Before the MAHARASHTRA ELECTRICITY … 58 42/Order-132 of 2015...3.1 GEPL is a Company engaged in...

Order in Case No. 132 of 2015

Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400005

Tel. 022 22163964/65/69 Fax 22163976

Email: [email protected]

Website: www.mercindia.org.in/ www. merc.gov.in

CASE No. 132 of 2015

In the matter of

Application of Global Energy Pvt. Ltd. for grant of a Licence for Trading of

Electricity within Maharashtra

Coram

Shri Azeez M. Khan, Member

Shri Deepak Lad, Member

ORDER

Dated: 27 April, 2018

1. M/s. Global Energy Pvt. Ltd. (GEPL), 207, Gera Imperium II, Patto Plaza, Panjim,

Goa has filed an Application on 18 September, 2015 citing Sections 14, 15, 86 (1)(d)

and (k) of the Electricity Act (EA), 2003 and the provisions of the MERC (Trading

Licence Conditions) Regulations, 2004 as amended („Trading Licence Conditions

Regulations‟) seeking an Intra-State Trading Licence for Maharashtra.

2. GEPL‟s prayer is as follows:

“Grant an intra-state trading license in the State of Maharashtra to

GEPL/Applicant, as per the details provided in the application filed as per

Schedule I of the MERC (Trading Licence Conditions) Regulation 2004 for a

period of 25 years;…”

3. The Application states as follows:

3.1 GEPL is a Company engaged in the trading of electricity. GEPL was granted an

Inter-State Trading Licence by the Central Electricity Regulatory Commission

(CERC) on 28 November, 2008. As per Rule 9 of the Electricity Rules, 2005, GEPL

is permitted to undertake Intra-State Trading also under its Inter-State Trading


Licence. However, this does not take away its statutory right to seek a separate

Intra-State Trading Licence for Maharashtra.

3.2 GEPL also holds Intra-State Trading Licences from other State Commissions such

as Uttar Pradesh Electricity Regulatory Commission (UPERC), Andhra Pradesh

Electricity Regulatory Commission (APERC), Gujarat Electricity Regulatory

Commission (GERC) and Odisha Electricity Regulatory Commission (OERC).

3.3 GEPL‟s Application dated 16 June, 2014 for Intra-State Trading Licence within the

State of Telangana is pending before the Telangana State Electricity Regulatory

Commission (TSERC). [The Commission notes that TSERC has since given GEPL

an Intra-State Trading Licence.]

3.4 GEPL had filed an Application for grant of Trading Licence before the Commission

on 5 September, 2006. The Commission, vide Order dated 28 September, 2007,

granted it an intra-State Trading Licence for 5 years which expired on 28

September, 2012. GEPL, therefore, is eligible for grant of a fresh Intra-State

Trading Licence.

3.5 No proceedings are pending before any Court/ Commission regarding the Intra-

State Trading Licence granted vide Order dated 28 September, 2007 by this

Commission. GEPL has approached the Commission for grant of fresh Intra-State

Trading Licence in Maharashtra under Category A for trading of 100 million kWh

electricity per annum.

3.6 GEPL fulfills the eligibility criteria provided in Regulation 5 of the Trading Licence

Conditions Regulations and hence is eligible for grant of Intra-State Trading

Licence in the State of Maharashtra.

3.7 GEPL has 8 years of experience as a Trading Licensee. It has already been granted

Intra-State Trading Licence in various other States. GEPL has been a trader of

electricity within Maharashtra for the past 8 years. Hence, GEPL‟s case is fit for

grant of an Intra-State Trading Licence for the State of Maharashtra.

3.8 In the event the Licence is granted, it would be in the consumer interest as there will

be competition in the retail supply of power. This will also give a boost to open

access. GEPL has a good prima facie case for grant of Intra-State Trading Licence.

That would also fulfill the mandate of the EA, 2003 for promotion of competition.

4. Following documents have been submitted by GEPL with its Application:

i. Application as per format provided under Regulation 4 of the Trading

Licence Conditions Regulations

ii. Memorandum and Articles of Association


iii. Shareholding pattern

iv. Five year Trading Plan

v. Management information in respect of Trading, Commercial, Regulatory,

Finance, Information Technology (IT) and Human Resource (HR)

functions

vi. Accounting statements with Auditor‟s report for FY 2012-13, FY 2013-

14 and FY 2014-15

vii. Net Worth certificate for FY 2014-15.

5. Upon scrutiny of the Application, the following details were sought from GEPL:

i. Undertaking that no cases/litigations are pending against GEPL or against

any of its partners, directors or promoters, which falls under the conditions

of the circumstances mentioned in the Trading Licence Conditions

Regulations.

ii. Category of Licence being sought by GEPL.

iii. Net Worth certificate for latest three years.

iv. Clarification on whether GEPL is engaged in businesses other than

Trading of Electricity.

v. Details of present agreements entered into by GEPL where buyer and

seller both are within Maharashtra.

vi. Clarification on whether GEPL had submitted the information as required

in Annexures 3 and 4 of the Trading Licence Conditions Regulations

under the earlier Intra-State Licence granted by the Commission.

6. In its response dated 15 February, 2016, GEPL did not submit the information

relating to present agreement details, undertaking as required under the Trading

Licence Conditions Regulations and the details of submission of Annexures 3 and 4

under the earlier Intra-State Trading Licence.

7. GEPL also stated in its response that, considering the Judgment dated 11 May, 2009

of the Supreme Court in Civil Appeal No. 3457-3458 of 2009, an Application for

grant of Trading Licence cannot be rejected on the ground of legal proceedings being

pending against the Applicant. In view of the Supreme Court Judgment, the

Commission initiated the process of amendment of the Regulations regarding the

eligibility conditions /disqualifications of applicants for grant of Intra-State Trading

Licence by deleting the phrase “pending legal proceedings” in Regulation 4-A of the

Trading Licence Conditions Regulations. After previous publication, the Trading

Licence Conditions Regulations were amended on 24 April, 2017.

8. A Technical Validation Session (TVS) was held on 16 February, 2016. The list of

persons present is at Annexure 1. GEPL made a presentation on its Licence

Application. It stated that the present agreement details and submission of details

about Annexures 3 and 4 under the earlier Intra-State Trading Licence are not


relevant to the present Application as it is applying for a fresh Trading Licence, and

these details are beyond the eligibility requirements of Section 52 of the EA, 2003.

The Commission was not convinced and observed that, while issuing a fresh

Licence, the past performance of GEPL under its earlier Intra-State Trading Licence

may also require consideration. The Commission directed GEPL to provide the

following additional information:-

i. The volume of electricity traded under various Intra-State Licences and also

under the earlier Inter-State Licence.

ii. Five year trading plan with quantum of electricity in MU instead of in MW.

iii. Clarification on whether the present organizational set-up is sufficient to carry

out trading operations in multiple States.

iv. Clarification on whether the manpower indicated would deal exclusively with

the trading business within Maharashtra.

v. Clarification as to how GEPL would differentiate between Intra-State Trading

transactions carried out under the Intra-State Licence and those carried out

under the Inter-State Licence, considering that both would have different

financial implications; and clarify whether the agreements with the parties

specify the applicable Licence.

9. GEPL submitted additional information on 5 April, 2016, namely details of the

volume of electricity traded between from September, 2007 to September, 2012

under the earlier Intra-State Trading Licence; that the quantum proposed for first 5

years was 50.52 MU in the first year with around 5 MU increase in each year,

reaching 73.18 MU in the 5th year; and that its present organizational set-up is

sufficient to carry out trading operations in several States. GEPL clarified that the

manpower indicated in the presentation before the Commission during the TVS on

16 February, 2016 dealt exclusively with its Trading Business in Maharashtra. The

procedure for grant of Open Access implemented by Maharashtra State Load

Despatch Centre (MSLDC) distinguishes between Intra-State and Inter-State

transactions. GEPL annexed the application format for grant of Short Term Open

Access to be submitted to MSLDC.

10. However, GEPL did not submit the volume of electricity traded under other State

Licences and also under the earlier Inter-State Licence, as sought during the TVS.

Hence, vide e-mail dated 13 April, 2016, GEPL was asked submit the pending

replies/ clarifications. In its reply dated 1 June, 2016, regarding submission of


undertaking as required under the Trading Licence Conditions Regulations and

agreement details, GEPL stated that the information sought has no reasonable nexus

with the regulatory scheme and intent of the EA, 2003. It is unreasonable and

contrary to Article 14 of the Constitution of India. These details are not relevant to

the current proceedings. The present agreement details sought are essentially in the

nature of trade secrets of GEPL and, if published, would cause irreparable harm to it.

GEPL also stated that, as the Commission is dealing with a fresh Licence matter,

submission of data pertaining to the earlier Licence as per the Regulations format is

devoid of any merit and arbitrary. The details sought regarding volume traded in

other States and Inter-State trading have no nexus with the regulatory scheme and

intent outlined in Section 52 of the EA, 2003 and unreasonable. They cannot be

criteria for grant of Licence. Under Section 52, the criteria for grant of a Trading

Licence are fixed and limited to technical requirements, capital adequacy and

creditworthiness. Therefore, the Commission‟s jurisdiction with regard to grant of

Licence to trade in electricity must be exercised in conformity therewith. Since

GEPL has filed an Application for a fresh Licence, the same needs to be processed

strictly as per the requirements under Section 52 of the EA 2003.

11. The second TVS was held on 6 September, 2016. The list of persons present is at

Annexure 2. GEPL stated that it has filed a Writ Petition (WP) before the Bombay

High Court challenging the Commission‟s earlier Order dated 28 September, 2007 in

Case No. 28 of 2006 (in which the Trading Licence had been granted only for 5

years), and that the outcome of the WP may have a bearing on the present

proceedings. Accordingly, the TVS may be postponed and the matter kept in

abeyance. The Commission directed GEPL to make its written submissions on the

Bombay High Court WP and GEPL‟s request. The Commission observed that the

purpose of the TVS is to assess the adequacy and correctness of details submitted

with the Licence Application before placing it in the public domain for comments.

Accordingly, the TVS need not be postponed. A view can be taken, if required, on

the further process subsequently considering further developments. The Commission

observed that GEPL has not provided the details sought vide its data gaps

communicated on 27 January, 2016, and has contended that these are beyond the

technical requirement, capital adequacy and creditworthiness parameters laid down

in Section 52 of the EA, 2003. The Commission observed that, while issuing a fresh

Licence, the past performance of GEPL under the earlier Intra-State Trading Licence,

its performance in other States, etc. would help in assessing or validating GEPL‟s

claim for grant of Licence. GEPL agreed to provide the above details. The

Commission also stated that GEPL needs to clarify how it would differentiate

between Intra-State and Inter-State Trading transactions. GEPL stated that it would

file a reply explaining this.

12. In its response dated 30 December, 2016, GEPL stated as follows:


12.1 WP 2033 of 2016 filed by GEPL in Bombay High Court has been admitted on 17

November, 2016 and no interim relief has been granted. Hence, there is no need to

file any additional submissions with regard to the matter before the High Court.

12.2 GEPL is in agreement with the finding of the Commission that the TVS need not be

postponed as its purpose was to assess adequacy and correctness of the Licence

Application. Hence, the Commission is requested to proceed further with the Licence

Application.

12.3 With regard to the past performance of GEPL under its earlier Intra-state Trading

Licence, GEPL during the TVS had stated that it had already submitted the required

information as per Schedules 3 and 4 of the Trading Licence Conditions

Regulations and it would be resubmitted, if required. Accordingly, the details

pertaining to the volume of electricity traded during the earlier Licence period is

annexed with this submission.

12.4 GEPL‟s performance in other States has no reasonable nexus with the intent of

Section 52 of EA 2003. Apart from being ultra vires the powers conferred upon the

Commission under the EA, 2003, it is also arbitrary and unreasonable and contrary

to Article 14 of the Constitution of India.

12.5 As regards differentiation between Intra-State Trading and Inter-State Trading

transactions, at the time of submitting the application for grant of Open Access, the

Trading Licensee is required to provide the details regarding the Licence.

Accordingly, GEPL distinguishes between Inter-State Trading and Intra-State

trading transactions.

13. On 28 June, 2017, GEPL submitted an undertaking in accordance with the Trading

Licence Conditions Regulations stating that there is no Order of conviction under

any applicable law against any director or promoter of GEPL as on date. There is

also no indictment/adverse Order by a regulatory authority or which relates to a

grave offence of such a nature that it outrages the moral sense of the community

against GEPL or its promoters or directors as on date. There is no existing condition

or circumstances that cast a doubt on the ability of GEPL to perform its duties and

obligations under the EA, 2003.

Regulatory Proceedings

14. Although GEPL had not provided some of the details sought (i.e. details of

agreements entered into by GEPL within the State, volume of electricity traded in

other States and also under the Inter-State Licence, and the copies of the quarterly

reports of trading under the earlier Intra-State Licence), it had made its submissions


on the issues raised and the information sought. Accordingly, GEPL‟s Application

was admitted on 10 July, 2017. GEPL was directed to publish a Notice seeking

public responses on its Application. GEPL published the Public Notice on 14 July,

2017 in the following daily newspapers:

a) Free Press Journal (English),

b) Sakal Times (English),

c) Navshakti (Marathi)

d) Pudhari (Marathi).

A copy of GEPL‟s Trading Licence Application along with enclosures was made

available on GEPL‟s website. No objections or suggestions were received by either

GEPL or the Commission in response to this Public Notice within the stipulated

time.

15. After evaluating the Application submitted by GEPL, it was observed that it

qualified prima facie for grant of Trading Licence of Category “A” for Intra-State

Trading in the State of Maharashtra. The Commission accordingly published a Public

Notice under Section 15(5)(a) of the EA, 2003 seeking public comments on the

proposed grant of Trading Licence to GEPL on 1 September, 2017 in the daily

newspapers Times of India and Indian Express (English), and Loksatta and

Maharashtra Times (Marathi).The Notice also stated that opportunity to be heard in

person would be given by the Commission at the Public Hearing to be held on 4

October, 2017 at 11:00 hrs, at the Centrum Hall, 1st Floor, Centre No.1, World Trade

Centre, Cuffe Parade, Mumbai. The Public Hearing was conducted accordingly, at

which GEPL made a presentation on its Application. The list of persons present at

the Public Hearing is at Annexure 3.

Suggestions/ Objections received, and GEPL‟s Replies

16. Siddhayu Ayurvedic Research Foundation Pvt. Ltd.

(Written response received on 22.9.2017, oral submissions at Public Hearing)

Siddhayu Ayurvedic Research Foundation Ltd. (SARFPL) owns and operates a wind

energy generating facility with an installed capacity of 12.85 MW at Chakla, Taluka

& District Nandurbar in Maharashtra. It has filed a Petition in Case No. 83 of 2017

against GEPL, which is reserved for orders. The present objections/suggestions are

in addition to the arguments advanced in that Case. SARFPL objects to the grant of a

Trading Licence to GEPL.

The issues are as follows:


Windfall trading margins made by GEPL:

The Commission in its wisdom and with good intentions did not consider it

appropriate to fix trading margins in the State probably for the development of the

market. However, the Commission may now consider fixing trading margins

prospectively. Most of the State Electricity Regulatory Commissions (SERCs) have

considered it fit to fix trading margins on the Intra-State trading of electricity. The

trading margin should be fixed so that trading of electricity as well as the profits

made through such trading can be regulated. The whole business of electricity is a

regulated one. Fixation of trading margin is left to the discretion of the respective

SERCs under the EA, 2003. The whole idea of providing choice of supply,

competition etc under the EA, 2003 revolves around the concept of benefit which

such actions would create for the consumers and Generators. However, private

players like GEPL have made windfall gains at the cost of consumers and Generators

by depriving them of their legitimate benefits. GEPL may be directed to submit its

trading margins data to establish the facts.

Payments to many Generators not made even after power was used and sold:

Huge dues are not being paid by GEPL and are outstanding since 2012 in respect of a

large number of Generators for the power which it has already used and sold. GEPL

entered into agreements with such Generators under the Licence issued by the

Commission.

An enquiry into the conduct of GEPL would reveal that its modus operandi in its day

to day business is nothing but mere dooming tactics. The modus operandi is as

under:

1. Enter into an EPA (Energy Purchase Agreement (EPA) with Generators.

2. Pay them initially for some time.

3. Stop paying them/make part payments.

4. Don‟t pay regularly and create a lot of outstandings.

5. Compel the Generator to terminate the EPA.

6. Raise false and baseless counter-claims and deny legitimate payments for

power sold by Generators to it.

7. Keep making them run from pillar to post for their money.

8. Harass them by legal battles.

GEPL may be directed to submit the EPA data of all Generators and the outstanding

amount to ascertain these facts.

Deliberately and willfully flouting rules and laws even after being aware of them:


GEPL has induced small, ignorant Generators to get into private arbitrations without

being referred for the same by the Commission. Such arbitration proceedings are

non-est. The Commission may direct GEPL to submit the details of such

ongoing/concluded private arbitrations.

Past conduct under earlier Licence of utmost relevance for grant of further Licence:

Grant of fresh Licence to GEPL should be strictly as per the performance/conduct of

GEPL under its earlier Licence. GEPL has chosen to take a contrary stand in some of

its affidavits in the present proceedings stating that the past data under the earlier

Licence is not mandated as the present Application is for a fresh Licence. However,

grant of a fresh Licence has to be strictly in accordance with benchmarks achieved

by GEPL under its earlier Licence. Moreover, GEPL already holds an Inter-State

Trading Licence granted by the CERC and can use it to carry on trading activity

throughout India, but yet it prefers to take separate a Trading Licence for the

following reasons:

a. To evade trading margins where SERCs have not fixed them.

b. To create a wrong impression amongst stake-holders that GEPL is within

the jurisdiction of the SERC.

c. To confuse the CERC and the SERCs on issues of margins by technical

and hyper-technical arguments on the concept of Intra- and Inter-State

trading.

Irrelevant and incomplete data submitted by GEPL:

The data submitted has to be as on date. The data submitted by GEPL is quite old as

the Application has been filed way back in 2015. The Commission may direct GEPL

to file updated data including but not limited to its financial capabilities.

GEPL’s Reply

(dated 28.9.2017)

SARFPL has belatedly filed certain objections which cannot be considered after the

expiry of the period specified under the proviso to Section 15 (2). This proviso bars

consideration of any objections received after the “expiration of thirty days from the

date of publication of notice” under Section 15 (2). In view thereof, the objections

filed by SARFPL are not maintainable.

The objections are a blatant abuse of legal process and have been filed with an

oblique motive of pressurizing GEPL into settling SARFPL‟s unlawful monetary

claim on the one hand and giving up its counter-claim on the other. SARFPL and

GEPL have an ongoing commercial dispute in relation to sale and purchase of power

under a mutually agreed EPA dated 20 September, 2010.


That dispute has been raised by SARFPL in Case No. 83 of 2017, which is pending

disposal before the Commission. In the proceedings before the Commission in that

Case, SARFPL had declared that it would be filing objections against GEPL‟s

Licence Application. Such objections are evidently in retaliation to GEPL‟s stand in

Case No. 83 of 2017 and amount to an abuse of the process of this Commission.

SARFPL had chosen not to file any objections at the appropriate stage of publication

of notice under Section 15 (2); meaning thereby that it had no legitimate ground to

oppose GEPL‟s Licence Application and, further, that the objections which have

now been filed are motivated and aimed at harassing GEPL.

The objections of SARFPL are devoid of merit and may, therefore, be rejected by the

Commission. By placing reliance upon commercial disputes that are sub judice

and/or have not reached adjudicatory conclusion, SARFPL is seeking to pre-judge

such disputes in a manner gravely prejudicial to GEPL. GEPL, too, has significant

claims and counter-claims against entities with which it has transacted business,

which incidentally includes SARFPL.

Windfall trading margins made by GEPL

SARFPL‟s contention that „Intra-State trading margin‟ should be fixed by the

Commission is beyond the scope of the present proceedings and ignores the fact that

fixation of such margin has been statutorily left to the discretion of the Commission

by virtue of Section 86 (i) and (j).

Fixation of an Intra-State trading margin would apply to all entities undertaking such

trading activity, including the private and public sector Distribution Licensees

operating in Maharashtra. Therefore, any exercise for fixation of a trading margin

can only be undertaken in appropriate proceedings in which all the stake-holders are

made a party and given an opportunity to present their case with respect to trading

margin fixation.

In the absence of trading margin, there is no merit in SARFPL‟s unsubstantiated

contention that private players have made windfall gains and have deprived

consumers and Generators of their legitimate benefits.

Payments to many Generators not made even after power was used and sold

SARFPL‟s contention with respect to alleged non-payment of dues to Generators is

not only unsubstantiated and baseless, but also cannot be a legitimate ground to

oppose GEPL‟s Application for grant of Licence. Contractual disputes in commercial

transactions are not unique to GEPL, and are a necessary part and parcel of business

activities undertaken by Licensees across the sector, including large private and

public sector entities engaged in trading/distribution of electricity.


SARFPL‟s objections with respect to modus operandi adopted by GEPL are

baseless, malicious and denied. GEPL‟s contracts with counter-parties are entered

into on mutually agreed terms and conditions after careful deliberations by the

parties concerned, which have equal bargaining power and are under no obligation to

contract with GEPL. SARFPL has no locus to seek a direction requiring GEPL to

submit EPA/ data pertaining to alleged outstanding dues of other Generators,

particularly when such Generators have chosen not to participate in the present

proceedings.

Deliberately and willfully flouting rules and laws even after being aware of them

SARFPL‟s allegations with respect to violation of law by GEPL are incorrect,

baseless and denied. SARFPL is not justified in referring to the proceedings in Case

No. 83 of 2017 and the submissions therein, particularly when this Commission is

still seized of that Case.

Further, SARFPL has no locus to comment upon arbitration proceedings between

GEPL and other Generator(s). Accordingly, SARFPL‟s opinion with respect to the

validity of such arbitration proceeding is not only unwarranted, but extraneous to the

scope of the present proceedings.

Past conduct under earlier Licence of utmost relevance for grant of further Licence

There is no provision under the EA, 2003, which bars an entity from having both

Inter-State Trading Licence, issued by CERC, as well as Intra-State Trading

Licence(s), issued by the SERC(s). SARFPL‟s allegations that GEPL has applied for

an Intra-State Licence because it intends to evade trading margins, create wrong

impression among stake-holders and confuse the CERC and SERCs are baseless and

a figment of SARFPL‟s imagination.

With respect to the affidavits filed by GEPL, these were found to be in order by the

Commission, and it was only upon consideration of all the filings by GEPL from

time to time that the Commission, in the Public Notice dated 1 September.2017,

stated that it

“proposes to grant a license to GEPL as a Category „A‟ trader in terms of

MERC (Trading License Conditions) Regulations, 2004 as amended till now,

subject to the fulfillment of requirement laid down in Electricity Act, 2003 and

Regulations.”

In view of the Commission‟s proposal to grant Licence to GEPL, SARFPL‟s belated

attempt to rake up issues that have already been addressed by GEPL to the


satisfaction of the Commission is nothing but a mischievous attempt to frustrate the

subject Licence Application on untenable grounds.

Irrelevant and incomplete data submitted by GEPL

As regards the data submitted shall be as on date, SARFPL‟s contention with respect

to data submitted by GEPL is incorrect, unsubstantiated and therefore denied. GEPL

has, from time to time, furnished all the necessary data, after consideration whereof

the Commission proposed grant of Category „A‟ Licence.

17. POSCO Maharashtra Steel Pvt. Ltd.

(Written response received on 3.10.2017, after stipulated date)

POSCO Maharashtra Steel Pvt. Ltd. („POSCO‟), Mangaon, Distt. Raigad, is a partial

Open Access consumer.

POSCO entered into a Power Sale Agreement dated 15 October, 2012 with GEPL for

upto 5 years from November, 2012 to October, 2017.

Initially, the parties had agreed that GEPL shall deliver the Scheduled Contracted

Capacity to POSCO at a tariff of Rs. 6.78 per kWh („Transaction Cost‟). The

Transaction Cost was mutually modified from time to time.

The Transaction Cost offered by GEPL started exceeding the cost of power from the

Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL). In May, 2017, after

discussions and negotiations, the Transaction Cost was agreed as Rs. 6.20 per kWh.

Consequently, POSCO made advance payments for the month of July, 2017 at the

rate of Rs. 6.20 per kWh.

Subsequently, GEPL arbitrarily and unilaterally insisted on a Transaction Cost of Rs.

6.55 per kWh and raised invoices for July, 2017 at the Transaction Cost of Rs.

6.55/kWh and demanded the differential amount.

This conduct of GEPL is nothing but a fraudulent and unfair trade practice which

shows a lack of financial integrity, competence, reputation and character.

In view of the above, POSCO did not schedule any power from GEPL or MSEDCL

for September, 2017. POSCO also applied for the cancellation of its Short Term

Open Access which was duly cancelled by MSEDCL w.e.f. 1 September, 2017.

Thus, there was no consumption or failure to consume any power for the month of

September 2017.


However, GEPL stated that it had already arranged the Scheduled Contracted

Capacity for September, 2017 and falsely accused POSCO of failing to off-take

power, whereas the fact is that no capacity was approved by MSEDCL for

September 2017.

Under these circumstances, POSCO called upon GEPL to explain why POSCO

should not terminate the Agreement as the Transaction Cost offered by GEPL started

exceeding the cost of power from MSEDCL.

However, GEPL has refused to deliver electricity at the agreed Transaction Cost of

Rs. 6.20 per kWh for the month of July, 2017 or to withdraw its invoices for

September, 2017.

GEPL has exhibited an unprecedented practice of false invoicing and unfair trade

practices, described below.

On 1 September, 2017, GEPL issued Invoice copy No. 20172508 for an amount of

Rs. 5,44,32,000/- which it unconditionally withdrew on 4 September, 2017.

All of a sudden, on 18 September, 2017, GEPL issued invoices for the months of

July, August and September, 2017 for Rs. Rs. 7,48,94,458.87/-, which was

unconditionally withdrawn by it on 20 September,2017.

On 20 September, 2017, GEPL issued invoices for July, August and September,

2017 for Rs. 4,72,40,622.20/-

The conduct of GEPL of issuing invoices, then cancelling them and then again

issuing them and again cancelling them and again issuing them evidently establishes

the unfair trade practice and fraudulent conduct on the part of GEPL.

Consequently, POSCO is initiating appropriate proceedings against GEPL.

The above facts demonstrate that GEPL lacks business maturity, acumen and

professionalism expected from a Trading Licensee and there are serious doubts on

the ability of GEPL to perform its duties and obligations as a Trading Licensee.

Evidently, GEPL has inter alia engaged in fraudulent and unfair trade practices and

has shown a lack of financial integrity, competence, reputation and character.

Additionally, a promoter and majority shareholder of GEPL (Shri. Harry Dhaul) and

a Director of GEPL (Shri. Mikhail Dhaul) and others have criminal cases pending

against them. Shri. Harry Dhaul is an accused in Case No. 04/2013 before the

Special Central Bureau of Investigation (CBI) Court in Dharwad; CC 838/2016

before JMCF-II, Belgavi; and Criminal Petition No. 101198/2017 before the


Karnataka High Court in an alleged economic offence. Shri. Mikhail Dhaul is an

accused in Criminal Petition No. 100419/2017 before the Karnataka High Court

against the FIR No. 52/2017 filed before Mudhol Police Station, Bagalkot.

These facts have not been disclosed before this Commission. The Commission may

direct GEPL to submit details of these criminal cases and to give reasons for

concealing these material facts.

Miscellaneous Application(MA) No. 2 of 2014 in Case No. 22 of 2014 was filed by

Ushdev International Ltd. and MA No. 8 of 2014 in Case No. 22 of 2014 was filed

by Dhariwal Industries Pvt. Ltd., alleging that GEPL had defaulted in its obligations

and had operated trading business even after the expiry of its Trading Licence. [The

Commission notes that these Miscellaneous Applications were not for adjudication

of any disputes.]

The Commission may reject the Application of GEPL to operate as a Trading

Licensee in Maharashtra.

(Additional written response dated 16.10.2017)

GEPL had raised invoices for the months of July, August, and September, 2017 to

the tune of Rs. 4,72,40,622 in a fraudulent and unfair manner.

POSCO had submitted a Bank Guarantee for a sum of Rs. 6,04,80,000 /- in favour of

GEPL.

The due date of the impugned invoice for the month of September 2017 was

05.10.2017. Having a reasonable apprehension that GEPL may attempt to

fraudulently encash the Bank Guarantee immediately on or after 05.10.2017, POSCO

filed a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 on

04.10.2017 before the Delhi High Court (O.M.P. (I) (Comm) No. 409 of 2017).

Vide order dated 04.10.2017, the High Court directed GEPL and HSBC to maintain

status quo on the Bank Guarantee.

To its shock and surprise, when POSCO communicated that Order to HSBC on

04.10.2017, it was informed that GEPL had already encashed the Bank Guarantee on

04.10.2017 itself (a day before the due date of the impugned invoice for September

2017) and that too for the full amount of Rs. 6,04,80,000/- (as against its false claim

of Rs. 4,72,40,622.20/-).

Being aggrieved by the fraudulent encashment of the Bank Guarantee, POSCO filed

I.A. No. 11670 of 2017 in O.M.P. (I) (Comm.) No. 409 of 2017 seeking a direction

to GEPL to secure the sum of Rs. 6,04,80,000/-. Vide Order dated 10.10.2017, the

High Court directed GEPL to secure the sum of Rs. 6,04,80,000/-


The fraudulent, unfair, unethical and illegal practices adopted by GEPL are evident

from the record.

GEPL is not in a sound financial position and may not have the wherewithal to

secure the sum of Rs. 6,04, 80,000/-.

These facts may be taken into consideration while adjudicating the eligibility and

qualification of GEPL and reject its Application to operate as a Trading Licensee

Maharashtra.

GEPL’s Reply

(18 October, 2017)

The objections belatedly filed by POSCO ought not to be considered in view of the

mandatory time line specified under the proviso to Section 15 (2) for consideration

of such objections.


oblique motive of coercing GEPL into settling with POSCO‟s unlawful monetary

claims.

POSCO has made certain illegal claims in relation to a transaction following the

Power Sale Agreement dated October 15, 2012, as amended. POSCO and GEPL had

a five year long commercial relationship against a 12 year contract during which

GEPL had provided its services without any issue. Now, POSCO has proceeded to

object to the proposed grant of Trading Licence by this Commission based on a

business disagreement.

POSCO has filed its objections with malafide intent and with an oblique motive of

coercing GEPL to meet its illegal and arbitrary demands relating to the transaction

discussed above. Hence, the objections filed by POSCO are an abuse of the process

under law and are motivated and surreptitious in nature.

POSCO had chosen not to file any objections at the appropriate stage of publication

of notice under Section 15 (2) of the EA, 2003; meaning thereby that it had no

legitimate ground to oppose GEPL‟s license application, and only as afterthought it

has filed the objections expecting a business disagreement with GEPL with the

motivated aim of coercing and harassing GEPL. Hence, the objections filed by

POSCO be dismissed.

The proceedings for grant of Licence to trade in electricity have to be strictly in

terms of the requirements contained in Section 52 of the EA, 2003, namely, technical

requirement, capital adequacy and credit worthiness for being considered for a

license to be an electricity trader.


POSCO has failed to appreciate that under the scheme of Section 52 of the EA, 2003,

the criteria for grant of Licence to trade in electricity are fixed and limited to

technical requirement, capital adequacy and credit worthiness. The objections filed

by POSCO bear no reasonable nexus with the regulatory scheme and intent outlined

under Section 52 of the EA, 2003. The Commission may exercise its discretionary

jurisdiction with regard to grant of Licence to trade in electricity in conformity

therewith and not give credence to the prima facie malafide and illegal objections

filed by POSCO, which are clearly filed with an oblique intent.

POSCO has failed to demonstrate the existence of conditions and circumstances that

render GEPL ineligible and / or disqualified for the grant of a Trading Licence.

POSCO has failed to demonstrate that there are serious doubts on the ability of

GEPL to perform its duties and obligations as trading licensee.

POSCO and GEPL had a five year long commercial relationship during which GEPL

had provided its services as a Trading Licensee without any issue. Only when

POSCO was faced with a business disagreement and apprehended a dispute

consequent thereto, has it opted to raise such vacuous doubts to collude, confuse and

confound the current proceedings before this Commission and use it as an

opportunity to coerce GEPL into taking business decisions which would be

favourable to POSCO. GEPL denies and disputes that it had engaged in fraudulent

and unfair trade practices and that it had shown a lack of financial integrity,

competence, reputation and character. Such allegations made by POSCO are, apart

from being prima facie baseless and completely devoid of any merit, are an attempt

to vitiate the current proceedings before this Commission with an oblique interest.

Contractual disputes in commercial transactions are not unique to GEPL, and are a

part and parcel of business activities undertaken by licensees across sector, including

large private and public sector entities engaged in trading/distribution of electricity.

POSCO‟s attempt to concoct issues and collude, confuse and confound the current

proceedings before this Commission is nothing but a mischievous attempt to frustrate

the subject license application on untenable grounds.

By placing reliance upon cases that are sub-judice and /or have not reached

adjudicatory conclusion, POSCO is seeking to pre-judge GEPL.

POSCO‟s belated attempt to rake up issues that have already been addressed by

GEPL to the satisfaction of this Commission is nothing but a mischievous attempt to

frustrate the subject license application on untenable grounds.


POSCO has failed to appreciate that involvement of the applicant or any of its

promoters, partners, directors, associates, etc., in any legal proceedings may not itself

be sufficient to disqualify a person.

(Reply dated 27.11.17 to POSCO’s additional submission)

POSCO has filed the Supplementary Objections with an oblique motive of coercing

GEPL into settling with POSCO‟s unlawful monetary claims.

POSCO is seeking to misrepresent and leverage a purely commercial dispute, which

is currently sub-judice, to cause prejudice to the current proceedings before this

Commission which is a completely separate legal proceeding and has no bearing

upon POSCO, commercially or otherwise.

It is denied and disputed that GEPL had either fraudulently or unfairly raised

invoices on POSCO for the months of July, August and September 2017. POSCO

while making such allegations has deliberately withheld material facts before this

Commission which evidences the acceptance of contractual arrangements and the

existence of amounts owed by POSCO to GEPL which are substantially in excess of

the alleged claims made by POSCO.

The allegations and insinuations made by POSCO are a subject matter of a

commercial dispute which is currently sub-judice.

Contractual disputes in commercial transactions are not unique to GEPL nor are they

rare. They are a part and parcel of business activities undertaken by licensees across

the sector, including large private and public-sector entities engaged in

trading/distribution of electricity

Considering the long standing commercial relationship between POSCO and GEPL,

during which time admittedly POSCO was reasonably satisfied with GEPL, GEPL is

surprised at the allegations and fails to appreciate how the process of grant of a

license to trade in electricity would affect the illegal and baseless claims of POSCO

as against GEPL.

GEPL has already presented before the Commission its eligibility and qualification

for grant of a Category „A‟ Intra-State Licence for undertaking trading in electricity

within Maharashtra in terms of the Trading Licence Conditions Regulations, 2004, as

amended, and as has been required from time to time by this Commission.

Grant or rejection of Licence is governed by the provisions of Regulation 4-A of the

Trading Licence Conditions Regulations, 2004 and Section 52 of the EA, 2003 and

therefore, any disqualification which does not fall under these provisions cannot be a

ground for denying a Trading Licence to GEPL. None of these provisions


contemplates denial of a Licence merely on the ground of commercial disputes

between the parties or on account of the assertion of a monetary claim by one person

against the other. The mere fact that one party may assert a commercial monetary

claim against another is not at all a relevant circumstance which can be taken up by

the Commission while deciding whether or not to grant a Licence. Therefore,

POSCO has made submissions which are completely irrelevant and extraneous to the

application for grant of Licence. It is not disputed and cannot be disputed that GEPL

satisfies the eligibility norms specified under the Regulations and the EA, 2003.

Further, the mere existence of a commercial dispute or monetary claim does not fall

under the disqualifications prescribed under Regulation 4-A of the Trading Licence

Conditions Regulations, 2004.There is no averment by POSCO which fulfills the

ingredients of Regulation 4-A.

18. Maharashtra State Electricity Distribution Co. Ltd.


Vide letter dated 21 October, 2016, MSEDCL has brought to the notice of the CERC

certain irregularities of Electricity Traders in submitting the energy transacted by

them to CERC. It was observed that GEPL was not furnishing the monthly

information in the respective forms for Inter-State Trading, Intra-State Trading,

trading through Power Exchanges, long-term trading, cross-border trading and

banking transactions on its website, which is required by the CERC Regulations.

MSEDCL also informed CERC that GEPL is hiding the trading margins for the

electricity traded in Maharashtra on the basis of Inter-State Licence granted by

CERC. The Trading Licensees are executing supply agreements with the consumers /

Generators terming themselves as facilitators to escape from the responsibility which

has been entrusted upon them under the relevant Regulations. Such arrangement is

nowhere envisaged under the EA, 2003. MSEDCL in its Petition in Case No. 8 of

2017 has raised this issue and also requested this Commission to introduce Trading

Margin Regulations in the State to bring transparency. GEPL is violating the

mandatory margins to generate windfall gains. Hence the Licence granted to it

should be cancelled.

MSEDCL has signed various stand-by power arrangements with GEPL and has

raised weekly bills in accordance with these agreements. However, GEPL has not

made the payment before due date. The total outstanding as on June, 2017 is Rs.

15.97 crore. MSEDCL was compelled to invoke the Bank Guarantee. In order to

restrain MSEDCL from encashing the Bank Guarantee, GEPL filed Commercial Suit

No. 429 of 2017 in the Bombay High Court. Also, GEPL made part payment of Rs.

2.19 crore in August, 2017 which has been adjusted against the outstanding dues.

After reminders to make the balance payments, MSEDCL finally invoked the Bank

Guarantee amounting to Rs. 4.61 crore, and accordingly the balance outstanding

amount payable by GEPL is Rs. 9.58 crore. As the Bank Guarantee amount was


received by MSEDCL, the Bombay High Court disposed of the Notice of Motion.

MSEDCL is planning further appropriate action for recovery of the balance amount

of Rs. 9.58 crore from GEPL.

In view of various cases pending against GEPL at various forums and the practice

adopted by it, there is a serious doubt regarding the financial ability of GEPL to

fulfill its various obligations under the EA, 2003 and the Regulations. Hence, the

Commission should not grant Trading Licence to GEPL.

GEPL’s Reply

(2.11.2017)

The objections belatedly filed by MSEDCL ought not to be considered in view of the

mandatory time line specified under the proviso to Section 15 (2) for consideration

of such objections.

Section 15 (2) of the EA, 2003 expressly bars consideration of any objections

received after the “expiration of thirty days from the date of publication of notice”.

The fact that the said provision is couched in negative terms further amplifies the

prohibitive mandate against consideration of any objections after the expiry of thirty

days from the date of publication of notice under Section 15 (2).

GEPL relies upon the settled legal position reiterated by the Supreme Court in Vijay

Narayan Thatte v. State of Maharashtra, (2009) 9 SCC 92.

Another exposition of principles relating to interpretation of statutory provisions that

are couched in negative terms is found in V. N. Shrikhande (Dr.) v. Anita Sena

Fernandes (2011) 1 SCC 53¸ where the Supreme Court was dealing with Section 24-

A (1) of the Consumer Protection Act, 1986, which provides that

“the District Forum, the State Commission or the National Commission shall not

admit a complaint unless it is filed within two years from the date on which the

cause of action has arisen.”

Invoking the above principles of statutory interpretation, it is submitted that the

subject objections filed by MSEDCL are not maintainable at this belated stage, and

may, therefore, be not taken cognizance of.

MSEDCL‟s objections cannot be treated as objections in response to publication

under Section 15 (5), as under that provision, objections can be filed only by the

Central Transmission Utility (CTU) and the State Transmission Utilities (STUs).

Conferring a right to file objections under Section 15(5) on an entity other than

specifically named in that provision would be a violation of an unambiguous

statutory provision.


A bar against consideration of objections filed after expiry of thirty days of

publication of notice under Section 15 (2) cannot be defeated by giving entities

(other than CTU/STU) an opportunity to file their objections after publication under

Section 15 (5). It is trite that what cannot be done directly cannot be done indirectly.

The 90 days‟ time period specified under Section 15 (6) for disposal of an

application for grant of a license is also indicative of the legislative intent to confine

consideration of objections to the time period specified in the proviso to Section 15

(2).

The consideration of objections belatedly filed by MSEDCL would render the

proviso to Section 15 (2) otiose, and should, therefore, be consciously avoided.

Since Section 15 (2) expressly provides for the manner in which objections filed

against an application for grant of a license have to be considered, it follows that a

consideration de hors the said provision would be legally impermissible.

MSEDCL‟s objections are also in the teeth of the binding Regulations notified by

this Hon‟ble Commission.

Regulation 4-A disqualifies an entity from grant of a trading license in the event of

“conviction of the applicant or any of its partners, directors or promoters by a

Court of Law or indictment/ adverse order by a regulatory authority or which

relates to a grave offence of such a nature that it outrages the moral sense of the

community; insolvency and bankruptcy of the applicant or any of its partners,

directors or promoters; conviction of an offence involving moral turpitude, or

any economic offence; fraudulent and unfair trade practices or market

manipulation; financial integrity; competence; reputation and character and

any other sufficient reasons.”

The use of the expression “means and include” in the Explanation to Regulation 4-A

emphasizes that the above noted specific circumstances need to be conclusively

proved against an applicant in order to raise a plea of disqualification.

GEPL or any of its directors / promoters have neither been convicted of any offence

nor has there been any judicial or regulatory finding of fraudulent and unfair trade

practice or market manipulation against them, and hence MSEDCL has grossly failed

to meet the requirements of Regulation 4–A.

There is nothing in Regulation 4-A to suggest that legal proceedings arising out of

commercial disputes and pending before regulatory authorities will incur the

disqualifications specified therein. Without appreciating the issues involved in such

legal proceedings, MSEDCL is trying to pre-judge such issues against GEPL even


through the concerned forum seized of such issues has not given a verdict against

GEPL.

The expression “any other sufficient reasons” has to be interpreted by applying the

rule of ejusdem generis, and therefore, the residual category must be confined to the

specific disqualifications preceding it.

The objections filed by MSEDCL are a blatant abuse of legal process and have been

filed with the oblique motive of stifling competition that will necessarily accompany

the grant of trading license to a private entity. MSEDCL has itself been engaged in

selling significant quantum of electricity through Inter-State trading and would,

therefore, be naturally loathe to a licensed entity that can potentially reduce its

tradable surplus by offering better tariff and other innovative transaction models to

private Generators, as well as consumers.

The fact that MSEDCL had chosen not to file any objections at the appropriate stage

of publication of notice under Section 15 (2) lends further credence to the belief that

it had no legitimate ground to oppose petitioner‟s Licence application, and that the

same have been belatedly filed only to stifle competition and thwart market

development envisaged under the provision of the reform legislation.

MSEDCL and GEPL are parties in ongoing commercial disputes before the

Appellate Tribunal for Electricity (APTEL) in Appeal Nos.244 & 245 of 2016, and

therefore, its objections appear to be motivated and disingenuous.

MSEDCL‟s reliance upon cases that are sub judice is erroneous and misplaced for

the following reasons:

i) If ongoing legal proceedings can form the basis to impugn an entity‟s ability to

engage in a regulated business (electricity trading), MSEDCL‟s own capacity to

continue in distribution business would come into question, as it has a large

number of cases pending in different fora, including this Commission.

ii) By placing reliance upon cases that have, admittedly, not reached adjudicatory

conclusion, MSEDCL is seeking to pre-judge GEPL in a manner gravely

prejudicial to the latter.

iii) Pending legal proceedings are inadmissible for forming an opinion vis-à-vis

disqualifications specified under Regulation 4-A. The „undertaking on

affidavit‟ submitted by GEPL in compliance with the directions of this

Commission pertained to the absence of any order of conviction/ indictment

etc., and was found to be in accordance with the relevant Regulations.


This Commission - consistent with Regulation 4-A - did not direct GEPL to give an

undertaking with respect to pending cases, as that would have been beyond the scope

of Regulation 4-A.

Given the fact that Cases referred to by MSEDCL‟s objections are at different stages

of adjudication before the concerned forum, GEPL would be gravely prejudiced if

the same are prematurely taken into consideration for deciding the present license

application.

With respect to cases before CERC, neither have those Petitioners filed objections

before this Commission nor has MSEDCL referred to GEPL‟s contentions in those

cases. MSEDCL‟s one sided presentation of purported facts in pending legal

proceedings is mischievous and deserving of censure.

With respect to Case No. 83/ 2017, filed by SARFPL before this Commission, GEPL

has already filed a detailed reply in that Case.

Pending legal proceedings are neither a ground for disqualification under the

applicable Regulations nor impinge upon the technical competence, capital adequacy

and creditworthiness of an applicant in terms of Section 52 of the EA, 2003.

MSEDCL has failed to demonstrate conditions and circumstances that render GEPL

ineligible and / or disqualified for the grant of a trading license.

GEPL has complied with all the applicable Regulations of the CERC and the State

Commissions, including this Commission, and has effectuated the Open Access

transactions in accordance with the MERC (Distribution Open Access) Regulations,

2016 and MERC (Transmission Open Access) Regulations, 2016.

The fixation of „intra-state trading margin‟ by this Commission is beyond the scope

of the present proceedings and ignores the fact that fixation of such margin has been

statutorily left to the discretion of this Commission by virtue of Section 86 (1) (j),

which mandates the State Commission to fix intra-state trading margin only if the

same is considered necessary.

The fixation of intra-state trading margin would apply to all entities undertaking such

trading activity, including MSEDCL. Therefore, any exercise for fixation of a trading

margin can only be undertaken in appropriate proceedings in which all the stake-

holders are made a party and given an opportunity to present their case.

GEPL specifically denies that any outstanding amount is payable to MSEDCL. In

fact, it is MSEDCL which owes considerable amount to GEPL. MSEDCL owes

GEPL Rs.15.28 crore plus surcharge which is undisputed and acknowledged by

MSEDCL in its correspondence. So far, GEPL has not considered invoices for


under-drawal raised on MSEDCL for the period 1/7/2015 to 31/5/2017 for Rs. 19.71

crore which is disputed and sub judice, which GEPL shall be raising soon since the

entire issue is pending before APTEL. MSEDCL has fraudulently invoked GEPL‟s

Bank Guarantee.

19. Modern India Ltd.


Modern India Ltd. („Modern India‟) had executed several agreements with GEPL for

Sale of Power to it under their Trading Licence agreements, being

Agreement dated Validity of the Agreement

7.9.2016 1.4.2016 to 31.3.2017

8.5.2017 1.5.2017 to 30.9.2017

Addendum dated 8.9.2017 to

agreement dated

8.5.2017

1.10.2017 to 31.12.2017

As per these agreements, Modern India had supplied Solar power under Open Access

through the Trading Licence of GEPL and subsequently submitted bills against each

supply. Initially, GEPL used to give those payments but not since January, 2017.

Inspite of repeated requests, reminders and demands, GEPL has wilfully and/or

deliberately failed, neglected and refused to make payment of outstanding dues in the

manner and within the time stipulated and as such committed gross breach / default

in due performance and observance of the terms and conditions of this Commission.

The details of dues are as follows:

Sr.

No. Trader Consumer Period Amount (Rs.)

1 GEPL Asian Colour Coated Limited Dec-16 1,15,058

2 GEPL Edelweiss Commodities

Services Limited Jan-17 14,68,303

3 GEPL Kalyani Carpenter Special

Steel Limited Feb-17 6,32,978

4 GEPL Edelweiss Commodities

Services Limited Apr-17 17,12,121

5 GEPL Unique Estate Development

Co Ltd Jun-17 12,85,285


6 GEPL Unique Estate Development

Co Ltd Jul-17 9,42,780

Total 61,56,525

As per agreement with GEPL, Modern India is also entitled to claim interest on the

amount of outstanding @ 15% p.a., i.e. 2, 28,117.47.

Modern India has tried several times to request GEPL to make payment of the said

outstanding dues, but it only assured payment which was never fulfilled till date.

In view of and under the circumstances above, Modern India objects to grant of

Trading Licence to GEPL

20. Morries Energy Ltd.


Morries Energy Ltd. („Morries‟) had executed several agreements with GEPL for

sale of power to it, being

Agreement dated Validity of agreement

5.1.2017 1.1.2017 to 31.3.2017

Addendum to agreement

dated 5.1.2017 dated

10.3.2017

1.4.2017 to 31.5.2017

8.5.2017 1.5.2017 to 30.9.2017

As per these agreements, Morries had supplied Solar power to the consumers under

Open Access through the Trading Licence of GEPL and subsequently submitted bills

against each supply to GEPL. Initially GEPL used to make payments but not since

February, 2017.

Inspite of repeated requests, reminders and demands, GEPL has wilfully and/or

deliberately failed, neglected and refused to make payment of outstanding dues in the

manner and within the time stipulated and as such committed gross breach / default

in due performance and observance of the terms and conditions of this Commission.

The details of dues are as follows:


Sr.

No. Trader Consumer Period

Amount

(Rs.)

1 GEPL

Hindustan National

Glass and Industries

Ltd.

Feb-17 9,50,519.03

2 GEPL

Edelweiss

Commodities Services

Limited

Apr-17 11,76,560

3 GEPL Unique Estate

Development Co Ltd Jun-17 9,13,287

4 GEPL Unique Estate

Development Co Ltd Jul-17 16,03,913.39

Total 46,44,279.42

As per the agreement with GEPL, Morries is also entitled to interest on the amount

of outstandings @ 15% p.a.

Morries has tried several times to request GEPL to make payment of the said

outstanding dues, but it only assured payment which was never fulfilled till date.

In view of the above, Morries objects to the grant of Trading Licence to GEPL.

GEPL’s Replies

(dated 17.11.2017)

The Objectors have belatedly filed certain objections, which cannot be considered

after the lapse of the period specified under the proviso to Section 15 (2) of the EA,

2003.

The above proviso bars consideration of any objections received after the

“expiration of thirty days from the date of publication of notice” under Section 15

(2) of the EA, 2003. In view thereof, the objections are inadmissible in law.

The period of 90 days prescribed under Section 15 (6) of the EA, 2003 for disposal

of an Application for grant of a Licence is also indicative of the legislative intent to

confine consideration of objections to the time period specified under the proviso to

Section 15 (2) of the EA, 2003.

The consideration of objections belatedly filed by the Objectors would render the

proviso to Section 15 (2) of the EA, 2003 otiose, and should, therefore, be

consciously avoided.



oblique motive of coercing GEPL into settling with the Objectors‟ unlawful

monetary claims.

The Objectors have made certain claims in relation to certain transactions following

the agreements relating to Sale of Power between GEPL and them.

The Objectors and GEPL have had a stable commercial relationship and GEPL had

provided its services without any issue.

GEPL is exploring the possibility of further commercial engagements with the

Objectors and is in the midst of discussions. Now, the Objectors have proceeded to

object to the proposed grant of a Trading Licence based on disagreements originating

from the usual course of a business.

The Objector, has admitted in the Objections that GEPL used to regularly make

payments till January, 2017, and has alleged that GEPL has stopped paying since

then.

However, an Objector has post January, 2017 also preferred to enter into commercial

arrangements with GEPL.

The grant or rejection of Licence is governed by Regulation 4-A of the Trading

Licence Conditions Regulations and Section 52 of the EA, 2003 and therefore, any

disqualification which does not fall within the above provisions cannot be a ground

for denying the grant of Trading Licence to GEPL.

None of these provisions contemplates denial of a Licence merely on the ground of

commercial disputes between the parties or on account of the assertion of monetary

claim by one person against the other. The mere fact that one party may assert a

commercial monetary claim against another is not at all a relevant circumstance

which can be taken up by the Commission while deciding whether or not to grant a

Licence. Therefore, the Objectors have made submissions which are completely

irrelevant and extraneous to the Application for grant of Licence. It is not disputed

and cannot be disputed that GEPL satisfies the eligibility norms specified under the

Trading Licence Conditions Regulations and the EA, 2003.

There is no averment by the Objectors which fulfills the ingredients of Regulation 4-

A.

The Objectors have chosen not to file any objections at the appropriate stage of

publication of notice under Section 15 (2) of the EA, 2003; meaning thereby that

they had no legitimate ground to oppose GEPL‟s Licence Application, and only as


afterthought have they filed objections expecting a business disagreement with

GEPL with the motivated aim of coercing and harassing GEPL.

The proceedings for grant of a Licence to trade in electricity has to be strictly in

terms of the requirements in Section 52 of the EA, 2003, namely, technical

requirement, capital adequacy and credit worthiness for being considered for a

Licence to be an electricity trader.

The Objectors have failed to appreciate that under the scheme of Section 52 of the

EA, 2003, the criteria for grant of a Licence to trade in electricity is fixed and is

limited to the technical requirement, capital adequacy and credit worthiness. The

objections bear no reasonable nexus with the regulatory scheme and intent outlined

in Section 52 of the EA, 2003. The Commission may exercise its discretionary

jurisdiction with regard to grant of a Licence to trade in electricity in conformity

therewith and not give credence to the prima facie malafide and illegal objections

filed by the Objectors, which are clearly filed with an oblique intent.

The Objectors have failed to demonstrate the existence of conditions and

circumstances that render GEPL ineligible and/or disqualified for the grant of a

Trading Licence. They have failed to demonstrate that there are serious doubts on the

ability of GEPL to perform its duties and obligations as a Trading Licensee.

GEPL is exploring the possibility of further commercial engagements with the

Objectors and is in the midst of discussions.

Only when the Objectors were faced with a business disagreement and apprehended

a dispute consequent thereto, have they opted to raise such vacuous doubts to

collude, confuse and confound the current proceedings and use it as an opportunity to

coerce GEPL into taking business decisions which would be favourable to them.

GEPL denies and disputes that GEPL has willfully and/or deliberately failed to make

payment of such dues.

Such allegations made by the Objectors are, apart from being prima facie wholly

baseless and completely devoid of any merit, an attempt to vitiate the current

proceedings with an oblique interest.

Contractual disputes in commercial transactions are not unique to GEPL, and are a

part and parcel of business activities undertaken by licensees across the sector,

including large private and public sector entities engaged in trading/distribution of

electricity.

The Objectors‟ attempt to concoct issues and collude, confuse and confound the

current proceedings before this Commission is a mischievous attempt to frustrate the


license Application on untenable grounds. This is evident from the conduct of the

Objectors and the fact the Objectors have till date not approached any forum under

the law to resolve their alleged grievances and continue to engage commercially.

GEPL was asked to provide the latest audited accounting statements and Net Worth

certificate (CA certified) for FY 2015-16 and FY 2016-17. On 18 October, 2017,

GEPL submitted the copies of audited accounts for FY 2015-16 and provisional

audited accounts for FY 2016-17. On 22 December, 2017, GEPL submitted the

audited Net Worth certificate for the latest three years, as under:

Sr. No. As on Amount (Rs.)

1 31 March, 2017 114,25,75,512/-

2 31 March, 2016 111,97,40,732/-

3 21 March, 2015 106,53,69,027/-

On 28 December, 2017, Morries informed the Commission that it had filed a

complaint/ Petition before CERC on 22 December, 2017 for revocation of the

Trading Licence granted by CERC, and enclosed a copy. Morries sought that

Trading Licence not be granted to GEPL till the issue is decided by CERC. On 20

February, 2018, a similar request was made on behalf of Modern India with

reference to its complaint/ Petition filed before CERC on 26 December, 2017 for

revocation of GEPL‟s Trading Licence.

Commission‟s Analysis and Ruling

21. Section 12(c) of the EA, 2003 requires (subject to certain exemptions and

qualifications in Sections 12 and 13) a Licence to trade in electricity, which may

be granted by the Appropriate Commission upon application under Section

14(c). Since GEPL seeks a Licence for trading within Maharashtra, it has

applied to this Commission. GEPL already holds a 25-year Trading Licence

since 28 November, 2008 from the CERC, which allows it to trade Inter- as well

as Intra-State. It was also earlier granted a 5-year Intra-State Trading Licence

by this Commission, which expired on 27 September, 2012.

22. In these proceedings, 5 entities – MSEDCL (a Distribution Licensee), a buyer

(POSCO) and three Generators (SARFPL, Modern India and Morries) – who

are or were dealing with GEPL have opposed its Application. GEPL has

contended that their objections cannot be considered by the Commission since

they were received after the period of 30 days stipulated in the proviso to

Section 15(2) of the EA, 2003. However, that period is stipulated for responses

to the Notice of the Application to be published by GEPL under Section 15(2).

As recorded earlier in this Order, no responses were received to that notice.

However, the subsequent Section 15(5) reads as follows:


“Before granting a licence under Section 14, the Appropriate Commission

shall-

(a) Publish a notice in two such daily newspapers… stating the name and

address of the person to whom it proposes to issue the licence;

(b) Consider all suggestions and the recommendations, if any, of the Central

Transmission Utility or the State Transmission Utility, as the case may be.”

The objections set out in this Order are in response to the subsequent Public

Notice published by the Commission under Section 15(5)(a), and are being

considered under Section 15(5)(b). While SARFPL‟s response was received

within time, the others were received after the date stipulated by the

Commission in its Public Notice. However, unlike Section 15(2), Section 15(5)

does not debar the Commission from considering suggestions and objections

received after the date stipulated in its Public Notice. In several Tariff and

other proceedings which require public consultation also, it has been the

Commission‟s practice to consider submissions also keeping in view its intent

and purpose. Hence, the Commission has considered these submissions in this

matter also.

23. In this background, the Commission‟s analysis, findings and conclusions on

GEPL‟s Application for an Intra-State Trading Licence are set out below.

24. The objections raised during these proceedings are summarized as follows:

a) Windfall trading margins;

b) Non-payment of outstanding principal amounts and interest to Generators,

and to MSEDCL for stand-by, or under-payments;

c) Over-billing to buyers;

d) Criminal and other proceedings against promoters/ Directors.

Windfall Trading Margins

SARFPL and MSEDCL have stated that GEPL is making windfall gains from

its trading margins. MSEDCL has stated that it has intimated the CERC, and

also of non-submission of stipulated returns, etc. Both have sought that trading

margins be fixed for electricity traded under the Commission‟s Intra-State

Licences.


CERC has fixed the trading margin for its Licensees. Any complaint in this

regard or in respect of other requirements is to be made to and addressed by

CERC. Section 86(1)(j) enables the State Commissions also to fix the trading

margin for the Intra-State Trading of electricity “if considered necessary”.

This Commission has not fixed any trading margin, nor was any applicable

during the period of GEPL‟s earlier Intra-State Licence from 2007 to 2012. As

such, the issue of the trading margin charged by GEPL under its CERC

Licence or which would be charged if it is given an Intra-State Trading Licence

is irrelevant for deciding its Application.

However, as stated in its recent Order in Case No. 83 of 2017, the Commission

may separately review whether a trading margin is now required considering

the potential and development of the Intra-State market.

Non-payment to Generators, and to MSEDCL for stand-by; and over-billing to

buyers

SARFPL, a Wind Energy Generator and Objector in these proceedings, had

approached the Commission in Case No. 83 of 2017 for non-payment and

related defaults by GEPL under their EPA. In its recent Order dated 10 April,

2018, the Commission has upheld SARFPL‟s claims to the extent of payment

defaults by GEPL arising in the period of the earlier Intra-State Trading

Licence granted by the Commission from 2007 to 2012.

Modern India and Morries, both Generators, have also alleged that substantial

payments are pending from GEPL. The Commission notes that their claims

arise from agreements entered into in 2016 and 2017, and are not concerned

with the Intra-State Trading Licence granted by the Commission which

expired in 2012. Both have stated that they have approached CERC with their

claims in December, 2017 and sought revocation of GEPL‟s Inter-State

Licence. Further adjudication on these claims has not been reported by them,

and it seems from the CERC website that they have not been decided.

POSCO, a buyer, has stated that it is initiating proceedings and is pursuing

certain matters arising from its agreements with GEPL in the Delhi High

Court. The Commission notes that those proceedings have not attained finality.

They do not seem to be concerned with the period of the earlier Intra-State

Licence and, in any case, the Commission has not been approached under that

Licence.

MSEDCL has stated that it has invoked the Bank Guarantee provided by

GEPL under its agreement for stand-by, and is planning to take further action

for recovery of the remaining amount that it claims.


In its replies, apart from raising legal issues, GEPL has sought to rebut the

contentions of these Objectors and cited its counter-claims, but the

Commission does not consider it necessary or appropriate to go into them as

this is not an adjudication proceeding on these disputes.

The Commission notes that, vide its recent Order dated 27 February, 2018 in

Petition No. 211/MP/2016 upholding the claim of a Generator for payment of

outstanding principal and late payment surcharge amounts, the CERC has

asked GEPL to make such payment within a stipulated date or else show cause

why its Inter-State Trading Licence should not be cancelled or some further

conditions not added to it. In its Order dated 1 March, 2018 in Petition

No.10/MP/2016, the CERC has decided similarly considering late payment

surcharge amounts outstanding from GEPL to the Generator in that Case.

However, no final decision has been taken by CERC with regard to revocation

of the Inter-State Trading Licence, and CERC has also given GEPL the

opportunity to make payments according to its findings.

In this context, the relevant provisions of the Trading Licence Conditions

Regulations, as amended in 2017, reads as follows:

“4-A: ELIGIBILITY CONDITIONS/DISQUALIFICATIONS :

…Notwithstanding the generality of the foregoing, no applicant shall be

qualified for grant of licence under these regulations if the Commission is of the

opinion that conditions or circumstances exist that cast a doubt on the ability of

the applicant to perform its duties and obligations under the Act.

Explanation.—For the purposes of these regulations, “conditions or

circumstances” shall mean and include cases of conviction of the applicant or

any of its partners, directors or promoters by a Court of Law or indictment /

adverse order by a regulatory authority or which relates to a grave offence of

such a nature that it outrages the moral sense of the community; insolvency and

bankruptcy of the applicant or any of its partners, directors or promoters;

conviction of an offence involving moral turpitude, or any economic offence;

fraudulent and unfair trade practices or market manipulation; financial

integrity; competence; reputation and character, and any other sufficient

reasons:

Provided that the Commission may direct the applicant to furnish with its

application an undertaking in such form and accompanied by such documents

and information as may be stipulated by the Commission from time to time, which

shall be available from the office of the Commission and/or its internet

website:…”

The Commission notes that GEPL has been holding an Intra-State Trading

Licence from CERC for the last 10 years, from 2008. Moreover, Generators

and buyers who have contractual disputes with GEPL have recourse to the


terms of the agreements between them, which are subject to the provisions of

the EA, 2003 and the Regulations and Orders of the CERC or this

Commission, as the case may be. Apart from the recent Case of SARFPL, there

has been no adjudication or finding against GEPL by this Commission with

regard to payments to such Generators or buyers.

In view of the foregoing, the Commission concludes that the circumstances and

claims made in these proceedings -- concerning MSEDCL as summarized

above; and the disputes regarding non-payment to Generators, which mostly

concern the CERC, and being pursued by POSCO in the Delhi High Court,

which have yet to be decided – cannot be said to amount to conditions or

circumstances that put in question GEPL‟s ability to perform its duties and

obligations under the EA, 2003 so as to preclude it from grant of a Licence by

the Commission.

Criminal and other proceedings against promoters/ Directors

POSCO has cited ongoing criminal proceedings against a promoter and

majority shareholder as well as a Director of GEPL to contend that it is

disqualified from grant of a Licence. However, it is evident from Regulation 4-

A of the Trading Licence Conditions Regulations (quoted above) that, in the

absence of a conviction in these cases, GEPL cannot be disqualified on this

ground alone. In fact, the earlier reference in the Regulations was amended in

2017 to exclude „pending legal proceedings‟.

GEPL has also submitted an undertaking under the 1st proviso to Regulation 4-A

of the Trading Licence Conditions Regulations stating, inter alia, that there is no

order of conviction against any Director or promoter of GEPL.

25. Section 52 of the EA, 2003 provides that, without prejudice to the provisions of

Section 12(c), the Commission

“may specify the technical requirement, capital adequacy requirement and

creditworthiness for being an electricity trader.”

Regulation 5 of the Trading Licence Conditions Regulations specifies the

eligibility conditions accordingly.

26. Regulations 5.2 and 5.3 specify that:

“5.2 The applicant shall have not less than one full-time professional having

experience in each of the following disciplines, namely:-

(a) power system operations and commercial aspects of power transfer;


(b) finance, commerce and accounts;

Provided that the technical requirement of staff shall be complied with

before undertaking the Licensed Business notwithstanding the fact that the

Commission has granted the licence.

5.3 The applicant shall furnish to the Commission the details of the

professional and supporting staff engaged by him on full time basis before

undertaking the Licensed Business.”

The Form of Application in Schedule 1 requires information on the personnel

for trading, commercial, finance, regulatory, HR and IT functions. With its

Application, GEPL has provided the details of 11 personnel in this regard,

which the Commission finds to be satisfactory in terms of the requirements.

Besides, GEPL holds an Inter-State Trading Licence granted by CERC since

2008. It has also been granted Intra-State Trading Licences at various times by

SERCs such as those of Uttar Pradesh, Andhra Pradesh, Gujarat, Telangana

and Odisha, including after these proceedings began. Thus, it would also have

the organizational back-up to support its Maharashtra operations if required.

27. GEPL has stated that it envisages trading of around 50.52 MU in the first year,

increasing by 5 MU each year to reach 73.18 MU in the 5th

year. Hence, for the

time being, the Licence sought is for Category A, i.e. for annual trading of upto

100 million kWh. To be eligible for quantum of trading, Regulation 5.4 of the

Trading Licence Conditions Regulations requires GEPL‟s Net Worth to be at

least Rs. 1.50 crore. „Net Worth‟ is defined in Regulation 3(i) as follows:

“Net worth means, in the case of an individual or body of individuals, the

sum total of cash, bank balances and market value of investments in listed

securities as reduced by the amount of any loans and liabilities owing to any

person, and, in case of any other person, the sum total of paid up share

capital, share premium and such of the reserves as are eligible for

distribution as dividend;...”

GEPL being a Private Limited Company, its Net Worth is its paid-up share

capital, share premium and reserves eligible for distribution as dividend. As

required in the Application Form prescribed in Schedule I of the Regulations,

GEPL has submitted the Certificate of V.V. Ketkar, Chartered Accountant

certifying the Net Worth of GEPL as on 31 March, 2015 as Rs. 106.54 crore.

Subsequently, on 22 December, 2017, GEPL submitted a Certificate from

Chhabra & Associates, Chartered Accountants certifying the Net Worth for the

three years FY 2014-15 to FY 2016-17 as shown in the following Table:


As on Net Worth (Rs. crore)

31 March, 2017 114.26

31 March, 2016 111.97

31 March, 2015 106.54

Upon scrutiny of the Audited/provisional Financial Statements submitted by

GEPL, the Commission finds the Net Worth of GEPL as certified to be in order

and several times higher than the minimum of Rs. 1.50 crore required under

Regulation 5.4 for a Category A Trading Licence.

The Commission had also earlier analysed the Audited Accounts of FY 2014-15

and provisional accounts of FY 2015-16 which were initially available and found

the Balance Sheets of these two years to be robust. Some of the relevant figures

are tabulated below:

Sr.

no

Items FY 2015-16 (in

Crores)

FY 2014-15

(In Crores)

1 Shareholder‟s Fund 111.97 106.54

2. Reserve & Surplus 82.38 76.95

3. Trade Payable 148.42 182.88

4. Trade Receivables 102.39 154.45

5. Cash & Bank Balance 40.81 29.84

6. Turn over 1590.70 1016.57

7. Interest / Finance Cost 2.26 2.63

8. Net Profit before taxes 5.43 8.44

9. Earning per share (fv 10/-) 1.84 rupee 2.85 rupee

These figures indicate that GEPL is in a good financial position. The loans and

borrowings are conservative, as indicated by the low finance cost. The trade

payables have reduced from 154.45 crore to 102.39 crore, which suggests that it

is repaying its liabilities. The trade receivables have reduced to 69% in FY

2015-16 as against 84% in FY 2014-15. They are less than 10% of the turnover,

which suggests that they have accrued in the normal course of business. The

position in FY 2016-17 submitted subsequently is along similar lines.

Thus, GEPL‟s credit-worthiness is not in doubt. In terms of the requirements of

Regulation 4-A, it is also not alleged that GEPL or its promoters or Directors

are insolvent or bankrupt.

28. In view of the foregoing, the Commission finds that GEPL satisfies the

requirements for the grant of an Intra-State Trading Licence in terms of the

provisions of the EA, 2003 and the Trading Licence Conditions Regulations.

Accordingly, the Commission hereby grants a Licence to GEPL for undertaking

trading of electricity in Maharashtra for a period of 25 years under Section

14(c) read with Section 15(8) of the EA, 2003.


29. Considering the trading plan for the first 5 years submitted by GEPL and set

out earlier in this Order, the Licence is being initially given in Category A for

trading of electricity upto 100 MU per annum, subject to the provisions of

Regulation 16.1(c) of the Trading Licence Conditions Regulations governing

any change. Before the end of the first 5 years and thereafter before the end of

every fifth year, GEPL should submit its trading plan for the subsequent 5

years.

30. GEPL shall forthwith and, in any event, within a month, intimate the

Commission if any conditions or circumstances envisaged in Regulation 4-A of

the Trading Licence Conditions arise that cast a doubt on the ability of GEPL to

perform its duties and obligations under the EA 2003, including but not limited

to conviction of GEPL or any of its Directors or promoters by a Court of Law.

31. The Licence (Trading Licence No. 1 of 2018) granted to GEPL accompanies this

Order. It shall be made available by GEPL in accordance with Regulation 11,

and on its internet website.

32. As required under Section 15(7) of the EA, 2003, the Secretariat of the

Commission shall forward a copy of the Licence to the Energy Department,

Government of Maharashtra and the Central Electricity Authority; and to the

MSLDC, the STU, all Generating Companies, Transmission Licensees and

Distribution Licensees in Maharashtra.

33. Considering that several of the objections raised during these proceedings

presumably relate to agreements and transactions under the Trading Licence

granted to GEPL by the CERC (since the term of the earlier Intra-State Licence

given by this Commission ended on 27 September, 2012), the Secretariat of the

Commission shall also forward a copy of this Order to the Secretary, CERC for

its information.

34. The Trading Licence Conditions Regulations require certain periodical

certifications and returns to be submitted by the Licensee. The Secretariat of

the Commission shall ensure that the monitoring system for their receipt

through a Periodical Returns Register for Trading Licensees and others setting

out the monthly, quarterly and annual returns or reports is in place; and that

any default is brought to the notice of the Commission within a month for

Orders, irrespective of whether reminders were issued or not.

The Petition of M/s. Global Energy Pvt. Ltd. in Case No. 132 of 2015 stands disposed of

accordingly.

Sd/- Sd/-

(Deepak Lad) (Azeez M. Khan)

Member Member


Annexure-I

List of persons who attended the TVS held on 16 February, 2016

Sr.

No.

Name Organisation

1 Shri Amol Bavare GEPL

2 Shri Sumanta Ghosh GEPL

3 Miss Rutuja Shringarpure GEPL

4 Shri Kiran Kumar GEPL

5 Shri V.P. Nikhil GEPL

6 SmtDeepika Sehgal GEPL


Annexure-II

List of persons who attended the TVS held on 6 September, 2016

Sr.

No.

Name Organisation

1 Amol Bavare GEPL

2 Nikhil Ved Prakash GEPL

3 Sumanta Ghosh GEPL

4 Kiran Kumar GEPL

5 Aparajita Sharma GEPL

6 Dr. Ashok Pendse Thane-Belapur Industries

Association


Annexure III

List of persons who attended the Public Hearing on 4 October, 2017

Sr. No. Name Organization

1 Ashish Singh, Adv. Siddhayu Ayurvedic Research Foundation Pvt. Ltd.

2 Rahul Joshi Siddhayu Ayurvedic Research Foundation Pvt. Ltd.

3 Ankush Patkar POSCO Maharashtra Steel Pvt. Ltd.

4 Yong-Hue Baek POSCO Maharashtra Steel Pvt. Ltd.

5 Anish Raveendran POSCO Maharashtra Steel Pvt. Ltd.

6 Shri Parekh POSCO Maharashtra Steel Pvt. Ltd.

7 Mahendra Tatte POSCO Maharashtra Steel Pvt. Ltd.

8 S.S. Pol POSCO Maharashtra Steel Pvt. Ltd.

9 Amit Bute MSEDCL

10 S.S. Koltey MSEDCL

11 JeetRoy Choudhury MSEDCL

12 Shreya Sinha MSEDCL

13 Sumanta Ghosh, Adv. GEPL

14 Nikhil Vedprakash GEPL

15 Aparajita Sharma GEPL

16 Rakesh Bodalia GEPL

Before the MAHARASHTRA ELECTRICITY … 58 42/Order-132 of 2015...3.1 GEPL is a Company engaged in...

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