Torrent Power Ltd. v. U.P. Electricity Regulatory Commission (2025 INSC 838)

“No Statutory Hook, No Regulatory Net” — The Supreme Court’s new template for Section 128 investigations and franchisee oversight

1. Introduction

The present decision originates in a decade-long contest around the power-distribution franchise for Agra. Torrent Power Ltd. (“TPL”) had been appointed by Dakshinanchal Vidyut Vitran Nigam Ltd. (“DVVNL”)—a Government distribution licensee—to run the city’s network on an input-rate franchisee model. When a private citizen, Mr. Rama Shanker Awasthi (R-4), asked the U.P. Electricity Regulatory Commission (“UPERC”) to investigate both DVVNL and TPL under Section 128 of the Electricity Act, 2003, the Commission obliged and even set up an expert committee. The Appellate Tribunal for Electricity (“APTEL”) affirmed that course.

On statutory appeal under Section 125 of the Act, the Supreme Court had to decide:

1. Whether UPERC could entertain a petition styled as “public-interest” for ordering investigation under Section 128;
2. Whether a State Commission can directly review or monitor a distribution-franchisee agreement which is essentially contractual and rests on agency between the licensee and the franchisee; and
3. Whether APTEL was right in treating the petition as maintainable despite those jurisdictional objections.

2. Summary of the Judgment

Allowing TPL’s appeal, the Court (Pardiwala & Mahadevan JJ.) set aside both the UPERC order dated 16-07-2015 and the APTEL order dated 28-07-2016. Key holdings:

• Section 128 “satisfaction” missing: No prima-facie breach of licence conditions or of the Act was shown; hence UPERC could not trigger an investigation.
• No “public-interest” jurisdiction in the abstract: State Commissions are creatures of statute; they cannot act on public-interest invitations unless the Act expressly permits.
• Franchisee ≠ Licensee: A franchisee operates only as the licensee’s agent (Seventh proviso to §14 & §2(27)). ERCs may regulate the licensee, not micromanage the franchisee.
• Consumer grievances forum exclusive: Reliance on MERC v. Reliance Energy affirmed—individual consumers must proceed under §42(5) CGRF, not before the Commission—yet here, even that route was barred by UPERC’s own Regulations (§5.1 excludes §128 matters).
• Expert-Committee report rendered otiose; once the investigation itself lacked jurisdiction, the subsequent fact-finding lost legal relevance.

3. Analysis

3.1 Precedents Cited & Their Influence

1. Maharashtra ERC v. Reliance Energy, (2007) 8 SCC 381 – established that consumer grievances must go to CGRF/Ombudsman, limiting State Commission’s adjudicatory role. Court relies on its ratio but distinguishes current facts as a §128 petition.
2. Energy Watchdog v. CERC, (2017) 14 SCC 80 – quoted to stress that Commissions are not “mere post offices” but must still stay within statutory bounds.
3. All India Power Engineer Federation v. Sasan Power, (2017) 1 SCC 487; Jaipur Vidyut v. MB Power, (2024) 8 SCC 513; M.P. Power Mgt. v. SkyPower, (2023) 2 SCC 703 – cited for the centrality of consumer interest, yet Court clarifies that such interest cannot create fresh jurisdiction.
4. Rajeev Hitendra Pathak, (2011) 9 SCC 541; Chiranjilal Shrilal Goenka, (1993) 2 SCC 507 – relied on to affirm that tribunals derive power only from express statutory grant.
5. APTEL decisions – Amausi Industries Association (2013); City Corporation Ltd. (2024) – used to elucidate agency nature of franchisees and the inadmissibility of tariff challenges by them.

3.2 Legal Reasoning Unpacked

1. Statutory Architecture
   • §12 & §14 license electricity activities.
   • Seventh proviso to §14 allows a licensee to appoint a franchisee without separate licence; §2(27) defines franchisee.
   • §128 allows investigation only when the Commission is “satisfied” that a licensee has breached licence / Act.
   • UPERC Consumer-Grievance Regulations, 2007 expressly exclude §128 matters from CGRF jurisdiction.
2. “Satisfaction” threshold not met
   R-4’s three planks—absence of §17 approval, alleged urban-area bar, and supposed tariff violation—were legally untenable:
   • §17 governs transfers between licensees, not agency to franchisees;
   • The Act nowhere restricts franchisees to rural areas; §5 only sets national policy;
   • Input-rate model and cross-subsidy criticism, without data of manipulation, could not evidence breach.
3. Agency Principle
   Because a franchisee is an agent, the licensee alone answers to ERCs/consumers. Statute provides no mechanism for direct regulatory micro-supervision of franchisees. Monitoring AT&C reduction, collection efficiency or capital-expenditure roll-out lies contractually between DVVNL & TPL.
4. Public-interest Misconception
   Commissions must further public interest where the Act commands (tariff-setting, policy advice, licence revocation etc.) but cannot invent a roving enquiry power. Section 107/108 Govt. directions in public interest reinforce this legislative intent.
5. Error of APTEL
   Tribunal conflated “no public-interest PIL power” with “this is not a PIL.” Even if not PIL, absence of statutory footing doom the petition.

3.3 Prospective Impact

• Regulatory Discipline – State Commissions must record concrete statutory breaches before invoking §128. Loose references to “public interest” can no longer suffice.
• Franchisee Model Certainty – Validates autonomy of input-rate franchise agreements; reduces fear of ex-post regulatory re-opening unless licence/Act violation shown.
• Consumer-advocacy Roadmap – Aggrieved consumers must route complaints through CGRF/Ombudsman or through appeals under tariff orders, not via direct investigative petitions.
• APT Ground-Rules – APTEL must scrutinise jurisdictional triggers; mechanical affirmations expose orders to annulment in Supreme Court.
• Policy Alignment – Encourages States eyeing privatisation / franchisee models by clarifying that ERC scrutiny centres on the licensee’s performance, not the private partner’s internal business.

4. Complex Concepts Simplified

Distribution Licensee

A company authorised under §14 to operate power distribution in a defined area (e.g., DVVNL).

Franchisee

Person/company authorised by a distribution licensee to distribute electricity on its behalf in part of that area. No separate licence needed (Seventh proviso to §14).

Input-Rate Model

The franchisee buys all electricity at a pre-agreed “input price” per unit and collects consumer revenue at regulator-determined tariff; its profit hinges on reducing AT&C losses and improving collections.

AT&C Loss

Aggregate Technical & Commercial losses—the sum of energy lost technically (lines, transformers) and commercially (theft, non-payment).

Section 128 Investigation

Extraordinary power of an ERC to appoint an “Investigating Authority” against a licensee for proven or likely breach of licence/Act—requires recorded satisfaction.

5. Conclusion

The Supreme Court has sent an unambiguous signal: statutory boundaries matter. While consumer interest and public policy sit at the heart of electricity regulation, they cannot be used as alibis to over-reach. UPERC’s open-ended probe into the Torrent-DVVNL franchise, lacking the statutory anchor demanded by Section 128, was ultra vires. APTEL’s imprimatur therefore fell with it.

Going forward, State Commissions must ground every investigative or coercive step in demonstrable breaches of licence or law; franchisees can breathe easier knowing that routine business metrics will not be re-written by regulatory fiat; and consumers, though central to the electricity story, must utilise the specific participatory channels the Act provides. In short, Torrent Power redraws the jurisdictional map—ensuring that each stakeholder stays in the lane that Parliament has painted.