HASSAN, QURESHI AND MAMDOT

ADVOCATES AND LEGAL CONSULTANTS

36/3 - G, Gulberg II, Lahore, Pakistan
www.hqmlaw.com
MEMO REGARDING
RESIDUAL FUEL OIL
BASED POWER PLANT

Preliminary
Prepared by:
Umair Saleem and Taimur Akhtar

Associate at:
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Table of Contents
Introduction: .................................................................................................................................... 1
Queries: ........................................................................................................................................... 2
Discussion: ...................................................................................................................................... 2
A. Pakistani Case Law: ............................................................................................................. 4
B. Foreign Case Law: ............................................................................................................... 8
Relevant Laws:.............................................................................................................................. 15
a) The Regulation Of Generation, Transmission And Distribution Of Electric Power Act, 1997
(Xl Of 1997) .............................................................................................................................. 15
b) National Electric Power Regulatory Authority Licensing (Application & Modification
Procedure) Regulations, 1999. .................................................................................................. 15
c) National Electric Power Regulatory Authority Licensing (Generation) Rules, 2000. .......... 17
d) THE REGULATION OF GENERATION, TRANSMISSION AND DISTRIBUTION OF
ELECTRIC POWER ACT, 1997 .............................................................................................. 18
Conclusion: ................................................................................................................................... 19

Introduction:

Broadly speaking fuel oil is any liquid petroleum product that is burned in a furnace or boiler for
the generation of heat or used in an engine for the generation of power. Fuel oil is derived from
crude petroleum and is the most widely used liquid fuel for power generation. Distillate and
residual fuel oils are the two major categories of this type of fuel. As its name implies, residual
fuel oil is the remaining fraction resulting from the crude oil refining process.
Residual fuel oil is less useful because it is so viscous that it has to be heated with a special
heating system before use and it contains relatively high amounts of pollutants, particularly
sulfur, which forms sulfur dioxide upon combustion. Since the heating equipment takes up
valuable space, power plants and large ships are able to use residual fuel oil. However, its
undesirable properties make it very cheap. In fact, it is the cheapest liquid fuel available. For
power plants, the costs of heating the oil, extra pollution control and additional maintenance
required after burning it often outweigh the low cost of the fuel.
The demand-side landscape for residual fuel has changed over the course of the past few
decades, particularly in the electric power sector. From 2000 to 2005, natural gas and oil prices
tracked closely. Since 2006, the prices of these two fuels decoupled, as rapidly increasing supply
drove natural gas prices down. As a result, the power sector began relying more on natural gas
and less on residual fuel, except in circumstances where spot natural gas prices soared due to
weather-related constraints. Hawaii relies on residual fuel for much of its power generation (58%
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in 2010). To a lesser degree, Alaska and Florida use residual fuel. The factors accounting for
declining generation at residual-fired plants include the availability of more efficient natural gas
combined-cycle units. It is an undisputed fact that existing resources, i.e. Hydel and Thermal,
etc. are not sufficient to cater for the basic electricity requirements. Therefore, because of the
increasing demand and shortage of gas and other petroleum products in Pakistan at this time,
residual fuel oil is best suitable to produce energy to meet the existing and increasing
requirement of the shortfall of electricity.
In order to promote fair competition in the electricity industry and to protect the rights of
consumers as well as producers and sellers of electricity, the GOP has enacted the Regulation of
Generation, Transmission and Distribution of Electric Power Regulation Act, 1997 (NEPRA
Act). Under this Act, the NEPRAs role in the power business, inter-alia, will be to issue licenses
for companies and to regulate their operations according to NEPRA rules and regulations. The
prospective applicants will be required to comply with all NEPRA rules/procedures, inter alia,
for grant of license before security agreements are concluded for any project (Policy for Power
Generation Projects, 2002). Having said that, NEPRA is not protecting rights of electricity
producers which is one of the main objective of NEPRA. Undue delay in issuance of licences to
power generation companies is not only destroying the investments of electricity producers but
also affecting public at large.
Queries:

Whether there is a legal justification to set up a Residual Fuel Oil based power plants under the
laws of Pakistan?
Whether the NEPRA is bound to issue electricity generation licence, when all requirements
under relevant laws are met by the applicant?
Discussion:

There are four main licensable activities in the electricity value chain: generation; transmission;
distribution; and supply. It is a surprisingly common misconception that there are still electricity
boards or single electricity companies performing all or a combination of these functions. This is
largely because one corporate group may participate in all or some of these activities under the
same branding.
The main functions within the electricity value chain are licensable activities. Unless authorised
to do so by a licence or exemption, it is an offence to generate, transmit, distribute, or supply
electricity.As Justice Greene of the House of Lords wrote in Winter Garden Theatre (London)
Ltd v Millennium Productions Ltd [1948] AC 173:A license created by contract ... creates a
contractual right to do certain things which otherwise would be a trespass.
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In Pollo v. Taylor, 2004 ABQB 173, Justice Moore of the Alberta Court of Queen's Bench wrote:
"A licence, even though exclusive, does not give the licensee all the rights of the patentee. A
licence does not set up rights as between the licensee and the public, but only permits him to do
acts that he would otherwise be prohibited from doing. He obtains merely a right of user. But a
licence is a grant of a right and does not merely confer upon the licensee a mere interest in
equity. A licence is the transfer of a beneficial interest to a limited extent, whereby the transferee
acquires an equitable right in the patent. A licence prevents that from being unlawful which, but
for the licence, would be unlawful; it is a consent by an owner of a right that another person
should commit an act which, but for that licence, would be an infringement of the right of the
person who gives the licence. A licence gives no more than the right to do the thing actually
licensed to be done."
The definition and general nature of a licence is thus stated at page 32 of the 33rd vol. of the
American Jurisprudence: In its specific sense, to licence means to confer on a person the right
to do something which otherwise he would not have the right to do. A licence is in nature of a
special sense, to licence means to confer on a person the right to do something which otherwise
he would not have the right to do. A licence is in the nature of a special privilege rather than a
right to carry on business or to hold certain classes of property within the jurisdiction. As
Muhammad Munir CJ said in East and West steamship Company, this is the precise effect which
the Privy Council gave to the licencing law in Hughes Case.
Outstanding instances are the legal profession which has from the earliest times, operated under
an intensive licensing system, and the business of liquor.
A System, in the opinion of Corelius J, would in the relevant respect mean an arrangement by
way of regulation, applicable to a complex whole namely the trade of shipping in general. It
would provide for rules applicable uniformly, subject to suitable classification in relation to the
entire trade of shipping. Again it is inherent in the use of the expression licensing system that the
action of the state in respect of the trade should e in the nature of permission granted to do
certain acts provided certain conditions are satisfied; it goes entirely beyond the meaning of the
expression licencing to interpret it as a check upon even the primary process involved in the
trade which is being licenced (East and West Steamship co. case, p. 69.) Thus, uniformity of
rules, norms and conditions applicable to every case is the gist of the implication of the
expression licence and those that the answer the conditions so laid are entitled to obtain the said
licence. A system postulate that there should be not merely uniformity but that there should be
no room for any discrimination in the awarding of the licence to the eligible applications. (Haji
Ghulam Zamin and another v. A. B. Khondkar and others,PLD 1965 Dacea 156, 184)
In Government of Pakistan v. Zameer Ahmed(PLD 1975 SC 667),it was held, a clear distinction
between refusal to grant licence and cancel licence already granted. In the latter case, the legal
rights are often created because of the incident of the grant as a sequel o the licence. In short
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according to this a licence simpliciter is a privilege and not a legal right; much less is there a
legal duty for its grant.
But a licence may not be a matter of privilege or an act of discretion when it is applied for in the
light of declared or subsisting policy of the government and regulated by law. As long as the
policy holds the field, the grant of licence is regulated by law and the government cannot
arbitrarily pick and choose from amongst the applicants. Any citizen who fulfills the conditions
laid down in the law qua eligibility/entitlement can get an import or export licence as a matter of
right during the subsistence of the import/export policy. If prior to the change of policy an
effective step had been taken by the applicant and some right had accrued to him under the
original policy, the same would be protected and enforced by a court of law. This was held in
Ayyaz T.M v. Federation of Pakistan (PLD 1993 Lah 194, 209.). For this view support was
drawn, and if we may say so with respect rightly, from Pakistan v. Hussai Ali, PLD 1960 SC
(Pak) 307. That was a case of cancellation of import licence but when the act of cancellation was
challenged, the plea taken by the government was that the application for import licence was
defective on account of non-compliance with a rule requiring submission of a bank certificate.
The plea was held to e an after-thought and it was held: The licence granted was no mere act of
discretion or unilateral act on the part of the government. It was granted in fulfillment of an
undertaking which imposed prior conditions upon the applicant, which conditions he had
fulfilled, ad thereby there had accrued in his favour, something in the nature of a legal right to an
import licence of equivalent value. That right had been respected, and in so doing, the
Government had performed no are uncontrolled act of discretion under their power, but had
exercised the relevant power as a matter of obligation in favour of the respondent.
But even if what a person applying for a licence does is to seek a privilege, the days when it used
to be said that a person seeking a privilege is not entitled to be heard are long gone. The granting
authority has in the case of a licence also a duty to act fairly. (R v Secretary of state ex p. Fayad
(1997) 1 All ER 228, 240)

A. Pakistani Case Law:

Right to life guaranteed by Constitution of Pakistan, 1973 (the Constitution) in Article 9
includes provisions of electricity. (See Alleged Corruption in Rented Power Plants (2012 SCMR
773) and Shehla Zia v. Federation of Pakistan (PLD 1994 Supreme Court 694)). Article 18 of the
Constitution provides that every citizen have the right to enter upon any lawful profession or
occupation, and to conduct any lawful trade or business. Moreover, Article 38 of the Constitution
provides that State has to secure well-being of people by raising their standards. These rights of
persons are linked to supply of electricity and thus, need to be given to every individual living in
country.
The vision of introducing the Power Policy, 2013 (the 2013 Policy) is to support the current
and future energy needs of the country to set Pakistan on trajectory of rapid growth and social
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development and get the Pakistan out from the challenges faced by energy crises. The goals
mentioned in the Policy include to build a power generation capacity that can meet Pakistans
energy needs in a sustainable manner. Thus to achieve this goal, GOP has designed strategies to
overcome the power crises. The strategy to achieve the goal is focused on attracting and directing
local and foreign investments toward rapidly expanding the power generation capacity in short,
medium and long term. It is clearly outlined in the 2013 Policy that the MoWP will attract new
investments. The strategy outlined in 2013 Policy also requires to move towards cheaper fuels in
power generation mechanism. The outlined target in 2013 Policy sets a target to decrease
demand-supply gap from 4500-5000 to zero. Thus, to meet the principles outlined, there is need
a need to bring Residual Fuel Oil units for power generation in Pakistan.
In Ogra through Secretary v. Midway ii, CNG Station and others, 2014 SCMR 220, court ruled
that the availability of energy and the progress of a nation-state are inextricably linked. Article
38 of the Constitution commands, "The State shall......secure the well-being of the people... by
raising their standard of living..." Without energy, there can be no progress, no development
which will raise the standard of living of the people as commanded by Article 38 ibid. It was
ruled in above mentioned judgment that it is an undisputed fact that existing resources, i.e. Hydel
and Thermal, etc. are not sufficient to cater for the basic electricity requirements. Further, it was
ruled that scientific discovery and innovation has taken human potential to new heights in the
past decade; whereas in this country the state of affairs is so derelict that people have to time
their activities on the basis of when electricity is available.
The court stated that hydro-electric power is generally produced from dams and barrages when
the water level in the reservoir exceeds a specified level known as "Dead Storage Level". The
water level is dependent on seasonal rains. However, rather than increasing the number of
facilities available to harness hydro-electric power such as dams, barrages etc., the Government
seems to be engaged in a policy of promoting RFO as a basis for producing electricity.
Moreover, it was ruled that preference must be given to generate electricity by using coal and
gas, and unless there is no compulsion, the electricity should not be generated from RFO as
it is casting higher prices, which ultimately has to be borne by the consumers. However, as
it is established that Hydel and Thermal Plants are insufficient to meet the needs of energy in the
country, there is need to establish other plants keeping the environmental standards in mind to
cater the shortfall of energy, to bring the vision of 2013 Policy in practice and to get private
investment in conformity. Therefore, keeping all the stated principles and laws in mind, Residual
Fuel Oil Units can be established to meet the vision of 2013 Policy as well as grating people their
fundamental right to life and well-being.
Federal Government shall, by notification in the official Gazette, establish a National Electric
Power Regulatory Authority consisting of a Chairman and four members, one from each
Province. The Chairman shall be an eminent professional of known integrity and competence
with at least twenty years of related experience in law, business, engineering, finance,
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accounting, economics, the electric utility business, public administration or management. The
Chairman shall preferably be a person who is or has been a judge of a High Court or the
Supreme Court. Subject to NEPRA rules and regulations, the Authority may grant a generation
licence to any person to engage in the generation business. The Authority may order a public
hearing to be held on any application for a generation licence and shall decide the application
consistent with the outcome of the public hearing and the procedure for public hearings
prescribed under the National Electric Power Regulatory Authority (Tariff Standards and
Procedure) Rules, 1998. The Authority may refuse to issue a licence where the site, technology,
design, fuel, tariff or other relevant matters pertaining to the generation facility proposed in an
application for a generation licence are either not suitable on environmental grounds or do not
satisfy the least cost option criteria in which case the Authority shall indicate its preference for
alternative sites, technology, design, fuel, tariff or other relevant matters to the applicant and
shall, if so desired by the applicant, allow the applicant a reasonable opportunity to amend the
application in accordance with the preferences indicated by the Authority. The Authority may
decline to issue a licence if the Authority determines in writing that: a) the investments
associated with the facility or system are not justifiable in view of the needs of the electric power
industry or where the applicant has failed to demonstrate, in the opinion of the Authority, the
existence of the demand for the proposed facility or system; b) the plant and capacity
requirements of the electric power industry do not warrant the installation of additional plant or
capacity or warrant the installation of plant or capacity with technical, financial or other
characteristics different from the ones specified in the licence application; c) among competing
applicants, another applicant qualifies better in terms of quality of equipment, plant, service and
the corresponding economy of costs; or d) the site proposed by the applicant is not suitable on
environmental, social or other grounds. Within three days of the admission of the application by
the Authority, the Registrar shall cause to be published, in one English and one Urdu daily
newspapers with circulation in the entire country. The Registrar shall place the application, along
with comments, if any, received from the public no later than three days after the last date for
receipt of the comments from the public. In the event the Authority intends to reject an
application, it may allow an opportunity to the applicant to make a representation before it as to
why the application should not be rejected and, upon being notified of such opportunity, the
applicant may make a representation within a period not exceeding fourteen days following the
receipt of the afore-said notice from the Authority. The Authority shall decide the application
within twenty eight days after the date the application, along with the comments received from
the public, is placed before the Authority. In view of economic policies of the Government
aimed at boosting economic activity in the country for increasing the wealth of the people and
for ending the inertia, observed that Government agencies like NEPRA should have clear-cut
policies and apparatus for attending to such disputes so that these were quickly resolved and the
economic activity was saved from suffering (Maple Leaf Company Vs Islamabad Electricity
Supply, (2001 PLD 501, LHC)).High Court in this case referred the matter to NEPRA with
directions that the Authority by using all the powers which it had under the law should resolve
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the dispute while deciding the fate of the applications of the petitioners after hearing there within
a period of four weeks from the date of the judgment of the High Court. In another case, the
application remained pending and the Authority failed to decide the same within the period of
100 days as required as required by law. Petitioners, who on the basis of their application waited
for a period more than 100 days, during which their application had not been rejected, had
acquired a right that they should be dealt with in accordance with law as envisaged under Art.4
of the Constitution. Any excuse (now) made by the Authority was not acceptable for the reasons
that earlier when rejection order was passed, no such demand was put forward calling upon the
petitioners to fulfill the same or remove the objection, if any. Supreme Court observed that
authorities who were required to discharge their functions under statutory provisions, kept the
matter lingering on without any legal or constitutional justification. Supreme Court, in
circumstances, converted the petition for leave to appeal into appeal and allowed the same with
direction to the Authority to issue immediately licence to the petitioners (Independent Music
Group Smc (Pvt.) Ltd Vs Federation Of Pakistan (2011 PLD 805, SC)). In Al-Makkah Cng
Station Vs Government Of Pakistan Ministry Of Petroleum And Natural (2011 CLC 1953,
QHC). Petitioners fundamental right to conduct lawful business of such station had been
infringed. So long a trade or business was lawful, a citizen eligible to conduct same could not be
deprived from undertaking the same. Every citizen had a fundamental right to be dealt with in
accordance with law. Refusal of Oil and Gas Regulatory Authority to issue marketing licence to
petitioner was illegal, thus, he had not been dealt with in accordance with law. When statutory
functionary acted mala fide or in a partial, unjust and oppressive manner, then High Court could
issue appropriate directions. High Court in the above mentioned case accepted constitutional
petition and directed the Authority to issue marketing licence to petitioner immediately. In ARY
COMMUNICATION (PVT.) LTD. Vs FEDERATION OF PAKISTAN through Secretary,
Information and Broadcasting, Islamabad (2013 CLD 180 KHC)authority in this case is in
absolute unfettered discretion, acted arbitrarily and discriminately by issuing licence to
entertainment, sports, English and other television channels by ignoring channel of petitioner
without any sufficient reasons and cause. Authority in pursuance of powers conferred upon it,
had delayed licence to such an extent that petitioner was kept waiting for years without any fault
on its part, thus Authority did not act fairly, transparently, judiciously and above any suspicion.
Vested right of individual was protected by the Constitution and by fundamental rights
guaranteed to citizens. Functionaries like Authority in question, which exercised statutory power
were legally and constitutionally bound to discharge their functions strictly in accordance with
law, otherwise an action contrary to law would not be sustainable and such Authority would
expose itself for discriminatory treatment, which amounted to denial of valuable fundamental
rights of people, for whose benefit such Authority had been created. Action of Authority was
ultra vires, contrary to the Constitution and law, having no legal sanctity. High Court directed the
Authority to strictly follow principles of 'equity' and 'fairness' for taking decision on application
submitted by petitioner for Issuance of licence. In light of the above discussion it is obvious that
NEPRA is bound to issue licence within the given time frame and if NEPRA delay it future, in
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light of much resent Supreme Court judgment mentioned above, court can provide relief to
electricity generation unit. Rejection of application is not discretion of NEPRA. NEPRA have to
provide grounds of their decision.
B. Foreign Case Law:

In the case of the People vs. Perry, 13 Barb. 206, referred to by the plaintiff, a peremptory
mandamus was granted to compel the Mayor of Albany to issue a license for the booking of
emigrant passengers, and the Court say "this license could only be obtained by first giving a
bond of the description and tenor specified. Upon complying with all these prerequisites, as I
understand the law, any citizen has a legal right to exercise this vocation."

In The King Ex Rel. Henry Bradley v. W. R. Chilton V. L. A. Thurston, Minister of the Interior7
Haw. 523; 1889 Haw. LEXIS 52 [SUPREME COURT OF HAWAII], there was an application
by Henry Bradley and William R. Chilton for a writ of mandamus, directed to the Minister of the
Interior, to compel him to grant the said Chilton a license to sell spirituous liquors at retail on the
premises known as the Keystone Saloon, situate at the corner of King and Fort streets, Honolulu.
This petition was heard by Mr. Justice Dole on the thirtieth day of October last, who granted an
alternative writ commanding the Minister of the Interior to issue a license to the petitioner
Chilton upon his filing an approved bond and paying the license fee of one thousand dollars, or
to show cause to the contrary on the 5th of November. A demurrer was filed which was argued
before the said Justice, when the Attorney-General, on behalf of the Minister, urged that the
petition did not allege that the license fee of $ 1000 had been paid and an approved bond given;
and also that under the statute regulating the sale of spirituous liquors, the granting of a retail
spirit license is entirely in the discretion of the Minister of the Interior.
This view is consistent with the opinion of the Justices of the Supreme Court furnished to the
Legislature of 1888 upon certain questions submitted to them by that body in regard to the
discretion of the state in issuing licenses, and with Chapter 19 of Cooley on Taxation, in which
the principle is recognized that when there is an imposition of license fees upon any business or
occupation for the sake of regulation rather than of revenue, there is a discretionary power in the
state as to the granting of such licenses. The cases referred to in the brief of plaintiff's counsel,
with one exception, do not go further than the principle laid down in two of them, i.e. in
Supervisors vs. U.S. ex Rel., 4 Wall., 435, that "where power is given by statute to public
officers in permissive language as that they 'may if deemed advisable' do a certain thing, the
language used will be regarded as peremptory where the public interest or individual rights
require that it should be done," and in Newburg Turnpike Co. vs. Miller, 5 Johns. Ch., 113, "that
the word may means must or shall only in cases where the public interest or third persons have a
claim de jure that the power should be exercised." In the case, however, of the People vs. Perry,
13 Barb., 206, referred to by the plaintiff, a peremptory mandamus was granted to compel the
Mayor of Albany to issue a license for the booking of emigrant passengers, and the Court say
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"this license could only be obtained by first giving a bond of the description and tenor specified.
Upon complying with all these prerequisites, as I understand the law, any citizen has a legal right
to exercise this vocation." Although this case appears at first sight to be hostile to the view
adopted above, I find upon examination that it is not necessarily so, for the respondent stated by
way of defense "that he refused to grant the license for the reason that he supposed that it was a
matter resting in his discretion, and that in consequence of the frauds practiced upon emigrants
passing through Albany, by persons heretofore licensed, he had concluded that the interest and
safety of such emigrants would be better secured and promoted if no such license were given or
granted." In other words, he attempted to carry his discretion so far as in effect to repeal the law,
which would be contrary to all the authorities on the subject of official discretion. Therefore,
although the case was correctly decided, the conclusion of the presiding judge above quoted was
not necessary to the decision of the case, and cannot be considered as having weight as a judicial
precedent.
The respondent has shown, as appears by his allegations and the evidence, that there were public
reasons against the granting of the license in question, and that he was actuated by these reasons
in refusing to grant it, and he denies positively that he based such refusal solely or at all on the
ground that he "had decided to issue no more such licenses in said Honolulu." Having decided
that the law gives the Minister of Interior a discretion in the matter, it is not for the Court to pass
upon the sufficiency of the reasons of the respondent for refusing the license in question, further
than to ascertain whether he exercised a real discretion in the matter, that is, a conclusion based
upon public grounds which he had a right to consider as an executive officer sworn to execute
the laws, or whether he acted arbitrarily, from caprice or prejudice; and I consider an officer
under the circumstances may act from lofty public motives, and still be outside of his discretion,
as, for instance, if he should refuse such a license because he believed all traffic in liquor to be
injurious to the public. The grounds upon which the respondent claims to have acted have been
stated above, and I consider that there are among them reasons which may properly appeal to the
official discretion of the respondent.

In BERNARD COFMAN, v. Appellant, v. J. J. OUSTERHOUS, Dairy Commissioner for the
State of North Dakota, and J. N. Hagan, Commissioner of Agriculture and Labor for the State of
North Dakota, 40 N.D. 390; 168 N.W. 826; 1918 N.D. LEXIS 91; 18 A.L.R. 219, [SUPREME
COURT OF NORTH DAKOTA, it was held that Regulations and licenses under the police
power of the state can only be exercised where it has a real substantial relation to the public
health, public safety, and public morals, and unnecessary or unreasonable restrictions upon the
use of private property should not be imposed. Only an imperative necessity should prompt or
warrant the revocation of a license issued for a lawful business. (People v. Ringer, 27 L.R.A.
(N.S.) 528.)

The regulations of the Dairy Commissioner on the modes and manner of handling cream by a
licensee must be reasonable, fair, and just, and he cannot arbitrarily revoke a license, without
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substantial evidence of an intentional and material violation of the license. Tiedeman, Pol.
Power, 273, 35 L.R.A. (N.S.) 717.
Licenses, indeed, may be imposed not merely for the purpose of acting as temporary permissions
to engage in harmful occupations, but in order to so control those that are useful that their
operation may be harmless, and that they may really subserve the public good, which after all is
the basis of all property rights.
While the legislature may doubtless confer discretionary powers upon administrative boards or
officers to grant or withhold or revoke licenses or permits to carry on trades or occupations, or
perform acts, which are properly the subject of police regulation (although it has been held in
some of the state courts "to be contrary to the spirit of American institutions to vest this
dispensing power in the hands of a single individual," see Chicago v. Trotter, 136 Ill. 430, 26
N.E. 359; Re Frazee, 63 Mich. 396, 6 Am. St. Rep. 310, 30 N.W. 72;State v. Fiske, 9 R.I.
94; Baltimore v. Radecke, 49 Md. 217, 33 Am. Rep. 239; Sioux Falls v. Kirby, 6 S.D. 62, 25
L.R.A. 621, 60 N.W. 156), the regulations must be reasonable and the power conferred exercised
in a lawful and constitutional manner.
"In such cases the doctrine is, in the absence of anything upon the face of the law to the contrary,
that the discretion vested in such tribunal, board, or official, is a judicial or legal discretion, and
it will not be presumed, in absence of proof to the contrary, that it has been, or is being, used in
an unreasonable, arbitrary, or oppressive manner." But when the law vests absolute and arbitrary
discretion in a board or official, without right of appeal therefrom, to grant or refuse or revoke a
license for conducting a legitimate business; or when the power granted to such administrative
board or officer is shown to have been arbitrarily exercised under sanction of state authority, the
party thus unlawfully oppressed may secure redress in the courts. 4 Enc. U.S. S. Ct. 368, 369,
372. See also 17 R. C. L. p. 539, note 20.
And even in cases involving revocation of licenses in the exercise of official discretion, the
courts have not refrained from inquiring into the facts far enough to ascertain whether the facts
presented a case for the exercise of reasonable discretion, or whether the power of revocation had
been, or was attempted to be, exercised capriciously, arbitrarily, or oppressively. William Fox
Amusement Co. v. McClellan, 62 Misc. 100, 114 N.Y.S. 594; Edelstein v. Bell, 91 Misc. 620,
155 N.Y.S. 590; Bainbridge v. Minneapolis, 131 Minn. 195, L.R.A.1916C, 224, 154 N.W. 964.
It should be remembered that the business sought to be regulated by the statutes under
consideration is one inherently lawful and beneficial to society. In dealing with licenses for the
conduct of business of this nature, the courts have not hesitated to set aside measures vesting
arbitrary powers in boards (or especially in a single individual) to issue or revoke licenses, or to
set aside the arbitrary acts of such board or individual, when acting under a law fair on its face.
In Yick Wo v. Hopkins, 118 U.S. 356, 30 L. Ed. 220, 6 S. Ct. 1064, the Supreme Court of the
United States held an ordinance of the city and county of San Francisco, providing that it should
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be unlawful for any person to engage in the laundry business within the corporate limits "without
having first obtained the consent of the board of supervisors, except the same be located in a
building constructed either of brick or stone," to be violative of the 14th Amendment to the
Federal Constitution.
In determining the reasonableness of a license statute, the nature of the business sought to be
regulated must be considered. For it is self-evident that there is a vast distinction between a
license granted for the conduct of a business which is inherently lawful and harmless and relating
to a subject which is useful to the community, and one granted for the conduct of a business
which is inherently dangerous, or "which ministers to and feeds upon human weakness and
passions." Manifestly, conditions and restrictions placed upon licenses of the latter kind, and
entirely reasonable as applied to such licenses, might be entirely unreasonable as applied to
licenses of the former kind. This distinction was expressly recognized and pointed out by the
Supreme Court of the United States in Crowley v. Christensen, 137 U.S. 86, 34 L. Ed. 620, 11 S.
Ct. 13. That case involved a retail liquor dealer's license. The validity of the ordinance and the
action of the police commissioners in refusing to issue a license were assailed. It was asserted
that the ordinance was invalid under the principle announced in Yick Wo v. Hopkins, supra, as a
delegation of arbitrary discretion to the police commissioners. In distinguishing the two cases,
the Supreme Court of the United States, said: "It will thus be seen that that case [Yick Wo v.
Hopkins, Supra] was essentially different from the one now under consideration, the ordinance
there held invalid vesting uncontrolled discretion in the board of supervisors with reference to a
business harmless in itself and useful to the community; and the discretion appearing to have
been exercised for the express purpose of depriving the petitioner of a privilege that was
extended to others. In the present case the business is not one that any person is permitted to
carry on without a license, but one that may be entirely prohibited or subjected to such
restrictions as the governing authority of the city may prescribe." 137 U.S. 94, 95.
One of the most effective safeguards against the arbitrary acts of public officials is an
opportunity to be heard. And the weight of judicial authority seems to support the doctrine that a
person engaged in a business inherently lawful and useful to society may not be deprived of the
license to conduct it, without opportunity to defend his right to maintain it. The right to a full and
fair hearing by an applicant for a license was recognized and upheld in Hart v. Folsom, 70 N.H.
213, 47 A. 603. Cited in the majority opinion. And it has been said that the theory that a person
may be deprived of a license without an opportunity to be heard in his own defense "is so
opposed to the principles of the common law that any fact affecting the rights of an individual
shall be investigated and determined ex parte, and without opportunity being afforded to the
party to be affected thereby to be heard," that a law ought not to be construed as contemplating
such procedure unless that purpose is expressed in the plainest terms. State ex rel. Powell v. State
Medical Examining Bd. 32 Minn. 324, 50 Am. Rep. 575, 20 N.W. 238.
12

In considering the question of revocation of a license to practise law, the Supreme Court of the
United States said: "Before a judgment disbarring an attorney is rendered, he should have notice
of the grounds of complaint against him, and ample opportunity of explanation and defense. This
is a rule of natural justice, and should be equally followed when proceedings are taken to deprive
him of his right to practice his profession, as when they are taken to reach his real or personal
property. . . . The principle that there must be citation before hearing, and hearing or opportunity
of being heard before judgment, is essential to the security of all private rights. Without its
observance no one would be safe from oppression wherever power may be lodged." Ex parte
Robinson, 86 U.S. 505, 19 Wall. 505, 22 L. Ed. 205. See also People use of State Bd. of Health
v. McCoy, 125 Ill. 289, 17 N.E. 786; State v. Schultz, 11 Mont. 429, 28 P. 643.
Leaving constitutional consideration on one side, the idea that an individual appointive,
administrative official may revoke a license for the conduct of a lawful business, without
affording the licensee a full opportunity to be heard, is so contrary to the spirit of our institutions,
that it ought not be presumed that the legislature intended to confer such power or prescribe such
procedure unless it has said so in express terms.
In considering this question the Supreme Court of the United States said: "The defendant,
however, insists that some of the provisions of the statute are in violation of the Constitution of
the United States, and if it obtained the required license, it would be held to have accepted all of
its provisions, and (in the same words of the statute) 'thereby to have agreed to comply with the
same' 1. The answer to this question is that the acceptance of a license, in whatever form, will
not impose upon the licensee an obligation to respect or to comply with any provisions of the
statute or with any regulations prescribed by the State Railroad and Warehouse Commission that
are repugnant to the Constitution of the United States. A license will give the defendant full
authority to carry on its business in accordance with the valid laws of the state and the valid rules
and regulations prescribed by the Commission. If the Commission refused to grant a license, or if
it sought to revoke one granted, because . . . the licensee in the other refused to comply with
statutory provisions or with rules or regulations inconsistent with the Constitution of the United
States, the rights of the applicant or the licensee could be protected and enforced by appropriate
judicial proceedings." W. W. Cargill Co. v. Minnesota, 180 U.S. 452, 45 L. Ed. 619, 21 S. Ct.
423. See also San Francisco v. Liverpool& L. & G. Ins. Co., 74 Cal. 113, 5 Am. St. Rep. 425, 15
P. 380; Hibbard v. State, 65 Ohio St. 574, 58 L.R.A. 654, 64 N.E. 109.
It seems to me that under the rule laid down in State ex rel. Johnson v. Clark, supra, the question
raised by the petitioner that the dairy commissioner exceeded his jurisdiction in revoking the
license without giving the petitioner notice and an opportunity to be heard, is one properly
reviewable by certiorari. There is no question of fact presented. The questions presented are
purely questions of law, with respect to the powers and jurisdiction of the dairy commissioner. It
is conceded that he revoked petitioner's license without notice, and without affording him an
opportunity to be heard; and that the dairy commissioner based his action upon rumors or
13

hearsay statements submitted to him in the absence, and without the knowledge, of the petitioner.
In my opinion such action was wholly unwarranted under the statutes, and contrary to the
principles of natural justice.

In R. D. MORAD, vs. WYOMING HIGHWAY DEPARTMENT OF WYOMING, Wyoming
Highway Patrol Driver's License Division, No. 2424, 66 Wyo. 12; 203 P.2d 954; 1949 Wyo.
LEXIS 1, SUPREME COURT OF WYOMING, it was held that "any person denied a license"
shall have the right to apply to the district court of his residence to have determined the question
"whether the applicant is entitled to a license.

In Premier Club Enterprises, Inc. v. Peter M. Lukes et al., 28 Mass. L. Rep. 177; 2011 Mass.
Super. LEXIS 37, SUPERIOR COURT OF MASSACHUSETTS, AT WORCESTER, the
licensee said its notice of a revocation hearing violated Mass. Gen. Laws ch. 140, 183A. This
was no reason to grant a preliminary injunction because notice was waived when not raised
before the commission, and no prejudice was shown. The licensee showed a likelihood of
success on its claim of an invalid revocation because the commission did not give written notice
of the revocation, under Mass. Gen. Laws ch. 140, 183A, and provided no documentation
supporting revocation. The commission violated Mass. Gen. Laws ch. 138, 12, barring acting
on a revocation during an appeal period, because the licensee timely appealed, and Mass. Gen.
Laws ch. 138 governed the license, as it was issued under ch. 138. The licensee showed
irreparable harm because denying an injunction would bar it from running its business. It showed
a risk of irreparable harm outweighed an injunction's harm to the commission because it showed
irreparable harm and the commission did not allege harm. No adverse public effect from an
injunction was shown because the court had no evidence of the alleged violations, and the
commission gave the licensee no required notice.

Premier now moves the court to enter a preliminary injunction with respect to the Commission's
revocation of these licenses. Such an injunction is granted or denied "after an abbreviated
presentation of the facts and the law." Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609,
616, 405 N.E.2d 106 (1980). On the basis of this record, Premier must show "(1) a likelihood of
success on the merits; (2) that irreparable harm will result from denial of the injunction; and (3)
that, in light of the plaintiff's likelihood of success on the merits, the risk of irreparable harm to
the plaintiff outweighs the potential harm to the defendant in granting the injunction." Tri-Nel
Mgt., Inc. v. Board of Health of Barnstable, 433 Mass. 217, 219, 741 N.E.2d 37
(2001), citing Packaging Indus. Group, Inc., 380 Mass. at 617. When a party seeks to enjoin
governmental action, the court is also "required to determine that the requested order promotes
the public interest, or, alternatively, that the equitable relief will not adversely affect the
public." Commonwealth v. Mass. CRINC, 392 Mass. 79, 89, 466 N.E.2d 792 (1984). The court
considers each of these factors in turn.
14

It is well settled that the issuance of a handgun license is a privilege, rather than a right
(see Matter of Papaioannou v Kelly, AD2d , 14 A.D.3d 459, 788 NYS 2d 378 [1st Dept
2005]; Matter of Kaplan v Bratton, 249 AD2d 199, 201, 673 N.Y.S.2d 66 [1st Dept
1998]; Matter of Fondacaro v Kelly, 234 AD2d 173, 177, 652 N.Y.S.2d 604 [1st Dept 1996]).
The respondent Police Commissioner has broad discretion to determine whether the issue a
handgun license, in accordance with the provisions of Penal Law 400.00, Administrative Code
of the City of NY 10-131 (a) and the applicable regulations (see Sewell v City of New York,
182 AD2d at 472;see also Matter of Papaioannou v Kelly, 788 NYS 2d at 378). Judicial review
is limited to whether the respondent's administrative determination to deny petitioner's
application for a carry handgun license is arbitrary and capricious or an abuse of discretion
(see Matter of Papaioannou v Kelly, 788 NYS 2d at 379; Matter of Fondacaro v Kelly, 234
AD2d at 177; Sewell v City of New York, 182 AD2d at 473). In applying this standard, the
function of the courts is to ascertain whether there is a rational basis for the agency's action
(see Matter of Pell v Board of Educ., 34 NY2d 222, 231, 313 N.E.2d 321, 356 N.Y.S.2d 833
[1974]). The Court of Appeals explained, "Arbitrary action is without sound basis in reason and
is generally taken without regard to the facts" (Matter of Pell v Board of Educ., 34 NY2d at 231).
Nevertheless, as the Appellate Division stated in Matter of Kaplan v Bratton (249 AD2d at 201),
"[t]he agency's determination must be upheld if the record shows a rational basis for it, even
where the court might have reached a contrary result."
In THE KING ex rel. HENRY BRADLEY and W. R. CHILTON v. L. A. THURSTON, Minister
of the Interior,7 Haw. 523; 1889 Haw. LEXIS 52, SUPREME COURT OF HAWAII, the
plaintiffs, made the point that relying upon the approval by the official predecessors of the
respondent, of the premises in question as a suitable place for the sale of liquors, they have
expended money in improving the same whereby they have enhanced the value of the property
as a saloon, and that the respondent has no right to deprive them of this enhanced value by
refusing the license applied for. It does not appear from the evidence in the case how much
money was expended in improving the premises after the first liquor license was granted for
them in the year 1878. The petition for the writ of mandamus alleges "that large expense, to-wit,
over three thousand dollars was incurred by your petitioners in fitting up said premises as a
saloon for the purpose of said business." No further evidence was introduced upon this point; it
may have been that the whole or the greater part of the said three thousand dollars were
expended in fitting up the saloon upon the occasion of the institution of the liquor business there
in 1878, in which case such expenditure could not be said in any sense whatever to have created
a right on the part of the plaintiffs or either of them to a license.
The case of Central Broadcasting Services Ltd and Another V Attorney General (2006) where
the UK Privy Council held that although it could not be suggested that any applicant had a right
to be awarded a licence, the governments role where it is in charge of the regulatory process is
to ensure the efficient, objective and non-discriminatory handling of licence applications
thereby enabling the speedy granting of a licence where appropriate and thereby preserving the
constitutional right to freedom of expression.
15

Relevant Laws:

a) The Regulation Of Generation, Transmission And Distribution Of Electric Power Act, 1997
(Xl Of 1997)
3. Establishment of the Authority. (1) As soon as may be, but not later than thirty days after
the commencement of this Act, the Federal Government shall, by notification in the official
Gazette, establish a Nationa Electric Power Regulatory Authority consisting of a Chairman to be
appointed by the Federal Government and four members, one from each Province, to be
appointed by the Federal Government after considering tile recommendations of the respective
Provincial Governments.
(2) There shall be a Vice-Chairman of the Authority, appointed from amongst the members for a
period of one year, by rotation, in the following order, namely:
(i) the member representing the Province of Baluchistan;
(ii) the member representing the Province of North-west Frontier;(iii) the member representing
the Province of the Punjab; and
(iv) the member representing the Province of Sind.
(3) [The Chairman shall be an eminent professional of known integrity and competence with at
least twenty years of related experience in law, business, engineering, finance, accounting,
economics, the electric utility business, public administration or management]
Provided that the Chairman shall preferably be a person who is or has been a judge of a
HighCourt or the Supreme Court.]
(4) Every member shall be a professional of known integrity and competence with at least fifteen
years of related experience in law, business, engineering, finance, accounting, economics or the
electric utility business.

S.R.O. 142 (I)/99. ln exercise of the powers conferred by section 47 of the Regulation of
Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), the
National Electric Power Regulatory Authority hereby notifies the following regulations.
b) National Electric Power Regulatory Authority Licensing (Application & Modification
Procedure) Regulations, 1999.
5. Eligibility criteria. (1) The Authority may, in considering an application for the grant of a
licence, take into account such factors as may be deemed relevant by the Authority, including the
following:
(a) business experience of the applicant, its management staff, sub-contractors, engineering and
technical staff in the electric power industry, if any; (b) financial status of the applicant;
(c) the ability of the applicant to comply with the conditions of the licence;
16

(d) technology, technical specifications, model, design, operational characteristics and economic
life of the facility or the system;
(e) the ability of the applicant, the facility or the system in respect of synchronous operation in
co-ordination with other licensees;
(f) the ability of the applicant to comply with prudent utility practices, the grid code, the
distribution code or the uniform industry standards and codes of conduct; and
(g) project milestones and evidence of capability to achieve such milestones and expressions of
interest of contractors, financial institutions or the suppliers, as the case may be.
(2) Notwithstanding the applicant meeting the eligibility criteria, the Authority may decline to
issue a licence if the Authority determines in writing that:
a) the investments associated with the facility or system are not justifiable in view of the needs of
the electric power industry or where the applicant has failed to demonstrate, in the opinion of the
Authority, the existence of the demand for the proposed facility or system;
b) the plant and capacity requirements of the electric power industry do not warrant the
installation of additional plant or capacity or warrant the installation of plant or capacity with
technical, financial or other characteristics different from the ones specified in the licence
application;
c) among competing applicants, another applicant qualifies better in terms of quality of
equipment, plant, service and the corresponding economy of costs; or
d) the site proposed by the applicant is not suitable on environmental, social or other grounds.
8. Advertisement. Within three days of the admission of the application by the Authority, the
Registrar shall cause to be published, in one English and one Urdu daily newspapers with
circulation in the entire country:
(a) the prospectus;
(b) a notice to the general public of the admission of the application;
(c) an invitation to the general public to submit their comments to the Registrar within a period
of fourteen days from the date of the publication; and
(d) such other information as the Authority may from time to time direct.
9. Consideration of application. (1) The Registrar shall place the application, along with
comments, if any, received from the public pursuant to regulation 8, before the Authority no later
than three days after the last date for receipt of the comments from the public.
(2) Notwithstanding the provisions of regulation 8, the Authority may invite any person to
provide comments or otherwise assist the Authority in the consideration of the application.
17

(3) In the event the Authority intends to reject an application, it may allow an opportunity to the
applicant to make a representation before it as to why the application should not be rejected and,
upon being notified of such opportunity, the applicant may make a representation within a period
not exceeding fourteen days following the receipt of the afore-said notice from the Authority.
(4) Subject to the provisions of sub-regulation (5), the Authority shall decide the application
within twenty eight days after the date the application, along with the comments received from
the public, is placed before the Authority pursuant to sub-regulation (1), provided that the time
taken, if any, by the applicant in making a representation before the Authority in terms of sub-
regulation (3) shall be excluded from the afore-said period of twenty eight days.
(5) The decision by the Authority to grant a licence shall be without prejudice to the power of the
Authority to defer the issuance of the licence until such time the provisions of the licence are
settled by the Authority, and the Authority may refuse to issue the licence in the event the
licensee fails, within the time stated in this respect by the Authority, to agree to the terms and
conditions of the proposed licence.
(6) Subject to the applicable provisions of the Act and the rules and regulations made pursuant
thereto in this regard, the grant of a licence for any purpose shall not in any way hinder or restrict
the grant of a licence to another person within the same territory for a like purpose.
Web link:-
http://www.nepra.org.pk/Legislation/Regulations/Licence%20Application%20and%20Mo
dification%20Procedure%20regulations%201999.pdf
S.R.O. 221(I)/2000. In exercise of the powers conferred by section 46 of the Regulation
of generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), the
National Electric Power Regulatory Authority, with the approval of the Federal
Government, is pleased to make the following rules
c) National Electric Power Regulatory Authority Licensing (Generation) Rules, 2000.
3. Grant of licence.
(1) Subject to these rules and the other NEPRA rules and regulations, the Authority may grant a
generation licence to any person to engage in the generation business.
(2) The location, size, technology, interconnection arrangements, technical limits, technical
functional specifications and other details specific to the generation facilities of the licensee shall
be set out in a schedule to the generation licence.
(3) The net capacity of the licensees generation facilities shall be set out in a separate schedule
to the generation licence, after it has been determined to the satisfaction of and in the manner
specified by the Authority.
(4) The Authority may order a public hearing to be held on any application for a generation
licence and shall decide the application consistent with the outcome of the public hearing and the
procedure for public hearings prescribed under the National Electric Power Regulatory Authority
18

(Tariff Standards and Procedure) Rules, 1998, subject to such modifications as the Authority
may specify, shall be applicable to a public hearing on an application for a generation licence.
(5) The Authority may refuse to issue a licence where the site, technology, design, fuel, tariff or
other relevant matters pertaining to the generation facility proposed in an application for a
generation licence are either not suitable on environmental grounds or do not satisfy the least
cost option criteria in which case the Authority shall indicate its preference for alternative sites,
technology, design, fuel, tariff or other relevant matters to the applicant and shall, if so desired
by the applicant, allow the applicant a reasonable opportunity to amend the application in
accordance with the preferences indicated by the Authority.
Explanation -- For the purposes of sub-rule (5), least cost option criteria shall include the
following, namely:-
(a) sustainable development or optimum utilization of the renewable or non-renewable energy
resources proposed for generation of electric power;
(b) the availability of indigenous fuel and other resources;
Web link:-
http://www.nepra.org.pk/Legislation/Rules/Licensing%20(Generation)%20Rules%202000.
PDF
d) THE REGULATION OF GENERATION, TRANSMISSION AND DISTRIBUTION OF
ELECTRIC POWER ACT, 1997
(XL of 1997)
Establishment of the Authority. (1) As soon as may be, but not later than thirty days after
the commencement of this Act, the Federal Government shall, by notification in the official
Gazette, establish a Nationa Electric Power Regulatory Authority consisting of a Chairman to be
appointed by the Federal Government and four members, one from each Province, to be
appointed by the Federal Government after considering tile recommendations of the respective
Provincial Governments.
(2) There shall be a Vice-Chairman of the Authority, appointed from amongst the members for a
period of one year, by rotation, in the following order, namely:
(i) the member representing the Province of Baluchistan;
(ii) the member representing the Province of North-west Frontier;(iii) the member representing
the Province of the Punjab; and
(iv) the member representing the Province of Sind.
(3) [The Chairman shall be an eminent professional of known integrity and competence with at
least twenty years of related experience in law, business, engineering, finance, accounting,
economics, the electric utility business, public administration or management]
19

Provided that the Chairman shall preferably be a person who is or has been a judge of a
HighCourt or the Supreme Court.]
(4) Every member shall be a professional of known integrity and competence with at least fifteen
years of related experience in law, business, engineering, finance, accounting, economics or the
electric utility business.
Conclusion:
The purpose of the Power Policies, indeed, is well known, and is to provide people with
electricity at minimized rates while inviting the private investors to fulfill this purpose. The
successful implementation of this policy and the laws discussed above will lead to enormous
improvement within the power sector. The supply-demand gap could be eradicated completely;
and this way the country can have a power surplus which can then be regionally traded. In
essence, Pakistan could be transformed from energy strapped, importer of power to a regional
exporter of power. In summary, prosperity and social development will become a reality in a
Roshan Pakistan.