The Supreme Court has refused to interfere with a Jharkhand High Court interim order allowing Energy Watchdog to participate in proceedings concerning the alleged unauthorised supply of electricity and cross-subsidy surcharge demands totalling ₹284.91 crore.
The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held that the High Court’s interim arrangement, intended to place complete information before Jharkhand Bijli Vitran Nigam Limited (JBVNL), could not be regarded as perverse or warrant interference under Article 136 of the Constitution.
The Court, however, clarified that the hearing given to Energy Watchdog must remain an information-gathering exercise and should not be converted into proceedings resembling those of a court or tribunal.
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Amalgam Steels and Power Ltd. had entered into an agreement with JBVNL on May 17, 2012, for the supply of surplus electricity from its captive power plant to the second petitioner. The captive power plant agreement was subsequently renewed in 2017 and 2023.
Energy Watchdog submitted a complaint to the Additional Chief Secretary of Jharkhand’s Department of Energy on April 15, 2024. It alleged that the second petitioner was using electricity generated by the captive power unit without possessing valid “captive user” status under Rule 3 of the Electricity Rules, 2005.
On this basis, Energy Watchdog sought action against the company under Section 135 of the Electricity Act, 2003. According to the organisation, the Jharkhand government and JBVNL initiated a fact-finding inquiry against the petitioners on June 28, 2024.
Energy Watchdog subsequently approached the Jharkhand High Court through a PIL seeking a declaration that the electricity supply was illegal and unauthorised because it was allegedly undertaken without open-access approval and without satisfying the statutory conditions for captive status.
The PIL also sought a detailed investigation into the transactions and recovery of the alleged loss caused to the state electricity utility.
On August 26, 2025, JBVNL issued show-cause notices alleging that the petitioners had breached the captive power plant agreement, supplied electricity without its consent and violated JBVNL’s right of first refusal.
The distribution company also issued demands for cross-subsidy surcharge of ₹176.74 crore against Amalgam Steels and Power Ltd. and ₹108.17 crore against the second petitioner. The combined demand consequently amounted to ₹284.91 crore.
Amalgam Steels filed an interlocutory application before the High Court questioning the maintainability of Energy Watchdog’s PIL.
The High Court rejected the preliminary objection after finding that JBVNL’s affidavit disclosed prima facie substance in the allegations made in the PIL. Although Energy Watchdog was not a party to the agreement between JBVNL and Amalgam Steels, the High Court directed that it should also be heard in the proceedings arising from the show-cause notices.
The petitioners argued that Energy Watchdog was a stranger to the contractual dispute and had not suffered any legal injury. It could not, therefore, be treated as an aggrieved person entitled to maintain the writ petition.
The petitioners contended that the Electricity Act provides a comprehensive and self-contained mechanism for regulation, adjudication and compliance in the electricity sector.
According to them, the High Court could not expand that statutory framework by creating a tripartite process under which a third party was permitted to participate in proceedings initiated by JBVNL.
It was also argued that Energy Watchdog could pursue an appropriate legal remedy after the proceedings concluded if it remained aggrieved by the outcome.
Advocate Prashant Bhushan, appearing for Energy Watchdog, submitted that the petitioners had not paid the applicable cross-subsidy surcharge. He stated that an inquiry had been initiated following six complaints made by the organisation and that the demand was raised under the Jharkhand open-access rules.
The Supreme Court referred to the Constitution Bench judgment in PTC India Ltd. v. Central Electricity Regulatory Commission, which recognised the Electricity Act as an exhaustive code governing matters concerning electricity.
It also relied on Southern Power Distribution Company of Andhra Pradesh Ltd. v. Green Infra Wind Solutions Ltd., in which the Court reiterated that after the unbundling of the electricity sector and establishment of the Central and State Electricity Regulatory Commissions, no unallocated regulatory area remains outside the jurisdiction of the regulatory bodies.
The Court examined provisions defining the functions and powers of the electricity regulatory commissions. It noted that Sections 79(3) and 86(3) require the Central and State Commissions to ensure transparency while exercising their powers.
Section 86(1)(f) empowers the State Commission to adjudicate disputes between licensees and generating companies or refer such disputes to arbitration. Section 94(3), meanwhile, allows the appropriate commission to authorise any person it considers suitable to represent consumer interests in proceedings before it.
The Bench observed that the High Court would have to consider this statutory and regulatory framework before delivering its final judgment in the PIL.
The Supreme Court noted that the matter had reached it at an interim stage. The High Court had intended to proceed with the writ petition, but the filing of the special leave petition led the Supreme Court to issue notice and direct the parties to maintain the status quo on March 23, 2026.
According to the Bench, the facts placed before the High Court by Energy Watchdog appeared to have created an impression that “all is not well” with the proposed inquiry by JBVNL. The High Court had referred to the circumstances under which timely action was allegedly not taken despite the existence of a long-standing complaint.
The Supreme Court acknowledged that Energy Watchdog was not a party to the captive power plant agreement. Nevertheless, it held that the High Court considered the participation of an independent party necessary in the peculiar circumstances so that complete facts could be placed before JBVNL.
“The High Court has found it compelling to adopt an interim measure in the peculiar facts of the case which in our opinion cannot be termed as perverse, warranting any interference at this stage under Article 136 of the Constitution of India,” the Supreme Court observed.
While upholding the interim direction, the Supreme Court imposed an important limitation on the nature of Energy Watchdog’s participation.
It said JBVNL must independently decide the matter after considering the material placed before it with proper deliberation and caution. The utility must not transform the oral hearing into a judicial or quasi-judicial trial merely because Energy Watchdog has been permitted to participate.
The purpose of the hearing, the Court explained, is to collect information that may enable JBVNL to determine whether further action is necessary.
The Bench also made it clear that it had expressed no opinion on the merits of the allegations, the surcharge demands or the legality of the electricity supply arrangement.
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