Section 20: Sale of utilities of licensees

Electricity Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2003

Legal Commentary & Landmark Judgments: Section 20

Section 20 of the Electricity Act, 2003 establishes the statutory mechanism for the sale of a revoked utility, providing for public bidding to willing purchasers, right of first refusal to the State Government and local authorities, and fixation of reserve prices.

  • Statutory Sale Mandate Post-Revocation: Directs that upon revocation of a licence under Section 19, the utility must be put up for sale to ensure continuity of public electricity distribution or transmission.
  • Order of Priority and Right of First Refusal: Mandates offering the utility first to the State Government, then to the local authority, and failing their acceptance, soliciting competitive commercial bids from qualified private purchasers.
  • Fixation of Reserve Price and Continuity of Interim Supply: Empowers the Commission to determine the reserve price based on audited depreciated book value or market valuation, requiring the revoked licensee to operate the utility pending transfer to the purchaser.
Key Landmark Precedents:
  • Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. (2018) 3 SCC 133: The Supreme Court observed that the statutory scheme of utility transfer upon licence cancellation is designed to protect public consumer supply while ensuring fair valuation of expropriated capital assets.
  • Vellore Electric Corpn. Ltd. v. State of T.N. (1989) 4 SCC 138: The Supreme Court held that the determination of utility purchase price must adhere to objective statutory accounting principles, ensuring the outgoing utility is compensated fairly for operational assets.
Courtroom Practice & Strategic Litigation Guidance:

In utility acquisition or post-revocation asset disputes, ensure that asset valuation includes capital work-in-progress and unrecovered regulatory assets, challenging arbitrary undervaluation before the Commission and APTEL under Section 20.