) to Explanation 1 to r.3 – However, the holding by APTEL 
in Tamil Nadu Power case, that the minimum ownership and consumption 
criteria for captive users are required to be satisfi ed only on the last day of 
the fi nancial year, that is, 31st is not agreed with – The minimum threshold 
of ownership, which is 26%, is to be met and satisfi ed throughout the year 
and not at the end of the fi nancial year alone. [Paras 25, 27-29, 33, 35-37, 39]
Electricity Act, 2003 – s.2(8) – Electricity Rules, 2005 – r.3(1)
(a) – Plea that since s.2(8) uses the expression, “power plant set up by 
any person”, the captive user u/r.3(1)(a) must be the person who had 
participated in setting up the plant. It is submitted that, “set up”, does 
not include the acquisition of shares/ownership after the power plant 
has already been set up. Therefore, transfer of 

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