Procedural History:
The case originated when Respondent No. 4 filed Petition No. 816 of 2012 before the Uttar Pradesh Electricity Regulatory Commission (UPERC) challenging Torrent Power’s Distribution Franchisee Agreement (DFA) for Agra’s urban area. UPERC, in its 2015 order, dismissed Torrent’s jurisdictional objections and directed an expert committee investigation into the franchisee’s performance. Torrent appealed to the Appellate Tribunal for Electricity (APTEL) in Appeal No. 188 of 2015, which in 2016 upheld UPERC’s jurisdiction while clarifying the matter wasn’t a public interest litigation. The expert committee submitted its report in January 2017. Torrent then approached the Supreme Court through Civil Appeal No. 23514 of 2017, which in its July 2025 judgment reversed the lower forums’ decisions, holding that regulatory commissions cannot scrutinize franchisee agreements under Section 128 of the Electricity Act, 2003. The Supreme Court’s ruling nullified both APTEL’s order and the expert committee’s findings.
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Court Observation:
In its judgment, the Supreme Court made several key observations regarding the regulatory framework under the Electricity Act, 2003. The Court emphasized that Electricity Regulatory Commissions (ERCs) derive their powers strictly from statutory provisions and cannot exercise jurisdiction beyond what is expressly conferred by law. It clarified that while ERCs must consider public interest in tariff determination and other regulatory functions, they lack general jurisdiction to entertain matters solely on public interest grounds unrelated to statutory violations.The Court distinguished between the regulatory oversight of licensees and franchisees, holding that franchisees operate as agents of distribution licensees under Section 2(27) read with the seventh proviso to Section 14 of the Act. It observed that Section 128 investigations must target licensees rather than their franchisees, as the principal-agent relationship makes licensees ultimately responsible for franchisee operations. The judgment noted that contractual terms between licensees and franchisees fall outside the ERCs’ adjudicatory scope under Section 86(1)(f), which is limited to disputes between licensees and generating companies.Significantly, the Court cautioned against ERCs micromanaging franchisee agreements, stating that such oversight would disrupt the Act’s decentralized distribution framework. It found that the UPERC’s constitution of an expert committee to assess franchisee performance exceeded its regulatory mandate, as the Act provides no mechanism for direct supervision of franchisee operations. The judgment reinforced that regulatory interventions must be grounded in specific statutory violations rather than general public interest concerns.
Final Decision & Judgement:
The Supreme Court allowed Torrent Power’s appeal and set aside the Appellate Tribunal for Electricity’s (APTEL) 2016 order that had upheld UPERC’s jurisdiction. The Court held that Electricity Regulatory Commissions cannot investigate distribution franchisee agreements under Section 128 of the Electricity Act, 2003, as franchisees operate strictly as agents of licensees without independent regulatory oversight. The judgment nullified UPERC’s expert committee report, ruling that regulatory bodies exceeded their statutory mandate by scrutinizing franchisee performance metrics like loss reduction and collection efficiency. It clarified that contractual disputes between licensees and franchisees fall outside ERCs’ adjudicatory scope under Section 86(1)(f), which is expressly limited to licensee-generating company disputes. The Court reinforced that ERC interventions must demonstrate specific statutory violations rather than rely on general public interest arguments. This landmark decision redefined the boundaries of regulatory oversight in India’s power sector by insulating franchisee operations from direct commission scrutiny while maintaining licensee accountability.
Case Details:
Case Title: Torrent Power Limited vs. U.P. Electricity Regulatory Commission & Ors.
Citation: 2025 INSC 838
Appeal No.: Civil Appeal No. 23514 of 2017
Date of Judgment: 14th July 2025
Bench: Justice J.B. Pardiwala & Justice R. Mahadevan
