Regulatory Commissions Are Not Empires Unto Themselves, But Creatures Of Statute: Supreme Court Strikes Down Overreach Of Electricity Regulator

“Public Interest Cannot Be A Ground To Transgress Statutory Limits”: In a significant judgment delivered on 14th July 2025, the Supreme Court of India, in Torrent Power Ltd. vs. Dakshinanchal Vidyut Vitran Nigam Ltd. & Others, Civil Appeal No. 4355 of 2024, has emphatically ruled that State Electricity Regulatory Commissions (ERCs) cannot overstep their statutory mandate under the Electricity Act, 2003 by entertaining grievances of consumers or by investigating franchisee operations in the guise of public interest. The Court held that the Uttar Pradesh Electricity Regulatory Commission (UPERC) had acted beyond its jurisdiction by initiating proceedings under Section 128 of the Act and by constituting an Expert Committee to inquire into Torrent Power’s franchise operations in Agra.

Pronouncing its ruling, the Supreme Court observed, “An authority created by a statute must act under the statute and not beyond it,” firmly reminding the ERCs to operate within the four corners of law.

Dispute Rooted In Consumer Group’s Challenge To Franchisee Arrangement

The dispute arose when a consumer association challenged the appointment of Torrent Power as a distribution franchisee in Agra, alleging that public resources were being misused by providing electricity to Torrent at concessional rates, causing cross-subsidisation from other areas. UPERC not only entertained this petition under Section 128 but also constituted an Expert Committee to examine Torrent Power’s business practices.

Torrent Power challenged the jurisdiction of UPERC and the subsequent affirmation by the Appellate Tribunal for Electricity (APTEL), arguing that ERCs are neither authorised to adjudicate consumer grievances nor to directly regulate franchisee operations.

Supreme Court Frames The Core Legal Issue: Jurisdiction Must Flow From Statute

The Supreme Court identified the fundamental legal issue as the limit of jurisdiction conferred upon ERCs by the Electricity Act, 2003. The Court made it clear that, “Jurisdiction is the authority or power of the court to deal with a matter and make an order carrying binding force in the facts,” quoting its previous landmark ruling in Chiranjilal Shrilal Goenka v. Jasjit Singh, (1993) 2 SCC 507.

It reiterated the settled principle that tribunals and commissions “derive their power from the express provisions of the statute,” citing Rajeev Hitendra Pathak v. Achyut Kashinath Karekar (2011) 9 SCC 541.

Consumer Complaints Must Be Redressed By Forums Created Under Section 42, Not ERCs

The Supreme Court held that the Electricity Act clearly mandates consumer grievances to be addressed by Consumer Grievance Redressal Forums under Section 42(5) and that ERCs have no jurisdiction over individual consumer disputes. Referring to its prior decision in Maharashtra ERC v. Reliance Energy Ltd. (2007) 8 SCC 381, the Court stated, “In the face of this statutory provision we fail to understand how the Commission could acquire jurisdiction to decide the matter when a forum has been created under the Act for this purpose.”

It clarified that “even when public interest is invoked, the mechanism prescribed by statute cannot be bypassed.”

Franchisee Is An Agent, Not A Licensee — No Direct Jurisdiction Of ERCs Over Franchisee Operations

On the question of whether ERCs can investigate the operations of a distribution franchisee, the Court held that the franchisee is only an agent of the distribution licensee. It declared, “The Act does not contemplate any direct regulatory control by ERCs over franchisees,” relying on the statutory definitions in Section 2(27) and the Seventh Proviso to Section 14 of the Electricity Act.

The Court further noted, “ERCs may regulate the conduct of distribution licensees, but it cannot stretch its arms to directly investigate or supervise franchisee operations,” referring to Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor Power Co. (India) (P) Ltd. (2017) 16 SCC 498.

Misplaced Allegations Of Cross Subsidy And Input-Rate Model Rejected By Supreme Court

Responding to allegations regarding Torrent Power receiving power at discounted input rates, the Supreme Court explained the rationale of the input-rate model. Quoting from the APTEL decision in Amausi Industries Association v. UPERC (2013), the Court explained, “When losses are higher, the average revenue recovery rate would have to be lesser than the average recovery rate of the licensee.” The Court noted, “Appointment of a franchisee in high-loss areas is a rational administrative strategy and not a ground to invoke regulatory investigation.”

It observed that the consumer group had “not placed any credible material on record to demonstrate violation of license conditions or tariff orders.”

Section 128 Investigation Power Is Limited To Licensee’s Breach Of Statutory Obligations

The Court provided a precise interpretation of Section 128, stating, “Investigation under Section 128 can only be directed if the licensee has failed to comply with the provisions of the Act or the conditions of licence.” The Court concluded that no such case was made out in the present matter.

It further emphasised, “ERCs are not conferred a roving commission to investigate on vague grounds of public interest.”

Regulatory Oversight Cannot Become Micromanagement Of Private Contracts

Rejecting the broader supervisory claim of the ERC over franchisee operations, the Supreme Court declared, “The ERC cannot micromanage franchisee transactions or second-guess contractual arrangements between distribution licensees and franchisees.”

The Court noted that the regulatory oversight exists only in so far as it pertains to tariff orders, licensing conditions, and broad consumer welfare policies, but “does not extend to probing the internal workings of a franchisee’s operations.”

UPERC And APTEL Orders Quashed, Expert Committee Proceedings Nullified

Summing up, the Court observed:
“We have reached the conclusion that the UPERC fell in serious error in entertaining the petition filed by the respondent and passing the order constituting an expert committee. The APTEL also failed to look into the error committed by the UPERC.”

Consequently, the Court set aside the orders of both the UPERC and APTEL, along with the report of the Expert Committee, terming it as having “paled into insignificance.”

The Court allowed the appeal of Torrent Power and concluded that no costs were payable.

Commissions Must Function Within The Framework Of Law

The judgment serves as a landmark pronouncement reinforcing the principle that judicial, quasi-judicial, and regulatory authorities must strictly adhere to the limits of their statutory mandates. By decisively rejecting the UPERC’s overreach, the Supreme Court has sent a strong message that regulatory bodies are accountable to the law and cannot invoke “public interest” as a carte blanche to expand their jurisdiction.

Date of Decision: 14th July 2025