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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Shri Aman Dixit, Advocate, JSW;
  • Shri Aman Anand, Advocate, JSW;
  • Shri Anurag Agarwal, JSW.
Judges
  • P.K. Pujari
  • Chairperson
  • I.S. Jha, Member
Acts
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Shri Aman Dixit, Advocate, JSW;
  • Shri Aman Anand, Advocate, JSW;
  • Shri Anurag Agarwal, JSW.
Judges
  • P.K. Pujari
  • Chairperson
  • I.S. Jha, Member
Acts
See more information ...
Smart Summary

Concise Structured Summary of the Opinion — JSW Power Trading Company Limited

Factual and Procedural Background

The Petitioner, JSW Power Trading Company Limited, filed a petition seeking down-gradation of its inter-State trading licence in electricity from Category ‘I’ to Category ‘II’. Historically, by an order dated 25.4.2006 (Petition No. 161/2005) the company was granted a Category “F” licence for inter-State trading for India (except Jammu & Kashmir). After notification of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading licence and other related matters) Regulations, 2009, the licence was re-categorized as Category ‘IRS’.

The Petitioner subsequently initiated transfer and corporate name-change proceedings: Petition No. 75/MP/2017 sought approval to transfer the trading licence to JSW Green Energy Limited and to record a subsequent change of name in terms of a Scheme of Arrangement approved by the NCLT (order dated 9.3.2017). The Commission, by order dated 1.2.2018, gave in-principle approval for transfer to JSW Green Energy Limited and allowed the Petitioner liberty to seek change of name post Registrar of Companies approval. On 2.4.2019 (Petition No. 386/TD/2018) the Commission recorded the change of name back to "JSW Power Trading Company Limited".

The petition for down-gradation was heard on 12.2.2020. The Commission directed the Petitioner to file an Audited Special Balance Sheet in terms of Regulation 6(1)(b) of the 2020 Trading Licence Regulations (i.e., as on any date within 30 days preceding the date of application). The Petitioner filed a Special Balance Sheet dated 31.12.2019 (submitted on 13.2.2020).

When the present application was filed it was in accordance with the 2009 Trading Licence Regulations; subsequently those regulations were repealed and replaced by the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading licence and other related matters) Regulations, 2020. The Commission therefore examined the application under the provisions of the 2020 Trading Licence Regulations.

Legal Issues Presented

  1. Whether the Petitioner is eligible for downgrading its inter-State trading licence from Category 'I' to a lower category under the Central Electricity Regulatory Commission's Trading Licence Regulations, having regard to the transition from the 2009 Regulations to the 2020 Regulations.
  2. Whether the Petitioner satisfies the net worth and financial ratio requirements (net worth, current ratio and liquidity ratio) specified in the 2020 Trading Licence Regulations for the lower category (as the 2020 Regulations map the earlier Category II into Category IV with a corresponding net worth requirement of Rs. 10 crore).
  3. Whether the procedural documentary requirements for downgrading (uploading audited special balance sheet and payment of applicable licence fee for the target category) as prescribed in Regulation 15(3) of the 2020 Trading Licence Regulations have been complied with.

Arguments of the Parties

Petitioner's Submissions

  • The Petitioner submitted that due to stiff competition in the power market and considering future trading business potential it wishes to down-grade its trading licence (initially from Category ‘I’ to Category ‘II’ as applied) and intends to trade not more than 1,500 MUs in a year from April 2020.
  • The Petitioner complied with the Commission's direction at the hearing to furnish an Audited Special Balance Sheet; it filed the Audited Special Balance Sheet as on 31.12.2019.

The opinion does not contain a detailed account of any adversarial or additional legal arguments from other parties or respondents.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Commission's reasoning proceeded in a sequence grounded in the change of regulatory framework and the documentary evidence supplied by the Petitioner:

  1. Regulatory transition: The Commission observed that after notification of the 2020 Trading Licence Regulations, the categories under the earlier regulations were mapped into the new framework. Specifically, the category the Petitioner sought to occupy (Category II under the old scheme) corresponds to Category IV under the 2020 Trading Licence Regulations, which carries a net worth requirement of Rs. 10 crore.
  2. Statutory/regulatory tests identified: The Commission relied on Regulation 15(3) of the 2020 Trading Licence Regulations that governs downgration of licences. The regulation requires (a) an application may be filed for downgration, (b) upload of an audited special balance sheet to support compliance with net worth for the lower category, and (c) payment of licence fee applicable to the category sought.
  3. Financial eligibility conditions: The Commission referred to Regulation 3(3) of the 2020 Trading Licence Regulations which prescribes that a person applying for a Category IV trading licence should have a net worth of Rs. 10 crore and should have maintained minimum current ratio and liquidity ratio of 1:1 on the date of the audited special balance sheet accompanying the application.
  4. Examination of the Petitioner’s audited special balance sheet (as on 31.12.2019): The Commission undertook a numeric verification of the balance sheet submitted by the Petitioner. Based on the figures provided in that balance sheet, the Commission computed the net worth and liquidity measures as follows (all figures as presented in the audited documents):
    • Net worth computed: 12,259.00 (Rs. in lakh), as derived from the audited balance sheet items reproduced in the order.
    • Current ratio: 6.78 (as computed from current assets and current liabilities in the submitted balance sheet).
    • Liquidity ratio: 6.78.
  5. Application of regulatory threshold to facts: The Commission compared the computed figures with the regulatory thresholds in Regulation 3(3) — net worth requirement of Rs. 10 crore and minimum current and liquidity ratios of 1:1 — and found that the Petitioner satisfied these criteria on the date of the audited special balance sheet.
  6. Conclusion from analysis: Because the Petitioner met the net worth and liquidity/current ratio requirements and complied with the documentary requirement (filing the audited special balance sheet), the Commission concluded that the Petitioner was eligible for downgrading under the 2020 Trading Licence Regulations.

The Commission also noted the continuing obligations and consequences: the Petitioner must adhere to the terms and conditions of the 2020 Trading Licence Regulations going forward; failure to comply would render the licensee liable to appropriate action for non-compliance under the Electricity Act, 2003 and relevant Regulations. The Petitioner remains bound by the terms and conditions contained in the original order dated 25.4.2006 unless otherwise addressed by compliance or further orders.

Holding and Implications

Holding: The Commission approved the down-gradation of the Petitioner's licence from Category ‘I’ to Category ‘IV’ as per the 2020 Trading Licence Regulations with effect from 1.4.2020.

Implications and direct consequences specified by the Commission:

  • The Petitioner is authorised to hold a Category IV inter-State trading licence from 1.4.2020, having met the net worth and ratio tests required by the 2020 Trading Licence Regulations.
  • The Petitioner must fulfil the terms and conditions specified in the 2020 Trading Licence Regulations; failure to do so will render the licensee liable to appropriate action for non-compliance under the Electricity Act, 2003 and related Regulations.
  • The licensee shall remain bound by the terms and conditions contained in the earlier order dated 25.4.2006 (the Commission expressly recorded this continuing binding effect).
  • The Commission directed that a copy of this order be sent to the Central Government in the Ministry of Power and to the Central Electricity Authority under sub-section (7) of Section 15 of the Electricity Act, 2003 for information and record.
  • The Commission directed necessary endorsement be made on the licence to record the change of Category.
  • The petition (Petition No. 40/TD/2020) stands disposed of accordingly.

The opinion does not state that it establishes a new legal precedent; its effect is the administrative approval of the requested licence down-gradation for the Petitioner subject to regulatory compliance and supervision.

Show full summary ...

    Jsw Power Trading Company Limited, In Re

    The Petitioner, JSW Power Trading Company Limited, has filed the present Petition for down-gradation of its inter-State trading licence in electricity from Category ‘I’ to Category ‘II’.

    2. By order dated 25.4.2006 in Petition No. 161/2005, JSW Power Trading Company Limited was granted Category “F” licence for inter-State trading in electricity in whole of India, except the State of Jammu and Kashmir in accordance with the provisions of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading licence and other related matters) Regulations, 2004. Consequent to the notification of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading licence and other related matters) Regulations, 2009 (hereinafter referred to as the “2009 Trading Licence Regulations”), as amended vide notification dated 7.6.2010, the licence stands re-categorized as Category ‘IRS’, subject to the terms and conditions contained in the licence.

    3. Subsequently, the Petitioner filed the Petition No. 75/MP/2017 for approval of transfer of the trading licence held by JSW Power Trading Company Limited to JSW Green Energy Limited and to record the name of the transferee company from “JSW Green Energy Limited” to “JSW Power Trading Company Limited” in terms of the Scheme of Arrangement approved by the National Company Law Tribunal vide order dated 9.3.2017. The Commission in its order 1.2.2018 accorded in-principle approval for transfer of the trading licence of JSW Power Trading Company Limited to JSW Green Energy Limited and granted liberty to the Petitioner to approach the Commission for change of name of company after approval from the Registrar of Companies for the same.

    4. Based on the request of the Petitioner, the Commission in its order dated 2.4.2019 in Petition No. 386/TD/2018, changed the name of the licensee from “JSW Green Energy Limited” to “JSW Power Trading Company Limited”.

    5. The Petitioner has submitted that in view of the stiff and tough competition in power market and looking at the future business potential of trading, it is seeking down-gradation of its trading licence from Category ‘I’ to Category ‘II’ and is desirous to trade not more than 1500 MUs in a year from April, 2020.

    6. The matter was heard on 12.2.2020. The Petitioner vide Record of Proceedings for the hearing 12.2.2020 was directed to submit the Audited Special Balance Sheet in terms of Regulation 6(1)(b) of the 2020 Trading Licence Regulations i.e. as on any date falling within 30 days immediately preceding the date of making the application. On 13.2.2020, the Petitioner has submitted the Special Balance Sheet as on 31.12.2019.

    7. The licensee has filed the present application for down-gradation of its licence in accordance with 2009 Trading Licence Regulations. Subsequent to filing of the present Petition, the Commission has repealed 2009 Trading Licence Regulations and has notified the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading licence and other related matters) Regulations, 2020 (hereinafter referred to as the “2020 Trading Licence Regulations”). Accordingly, the matter is being examined in terms of provisions of the 2020 Trading Licence Regulations.

    8. We have considered the submission of the Petitioner. Consequent to the notification of the 2020 Trading Licence Regulations, Category II falls in Category IV with corresponding networth of Rs. 10 crore. Regulation 15(3) of the 2020 Trading Licence Regulations provides as under:

    “15. (3) Downgradation of licence:

    (a) The Trading Licensee may file an application to the Commission for downgradation of its licence to a lower category at any time:

    Provided that the Trading Licensee shall not be allowed to apply for upgradation of licence within the same Year.

    (b) The Trading Licensee shall be required to upload the audited special balance sheet to support the compliance of Net Worth requirement for lower category licence.

    (c) While applying for downgradation of licence, the Trading Licensee shall be required to pay the licence fee applicable for the category of licence for which the application is being submitted.”

    9. On perusal of the application, we find that the applicant being a Category ‘I’ licensee fulfills all technical requirements for grant of Category ‘IV’ inter-State trading licence. As regards the net worth requirements for Category ‘IV’, Regulation 3(3) of the 2020 Trading Licence Regulations provides that a person applying for Category IV trading licence should have net worth Rs. 10 crore and should have maintained minimum current ratio and liquidity ratio of 1:1 on the date of audited special balance sheet accompanying the application.

    10. The applicant has submitted the Audited Balance Sheet as on 31.12.2019. Based on the Audited Balance Sheet submitted by the Petitioner its net worth has been worked out as under:

    Net Worth Computation As per Audited Balance Sheet as on 31.12.2019 Particulars (Rs. in lakh) A) Paid up equity capital (1) 7005.00 B) Reserves and Surplus B.1. Capital Reserves 592.00 B.2. Capital Redemption Reserve 0.00 B.3. Debenture Redemption Reserve 0.00 B.4. Revaluation Reserve 0.00 B.5. Share Options Outstanding Account and Reserves other than free reserves (i.e. equity settled share based payment reserve, actuarial gain/loss) 14.00 B.6. Securities Premium Reserve 0.00 B.7. Surplus (P and L Account) 5251.00 B.8. Other Free Reserves (i.e. general reserve) 3.00 Reserves and Surplus not considered for Net worth computation (2) (B1+B2+B3+B4+B5) 606.00 Free Reserves and Surplus Considered for Net worth (2) (B6+B7+B8) 5254.00 C) Loans and Advances given to associates (3) 0.00 D) Deferred Expenditure (including Misc. Expenses) not written off (4) 0.00 Net Worth (1+2-3-4) 12259.00

    11. The net worth of the applicant is further represented by the following:

    Net worth (Asset approach), Current Ratio and Liquidity Ratio Computation 31.12.2019 A) Non-current Assets (Rs. in Lakh) A.1. Net block of Tangible Asset 6.00 A.2 Net Block of Intangible Asset 0.00 A.3 Capital work in progress 0.00 A.4 Intangible Assets under development 0.00 A.5 Non-Current Investments 0.00 A.6 Deferred Tax Assets 0.00 A.7 Long-term loans and advances 0.00 A.7.1 Less: Loans and Advances given to Associates included in above 0.00 A.7.2 Net Long Term Loans and Advances (A.7 - A.7.1) 0.00 A.8 Other Non-Current Asset (i.e. Advance income tax and security deposit with others etc.) 376.00 A.9 Deferred Expenditure (including Misc. Expenses) not written off (Not considered for net worth computation) 0.00 Total Non-Current Assets 382.00 Total Non-Current Assets considered for net worth (1) 382.00 B. Non-Current Liabilities, Pref. Share and Share Application money and Reserves other than free reserves B.1 Share application money pending allotment 0.00 B.2 Preference Share Capital 0.00 B.3 Long term Borrowings 248.00 B.4 Deferred tax Liabilities 355.00 B.5 Other Long Term Liabilities 0.00 B.6 Long Term provisions 5.00 B.7 Reserves other than free reserves 606.00 Total Non-Current Liabilities, Reserves other than free reserves considered for Net worth (2) 1214.00 C. Current Assets C.1. Current Investments 0.00 C.2. Inventories 0.00 C.3. Trade Receivables 4057.00 C.4. Cash and cash equivalents 192.00 C.5 Short Term Loans & Advances 0.00 C.5.1 Less: Loans and Advances given to associates 0.00 C.5.2 Net Short Term Loan and Advances (C.5 - C.5.1) 0.00 C.6 Other current assets (Advance for purchase of power (Related parties), advances to other vendors, balance with Govt. authorities) 11110.00 C.7 Deferred Expenditure (including Misc. Expenses) not written off (not considered for net worth & Liquidity purpose) 0.00 Total Current Assets 15359.00 Total Current Asset considered for Net worth (3) 15359.00 D. Current Liabilities D.1. Short-term Borrowings 0.00 D.2. Trade payables 566.00 D.3. Other Current liabilities (Advance from customers and statutory dues) 1700.00 D.4. Short-term provisions 1.00 Total Current Liabilities considered for Net worth (4) 2268.00

    12. Based on the above, the net worth, current ratio and liquidity ratio workout as under:

    Particulars 31.12.2019 Net Worth (Rs. in lakh) 12259.00 Current Ratio 6.78 Liquidity ratio 6.78

    13. The Petitioner meets the net worth, current ratio and liquidity ratio requirements specified by the Commission in 2020 Trading Licence Regulations. Accordingly, we approve the down-gradation of the Licence of the Petitioner from Category ‘I’ to Category ‘IV’ as per the 2020 Trading Licence Regulations with effect from 1.4.2020. The Petitioner shall fulfil the terms and conditions specified in the 2020 Trading Licence Regulations, failing which the Petitioner licensee shall be liable for appropriate action for non-compliance of the direction of the Commission under the provisions of the Electricity Act, 2003 and relevant Regulations. The licensee shall remain bound by the terms and conditions contained in the order dated 25.4.2006.

    14. A copy of this order be sent to the Central Government in Ministry of Power and CEA in terms of sub-section (7) of Section 15 of the Electricity Act, 2003 for their information and record.

    15. We direct that necessary endorsement be made on the licence issued to the applicant with regard to change of Category of the licensee.

    16. Petition No. 40/TD/2020 stands disposed of accordingly.

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    Comments

    Jsw Power Trading Company Limited, In Re
    (Mar 4, 2020)