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TMI Blog2011 (2) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction over electricity and (iii) the MCX had commenced launch of trading in electricity futures contracts without any approval of CERC and mere approval FMC had no efficacy in the eyes of law – Held that:- CERC cannot be permitted to have regulations under section 66 and 178(2)(y) by virtue of section 174 of the Electricity Act, to prevail over the provisions of section 14-A and 15 of the forward contracts in such fashion with regard to the futures contracts/forward contracts. domain and jurisdiction of respective authorities/commission is totally different and distinct in every aspect. CERC is a statutory authority being constituted under the Electricity Act, cannot be provided that the power beyond the statutes permitting to do futures, forward, derivative contracts which is admittedly a domain jurisdiction of authorities/commission under the FCR Act. CERC and/or even the Appellate authority under the Electricity Act have no jurisdiction to decide the validity of regulations framed by CERC under section 178 of the Act. It is subject to challenge by invoking judicial power under Article 226 of the Constitution of India - WRIT PETITION NOS. 1604 OF 2009 AND 1197 OF 2010 AND NOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Markets Commission. 3. The first respondent in both these petitions, Central Electricity Regulatory Commission ("CERC"), is established by the Central Government under sub-section (1) of section 3 of the Electricity Regulatory Commissions Act, 1998 and functioning as such before the date of coming into force of the Electricity Act, 2003. Section 79 of the said 2003 Act specifies some of the specific functions to be discharged by the Central Commission. 4. The second respondent, Forward Market Commission (FMC) herein and the petitioner in Writ Petition No. 1604 of 2009, was established in 1953 for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under the provisions of the FCRA. It is a regulatory authority which is overseen by the Ministry of Consumer Affairs, Food and Public Distribution, Government of India. 5. Then third and fourth respondents are Power Exchanges recognised by the CERC. 6. The challenge in both these writ petitions is to the two orders dated 28-4-2009 and 11-1-2010 passed by the CERC as well as the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be governed by the orders, guidelines, regulations and other prescriptions of this Commission since they are not inconsistent with the provisions of the 1952 Act." 8. Being aggrieved by the aforesaid order, MCX preferred a Review Petition being Review Petition No. 115 of 2009 seeking re-consideration and/or review and/or modification of certain observations and findings of the said order dated 28-4-2009. The review petition has been decided by the Commission on 11-1-2010 by which the CERC suo motu reversed the original order and deleted crucial observations which expressly stated that there was no conflict between the provisions of the FCRA and the Electricity Act. The CERC held that the ground of review as stated in para 5( c ) stood rejected as not maintainable. By the said order, CERC also held that there was a conflict between the FCRA and the Electricity Act and in view of sections 174 and 175 of the Electricity Act, the Electricity Act would have an overriding effect. Further, the Electricity Act was also a later central statute hence the provisions thereof would prevail. It also held that as there was a conflict between the provisions of the FCRA and the Electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Initially after hearing the learned counsel appearing for the parties this Court reserved the matter for judgment. However, by an order dated 26-11-2010, this Court subsequently issued notice to the added respondents by passing the following order. "The matters were heard and judgment was reserved. Subsequently, this Court while going through the papers came across the minutes of the meeting of Committee of Secretaries of various departments wherein the Cabinet Secretariat has ultimately given the following directions. ( i )There will be no trading in electricity futures for the time being. The decision to introduce electricity futures will be taken by the Central Government at an appropriate time with concurrence of FMC/DoCA and CERC/MoP. ( ii )In view of the decision at ( i ) above, CERC would omit the provisions relating to electricity derivatives from its Power Market Regulations. ( iii )In view of the devision at ( i ) above, DoCA will de-notify the electricity under section 15 of the FCRA. ( iv )DoLA will obtain the opinion of Attorney General on the question of regulatory jurisdiction on electricity derivatives in view of the provisions of the Electricity Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binet Secretariat, Rashtrapati Bhawan, New Delhi, initially filed an affidavit on 13-12-2010 raising preliminary objections about the maintainability of the petitions. The preliminary objections raised in paras ( i ) to ( v ) of the said affidavit read thus : "( i )The Respondent Nos. 5 and 6 strongly object to the maintainability of the present petition because the petitioners in Petition No. 1640 of 2009 have already pursued remedy(ies) with the Competent Body consisting of Secretaries to the Government of India from different Ministries. ( ii )I say that in the said constituted Committee, the petitioners hailing from the Ministry of Consumer Affairs and the other side from the Ministry of Power through their Secretaries not only participated in the proceedings on 16-7-2010 conducted by the said Committee but also deliberated in the said proceedings on the subject matter(s), in question, which proceedings ultimately culminated into certain decision(s) taken by the said High Power Committee. I say that the said Committee constituted and consisting of Secretaries of different Departments/Ministries have given their say and for their Department s views, which were duly considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s." 13. On the next date of hearing i.e., 20-12-2010, learned counsel appearing for respondent Nos. 5 and 6 pointed out that the Cabinet Secretary could not go through the affidavit filed by Mr. M.K. Sharma, Joint Secretary and Legal Advisor in the Department of Legal Affairs, Ministry of Law and Justice and that the Cabinet Secretary would like to file a detailed affidavit in this regard. This Court passed the following order on 20-12-2010. "A bitter dispute is going on between two Regulatory Authorities functioning under the Union of India, in so far as one of the writ petition is concerned. Since we have issued notices to the respondent Nos. 5 and 6, today learned counsel appearing for respondent Nos. 5 and 6 states that because of the pre-occupation, the Cabinet Secretary could not go through the affidavit filed by Mr. M.K. Sharma, Joint Secretary and Legal Advisor in the Department of Legal Affairs, Ministry of Law and Justice and therefore, he would like to file detailed affidavit in this regard. It is very unfortunate that between the two Departments of Union of India, there is a lack of communication and in our view, such happening is really disturbing. Learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Commission, other private bodies are also parties in the writ petition. 6. That I submit that as the attempt at the level of the Cabinet Secretariat has not been successful, it is respectfully prayed that this Hon ble High Court may be pleased to decide the matter as may be deemed fit and proper in the facts and circumstances of the case. 7. I say that the contents contained in para 2 to 6 are true to my knowledge and belief." 15. On 7-1-2011, this Court passed further order which reads thus : "Initially these matters were heard at length and adjourned for pronouncing the judgment. However, subsequently, this Court felt that considering the important issue involved in the matter, it would be desirable to hear Union of India through Cabinet Secretary as well as Ministry of Law and Justice. On the last date, Counsel for Union of India appeared and tendered an affidavit filed by respondent Nos. 5 and 6. At his instance the matter was adjourned till today. In the meanwhile, a further affidavit is filed by respondent No. 5. To the affidavit filed by respondent No. 5, replies have also been filed by the petitioners and respondent No. 3. 2. It is submitted on behalf of the U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set at rest all interdepartmental controversies at the level of the Government and such matters should not be carried to a court of law for resolution of the controversy. In the case of disputes between public sector undertakings and Union of India, this Court in Oil and Natural Gas Commission v. Collector of Central Excise (1992 Suppl. (2) SCC 432) called upon the Cabinet Secretary to handle such matters." 17. It is pointed out by the learned counsel appearing for the Union of India that the attempts made by the Cabinet Secretary to solve the dispute have been failed and in view of the argument of the learned counsel for the Union of India as well as learned counsel appearing for the parties in the matter, the issue in question is required to be decided only by this Court as the Regulations framed by CERC is under challenge at the instance of private party, this dispute cannot be sent to High Power Committee. In view of the said submission, this Court is now required to decide the controversy raised in these petitions on its own merits. 18. We have heard the learned counsel appearing for the parties, examined the matter on merits and also considered the written submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CRA, the Central Government is empowered to notify goods in respect of which forward contracts may be entered into only through associations recognised by the Central Government. Central Electricity Regulatory Commission (CERC) is concerned with inter State and not intra State electricity. He submits that there is no provision in the Electricity Act which can even remotely be said to refer to and/or deal with forward contracts and futures. The forward contract is different from ready delivery contract. In view thereof, therefore, there is no question of conflict between FCRA and Electricity Act. He submits that CERC and Forward Market Commission (FMC) are both regulatory authorities, governed by their respective special statutes, operating within their defined spheres, with distinct statutory functions, powers and duties. The impugned Regulations make it clear that the CERC has misused its power as a regulatory authority in order to bring forward contracts in electricity within its jurisdiction. Section 178(2)( y ) read with section 66 gives CERC the power to issue regulations. He submits that the Regulations notified by the CERC seek to deprive the petitioner, Multi Commodity Exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to trespass into the jurisdiction of another unrelated statutory regulator and interpret the provisions of the FCRA. In view of the above, the Regulations, in so far as it pertain to futures contract in electricity, issued by the CERC pending disposal of the writ petition filed by FMC are liable to be quashed and set aside. Mr. Seervai submits that while the original order enunciated a harmonious construction of the two statutes, the review order placed them in a position of irreconcilable conflict, robbing the FMC entirely of its jurisdiction over forward contracts vis-a-vis electricity. He submits that on a comparison of the two orders it is abundantly clear that the review order is illegal, improper and bad in law, being no more than a motivated attempt to re-write the original order and allow the CERC to usurp power and authority not vested in it or conferred upon it under the Electricity Act. Mr. Seervai further submits that on perusal of the Regulations, it is clear that CERC has once again misused its power as a regulatory authority in order to bring forward contracts in electricity within its jurisdiction. Mr. Seervai finally submits that the futures contracts cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ( j ) of section 79 of the Electricity Act deals with fixing the trading margin in the inter State trading of electricity, if considered necessary. In the instant case, electricity is not a good which can be delivered. It is submitted that the CERC is empowered to take appropriate measures to regulate to regulate transactions in power as it thinks fit. Mr. Chinoy submits that the forward contracts in electricity/for the delivery of electricity are necessarily matters concerning electricity and are within the ambit of section 55 read with section 178(2)( y ) of the Electricity Act. Mr. Chinoy further submits that if there is a conflict between Union and State Lists, the Union list will prevail but when Parliament has framed two enactments, then the object of the Act is to be seen. Mr. Chinoy submits that the contention that forward contracts for electricity are not within the purview of Electricity Act, is based on a misreading of the nature of forward contracts under the FCRA. The learned counsel submits that the forward contracts in electricity are necessarily contracts for the delivery of electricity. He submits that FMC cannot file any proceedings as the writ can only be fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Electricity Policy notified by the Central Government under section 3 of the Electricity Act of 2003. 21. Mr. Dwarkadas, learned senior counsel appearing for the FMC, submits that the FMC is a Regulatory authority under the Ministry of Consumer Affairs, Food and Public Distribution, Government of India and has been set up in 1953 under the provisions of the FCRA. He submits that FMC has filed the above petition being Writ Petition No. 1604 of 2009 challenging the order dated 28-4-2009 passed by CERC, modified order dated 11-1-2010 passed by CERC and the Regulations notified by CERC on 20-1-2010. Mr. Dwarkadas submits that by passing the impugned orders and the regulations, CERC has tried to usurp jurisdiction over forward and futures market which fall within the exclusive domain of FMC by virtue of the provisions contained in FCRA enacted by Parliament in exercise of the power vested in it by Entry 48 of List-1 in the Seventh Schedule of the Constitution of India which gives power to the Parliament to legislate on the subject of Stock Exchanges and Futures markets. Mr. Dwarkadas further submits that FMC vide its letter dated 7-1-2009 explained to the CERC that under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Business Rules, the Ministry of Power has been allocated the administration of the Electricity Act as well as matters relating to CERC, whereas the Ministry of Consumer Affairs, Food and Public Distribution has the control of future trading and FMC. Forward Trading in Electricity comes under the purview of FCRA and this does not take away the jurisdiction of the CERC in respect of regulating spot trading in electricity. He submits that during the pendency of the petition, the CERC gave permission on 31-8-2009 to PXIL and IEXL which are power exchanges set up under the Electricity Act, 2003 to facilitate spot trading in electricity, to organise month ahead contracts in electricity which are essentially forward contracts in the nature of Non Transferable Specific Delivery Contracts. Neither PXIL nor IEXL have been granted certificate of registration by the FMC under section 14A nor recognition has been granted by the Central Government under section 6 of the FCRA. Mr. Dwarkadas further submits that the Regulations notified by the CERC also suffer from other fatal flaws. It speak of derivatives which include options which are specifically prohibited by the FCRA. Mr. Dwarkadas furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66 of the Electricity Act which provides for the "development of a market (including trading) in power by the appropriate Commissions. Mr. Dwarkadas submits that the interpretation of the section and the word "trading" is not supported by either the text or the context contained in the Electricity Act. Sub-section 71 of section 2 defines trading which means purchase of electricity for resale. This definition has no relevance for forward trading in which "short" and "long" positions are taken by traders based on their perceptions of future trends of prices and these are not connected with a prior purchase or a necessary resale. In view of the aforesaid, Mr. Dwarkadas submits that the two orders of the CERC and the Regulations in so far as they relate to forward trading in electricity deserve to be quashed. 22. Mr. Vikas Singh, the learned counsel appearing for respondent No. 3 in Writ Petition No. 1197 of 2010, has submitted that the petitions are not maintainable. The learned counsel has raised preliminary objection to the maintainability of the writ petitions. He submits that under section 179 of the Electricity Act, a regulation framed by the CERC is supposed to be laid befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under section 15 of the FCRA as the entire subject of electricity was taken over in the Electricity Act including trading in electricity and development of the market of power in electricity including trading. It is the further submission of the learned counsel that the sale and purchase of electricity in power exchanges is a relatively new development all over the world and hence the Union Parliament in its wisdom thought it appropriate to confer the power on the various appropriate commissions to decide as to when the market of electricity becomes right for being traded on power exchanges. Lastly he submits that futures in electricity, whether to be permitted or not and if to be permitted under what conditions is to be determined by the appropriate commission as a part of its mandate to develop the market of power including trading of electricity as specified that is by regulations as per the National Electricity Policy formulated by the Central Government under section 3 of the Electricity Act. He submits that the writ petitions, being devoid of any merits, be rejected with costs. 23. It may be noted that against the interim order dated 15-2-2010, passed in Writ Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided in reference to the object and purpose of the laws under consideration" 25. It is required to be noted that both the regulatory authorities are functioning under different statutes and, therefore, neither of them can be said to be subject to the jurisdiction of other. In our view, CERC has no jurisdiction to give any direction in connection with the decision taken by FMC under the FCRA. As long as the statutory enactment prevails today, the subject matter of forward contract is regulated under the provisions of FCRA in connection with the delivery of goods and the payment of a price therefor. 26. Before we delve into the matter, it is necessary to have the factual matrix in connection with the enactment of the FCRA and Electricity Act, 2003. The FCRA was enacted on 26-12-1952, providing for regulation of certain matters relating to forward contracts, the prohibition of options in goods and for matters connected therewith. Sub-section ( b ) of section 2 defines "Commission" means the Forward Markets Commission established under section 3. The forward contract means a contract for the delivery of goods and which is not a ready delivery contract. Section 2 ( i ) deals wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price discovery process making it a highly participative process for providing a better future indication on electricity prices allowing all users of electricity to hedge the risks in electricity prices through the financial instrument called electricity futures without fear of providing or taking delivery. 27. By virtue of section 15 of the FCRA, forward contracts can be entered into only in respect of goods notified by the Central Government in the Official Gazette and the said contracts in respect of the goods so notified are mandatorily required to be entered into only by and between the members of a recognised association or with any such member, failing which a forward contract even in respect of notified goods would be illegal. On a notification being issued in respect of any of the goods by the Central Government, the forward contracts in respect thereof would be regulated under the provisions of FCRA by the regulatory authority being the FCA constituted under section 3 of the FCRA. Under section 15 of the FCRA, the Central Government issued a notification dated 9-1-2006, whereby electricity was specified as goods in respect of which forward contracts could be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves of a developmental role for the appropriate commission and provides that it shall endeavour to promote the development of a market (including trading) in power in such manner as may be specified. The mandate of the Central Commission under section 79 is to, inter alia, regulate inter state transmission of electricity, determine tariff and issue licenses to electricity traders with respect to inter-State transmission and to fix trading margins in inter-State trading. Under section 86, the State Commissions are required to, inter alia, facilitate intra-State transmission of electricity, issue licenses to electricity traders with respect to their operations in the State and fix the trading margin in the intra-State trading of electricity. 29. On a conjoint reading of the provisions of FCRA and the Electricity Act, it is axiomatic that the Electricity Act and the authorities established thereunder have been empowered to govern the various aspects of electricity including generation, transmission, distribution and trading. It is also clear that the FMC established under the provisions of FCRA is empowered to govern all futures and forward contracts including electricity futu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try must be put upon them. The words employed in the entry are to be interpreted so as to include all ancillary and subsidiary matters. Mr. Seervai has also relied upon the judgment of the Supreme Court in the case of Calcutta Gas Co. (Proprietary) Ltd. v. State of West Bengal [1962] Supp (3) SC. In this case the Supreme Court was faced with interpreting the scope of Entries 24 (Industry) and 25 (Gas and Gas Works) in List II of Schedule VII. The appellants in the said case contended that Entry 24 was to be given the widest meaning, so as to include the industry aspect of gas and gas works, leaving other aspects to be covered by Entry 25. The Supreme Court held that if industry in Entry 24 is interpreted to include gas and gas works, entry 25 may become redundant thereby depriving of all its contents. He submits that every attempt should be made to harmonize the apparently conflicting entries not only of different lists but also of the same lists and to reject that construction which will rob one of the entries of its entire content and make it nugatory. Mr. Seervai further submitted that the Entry in the Union List-I cannot be said to be useless lumber. In the said case the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently by this Court." In view of the above, the learned counsel for the petitioner submits that considering the scheme of the two statutes and the entries under which they have been enacted, the contention of the learned counsel for the first respondent ought not to be countenanced. 34. Mr. Seervai submitted that the well-settled principle of interpretation of the legislative entries in the three lists of the Seventh Schedule has been enunciated in the judgment of the Supreme Court in the case of I.T.C. Ltd. ( supra ). The relevant observation of the Supreme Court is as under. "93. That the legislative power of Parliament in certain areas is paramount under the Constitution is not in dispute. ...The supremacy of Parliament has been provided for by the non obstante clause in Article 246(1) and the words "subject to" in Articles 246 (2) and (3). Therefore, under Article 246 (1) if any of the entries in the three lists overlap, the entry in List 1 will prevail. Additionally some of the entries in the State List have been made expressly subject to the power of Parliament to legislate either under List I or under List III. Entries in the lists of the Seventh Schedule either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible external aids to the interpretation of such a statute. In support of his submission, the learned counsel has relied upon the decision of the Supreme Court in the case of Desh Bandhu Gupta Co. v. Delhi Stock Exchange Association Ltd. [1979] 4 SCC 55. In the said case, certain documents issued by the Government simultaneously with a notification under the Securities Contracts (Regulation) Act, 1956 were used as a contemporanea exposition of the notification. In both cases, using executive documents as a contemporaneous exposition of the Government s intention, the Supreme Court referred to Crawford on Statutory Construction and stated that contemporaneous construction placed by administrative or executive officers charged with executing a statute should be shown to be clearly wrong before it is overturned and that while it is not controlling, it is, nevertheless, entitled to considerable weight and is highly persuasive. The Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 1 followed the above dictum and held that this rule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998. Mr. Chinoy submitted that the Electricity Act, 2003 is an exhaustive Code on all matters concerning electricity. The learned counsel has placed reliance of the Supreme Court in the case of PTC India Ltd. s case ( supra ). The Supreme Court held thus : "9. The 2003 Act is enacted as an exhaustive Code on all matters concerning electricity. It provides for "unbundling" of SEBs into separate utilities for generation, transmission and distribution. It repeals the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The 2003 Act, in furtherance of the policy envisaged under the Electricity Regulatory Commissions Act, 1998 ("1998 Act") mandated the establishment of an independent and transparent regulatory mechanism, and has entrusted wide ranging responsibilities with the Regulatory Commissions. While the 1998 Act provided for independent regulation in the area of tariff determination; the 2003 Act has distanced the Government from all forms of regulation, namely, licensing, tariff regulation, specifying Grid Code, facilitating competition through open access, etc." The learned Counsel submits that the Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of goods is carried on/transacted. While relying on the judgment of the Supreme Court in the case of Chimanlal Premchand v. State of Bombay AIR 1960 SC 96, Mr. Chinoy submits that the power under section 26 of the Bombay Agricultural Produce Markets Act to make rules for a market would include the power to make rules for the regulation of business and conditions of trading in the market area and that included making rules stipulating that no person could do business in agricultural produce except under a license granted by the Market Committee. 41. Mr. Chinoy further submits that Article 246 of the Constitution of India provides for the supremacy of Parliamentary legislation over State legislation and has no application when considering which of two Parliamentary Legislations will prevail/override the other. Since both the legislations are Parliamentary legislations, there is no issue of constitutional competence to enact the Act of 2003 or any of its provisions can arise. It is well settled that an enactment can be attributed to more than one entry in the lists. He submits that a piece of legislation need not necessarily fall within the scope of one entry alone, more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undesirable for the efficient functioning of anything but the most primitive economy... To the extent to which forward trading enables producers, manufacturers and traders to protect themselves against the uncertainties of the future, and enables all the relevant factors whether actual or anticipated, local or international, to exercise their due influence on prices, it confers a definite boon on the community, because to that extent, it minimises the risks of production and distribution and makes for greater stability of prices and supplies....It is therefore necessary to eliminate certain forms of forward trading, and permit others under carefully regulated conditions, in order to ensure that, while producers, manufacturers and traders will have the facility they need for the satisfactory conduct of their business, the wider interest of the community, and particularly, the interest of consumers, will be adequately safeguarded against any abuse of such facilities by others." 43. The status of the FMC as an expert body to ensure the proper regulation of forward contracts in the best interest of the society has been reiterated by the Supreme Court in the cases of ( i ) Waverly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sa System (Badha). However, before applying this test, there are two tests to be applied, as observed in the said case. The principles are as under : "1. Where two texts which are apparently conflicting are capable of being reconciled, then by the principle of harmonious construction (which is called the Samanjasya Principle in Mimansa) they should be reconciled. 2. The second situation is a conflict where it is impossible to reconcile the two conflicting texts despite all efforts. In this situation, the vikalpa principle applies, which says that whichever law is more in consonance with reason and justice should be preferred. However, conflict should not be readily assumed and every effort should be made to reconcile conflicting texts. It is only when all efforts of reconciliation fail that the vikalpa principle is to be resorted to. 3. There is a third situation of a conflict and this is where there are two conflicting irreconcilable texts but one overrides the other because of its greater force. This is called a badha in the Mimansa system (similar to doctrine of ultra vires )". 46. Mr. Vikas Singh, learned counsel appearing for respondent No. 3 submits that in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider the arguments wherein a defence had been taken that the contract being not for delivery of goods and being speculative in nature was not a forward contract, was pleased to reject the said argument as according to the Supreme Court the FCRA was meant to curb the mischief of speculation and hence any person indulging in such practice which were not resulting in delivery was held to be violating the prohibition under the Act. The learned counsel submits, while relying upon the decision of the Supreme Court in the case of Ashoka Marketing Ltd. ( supra ) that since Electricity Act also is dealing with a large number of subjects which are exclusively in List-I like railways, telegraph under section 67, 159, 160 and 164, the said Act insofar as they relate to such subjects can easily be traced to List-I. The learned counsel lastly submits that in case of an express or implied conflict, the Electricity Act will prevail. To fortify his argument, the learned counsel has relied upon the decision of Gujarat Urja Vikas Nigam Ltd. s case ( supra ). 48. To recapitulate, FCRA was enacted in the year 1952. The object of the Act as per the preamble is to provide for the regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force or in any instrument having effect by virtue of any law other than this Act. In our view, in view of the specific provisions in FCRA, which is a central legislation enacted earlier in point of time, by which in a notified commodity forward contract can be undertaken only through the machinery under the said Act, the futures contract in electricity cannot be exclusively dealt with by the authority under the FCRA. Similarly, in view of the specific provisions under the FCRA, CERC also cannot deal with the futures contract on its own and have no power to deal with the same in the futures contract, unless appropriate enactment has been made by way of statutory provision regulating the futures contract giving powers only to one authority out of the aforesaid two authorities. 51. It is no doubt true that electricity is a special legislation provided for a specific purpose wherein the interest of consumer is also required to be taken into consideration. In our view, both the enactments operate in the respective fields. If any futures contract in case of a notified commodity under the FMC is concerned, it can be done only through the machinery provided under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RC was justified in exercising jurisdiction on the basis of the application filed by Respondent No. 3 before the CERC or not. As stated above, neither the FMC nor the CERC can exclusively deal with electricity in the matter of futures contract. The CERC cannot act in the futures contract in the matter of electricity unless appropriate enactment has been made by the Parliament in this behalf. The Regulations under challenge cannot be given effect to and it will have no effect so far as futures contract in electricity is concerned. In so far as the power of CERC to deal with electricity in the futures contract is concerned, as pointed our earlier, even the Cabinet Secretary also asked both the Regulatory authorities not to act further and CERC has been specifically asked not to give effect to the Regulations till the dispute can be sorted out. 53. So far as Electricity Act is concerned, it is a special Act which deals with various aspects of electricity including fixation of rates, etc. However, so far as futures contract is concerned, the CERC cannot frame any Regulations in connection with futures contract. Considering the same, the Regulations framed by CERC cannot be given an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 38 "Electricity". Both the entries are operating in their respective fields without any conflicts. 3. "Under the Constitution, the subject of "stock exchanges and future markets" is included in the Union List. Consequently, the State Legislatures are no longer competent to enact any fresh legislation with regard to forward markets, and unless Central legislation on this subject is enacted, the resulting lacuna may prevent desirable action being taken, when needed". "The FCR Act basically take into consideration "forward trading, which normally plays a useful part in tempering price fluctuations, tends in certain situations to exaggerate such fluctuations to the detriment of the interests of producers as well as consumers". "The main principle underlying these provisions is that forward contracts should be allowed to be entered into only in accordance with the rules and bye-laws of a recognized association. The rules and bye-laws will be subject to the approval of the Central Government who will also have the power to make such rules and bye-laws." "The regulatory provisions of this Act will be extended by notification to different classes of goods and to different a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other protective clauses and miscellaneous provisions which empowers authorities/commissions to make rules and regulations. 7. The Apex Court in ( PTC India Ltd. s case ( supra ) elaborated the same in following words : "17. The 2003 Act is enacted as an exhaustive code on all matters concerning electricity. It provides for "unbundling" of SEBs into separate utilities for generation, transmission and distribution. It repeals the Electricity Act, 1910; the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The 2003 Act, in furtherence of the policy envisaged under the Electricity Regulatory Commissions Act, 1998 (the 1998 Act), mandated the establishment of an independent and transparent regulatory mechanism, and has entrusted wide-ranging responsibilities with the Regulatory Commissions. While the 1998 Act provided for independent regulation in the area of tariff determination; the 2003 Act has distanced the Government from all forms of regulation, namely, licensing, tariff regulation, specifying Grid Code, facilitating competition through open access, etc. 18. Section 3 of the 2003 Act requires the Central Government, in consultation wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the rules to carry out the provisions of the Act. SERCs have a corresponding power under section 181. The rules and regulations have to be placed before Parliament and the State Legislatures, as the case may be, under section 179 and 182. The Parliament has the power to modify the rules/regulations. This power is not conferred upon the State Legislatures. A holistic reading of the 2003 Act leads to the conclusion that regulations can be made as long as two conditions are satisfied, namely, that they are consistent with the Act and that they are made for carrying out the provisions of the Act." 8. The Central Electricity Regulatory Commission (CERC) is a creation of Electricity Act. The Power Exchange of India Limited (PXI), recognized by CERC, has set up under the Electricity Act. Same is the position of Indian Energy Exchange (IEX). 9. The concept "trading" is defined under section 2(71) of the Electricity Act as under : "2(70) "trading" means purchase of electricity for resale thereof and the expression "trade" shall be construed accordingly." The meaning of "trading" as per- Black s law dictionary, eigth edition - "The business of buying and selling, esp. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct needs to be noted while dealing with the marketing and/or trading in electricity. When it comes to futures contracts or forward market, the provisions of Sections 14, 15 and 81 of FCR Act which govern the field by its rules and regulations and authorities also just cannot be overlooked. The power market in electricity developing and is at evolving stage which needs clear and unqualified rules, regulations and controlling authorities in view of specific provisions of the Electricity Act, that itself is not sufficient to permit FMC and MCX to do business of futures contract in electricity exclusively. All commodities/goods are storable. The electricity is not storable goods, except produced by Hydro-Projects. There cannot be any comparison of electricity as goods with the other goods/commodities. This typical characteristic of electricity as goods, goes to the root of the matter. The Electricity Act deals with and covers all aspect of electricity rights from an establishment of projects of electricity, manufacturing, process, production, supply, distribution, tariff, rate of electricity and its regulations. The CERC controls and deals with such issues in the respective States. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities even under the FCR Act can have exclusive and independent control and authority to trade in the electricity in futures market/forward market. No other authority/ commission is entitled to challenge and control the trading power of CERC by any modes in any markets, but this can be subject to appropriate rules/regulations as contemplated under section 178(2) of the Electricity Act based upon the desirable and workable electricity power policy. Mere notification and/or approval under sections 15/16 of the FCR Act itself is not sufficient to empower the authorities/commission to do the future markets of electricity under its existing rules and regulations. 17. Any electricity market/trading covers and means availability of electricity, electricity producers, Central, State, private projects/sectors, suppliers, distributors, transmitters and transporters from one place to another, from one State to other State and/or within a State considering the demand and supply for the consumers. The demand and supply of electricity, the price and/or tariff of electricity at all levels/stages need to be under the strict control of the CERC and its authorities. 18. The business of futur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct also deals with subjects like railway, telegraph, telephone that itself is not sufficient to do futures trading in electricity. Any trading of power on PXI/IEX where delivery and payment is made beyond 11 days, falls within the ambit of forward contracts. But any contract having fixed delivery period, fixed parties and certain price stands on different footing. 20. Furthermore, apart from knowledge of law, engineering, finance, commerce, economics and management and various factual and technical details are required even for commission and also to the appropriate appellate body to deal with the various aspects of tariff and electricity. The availability and/or non-availability of transmission facility, generation facility at sale point and/or availability of demand or electricity at the point of purchase, the wheeling facilities, all these are important aspects which are necessary while dealing with the trading in electricity. The notification issued under section 15 of the FCR Act, itself is not under challenge, but in view of above, it is difficult and not practicable and feasible for FMC and MCX to deal with the physical delivery of the electricity. To say that there woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, though the Electricity falls within ambit of commodities/goods in FCR Act, by notification in the year 2006, which was definitely after Electricity Act of 2003, the conflict therefore, definitely needs to be resolved by appropriate laws and regulations. In view of the above, the grant of approval in January, 2002 by the FMC to MCX permitting to trade in Electricity forward contracts based upon notification of January, 2006 is by itself not sufficient. 23. The domain and jurisdiction of respective authorities/commission is totally different and distinct in every aspect. CERC is a statutory authority being constituted under the Electricity Act, cannot be provided that the power beyond the statutes permitting to do futures, forward, derivative contracts which is admittedly a domain jurisdiction of authorities/commission under the FCR Act. It is difficult to go beyond for both these authorities to cross and/or interfere with the powers, functions and duties as provided under their parents statute, unless relevant provisions including section 18 and 27 of the FCR Act and also of Electricity Act are invoked. 24. There is no question of giving any overriding effect in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd contract in electricity excluding other and/or independently. ( c )It is not only question of resolving the conflict between two entries and/or mandates of the respective specialized Act, but actual and physical workable solution to permit and/or to allow either authorities/commissions/exchanges to deal with the electricity in the futures/forward market. Both authorities/commissions under the respective Acts may not be in a position to control and regulate the futures contract in electricity exclusively, unless those Acts and regulations are amended/revised and re-framed. Both cannot have exclusive jurisdiction as claimed in the present scenario in India. ( d )It is clarified that the Union of India and/or the concerned commission and/or the regulatory authorities are free to revise and/or to reframe the rules and the regulations and/or to amend the concerned statutes to permit the futures/forward and derivatives contract in electricity, if so advised. ( e )The regulations of CERC as notified on 20 January, 2010, which deals with the aspects of futures contracts or forward contracts, therefore, are inoperative to that extent only. The impugned order dated 28-4-2009 and ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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