TaxTMI 
TaxTMI 
1988 (7) TMI 367
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.... the Department of Energy. The fourth appellant is the Assistant Electrical Inspector, a functionary under the U.P. Electricity (Duty) Act, 1952, Mirzapur Zone, Rani Patti, Mirzapur. The fifth appellant is the Collector of Mirzapur. There are four respondents in this appeal. The first respondent is Renusagar Power Co. Ltd. The second respondent is Hindustan Aluminium Corporation Ltd. (Hindalco). Respondent No. 3 is Shri D.M. Mimatramka who resides at Hindalco Administrative Colony, Renukut, Mirzapur. The fourth respondent is Shri Rajendra Kumar Kasliwal who resides at Hindustan Aluminium Corporation Ltd., Renukut, District Mirzapur. Respondents Nos. 3 and 4 mentioned above are the shareholders of the first respondent and the second respondent, that is, Renusagar Power Co. and Hindustan Aluminium Corporation Ltd. respectively. It is stated that Hindustan Aluminium Corporation Ltd. established an aluminium factory at Renukut in Mirzapur District, U.P., in 1959. It is the case of the respondents that it was induced to do so on the assurance that cheap electricity and power would be made available at the relevant time. In 1962, a plant of Hindustan Aluminium Corporation Ltd. for man....
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.... electricity duty on the energy consumed by Hindustan Aluminium Corporation Ltd. was exempted from April 1, 1959, the date on which the Ordinance came into force. It was further stated that the U.P. Electricity (Duty) (Amendment) Ordinance, 1959, was repealed and the provisions were incorporated into an amending Act, viz., U.P. Act No. 12 of 1959, and termed as the U.P. Electricity (Duty) (Amendment) Act, 1959. By virtue of sub-section (2) of section 1, the Amendment Act provided that the Act would be deemed to have come into force with effect from April 1, 1959. The Amendment Act repealed the provisions of the U.P. Electricity (Duty) (Amendment) Ordinance, 1959. In section 2, after clause (d), the clause which was inserted as a new clause (e) provided that electricity duty would not be leviable on the consumption of energy by a consumer in any industry engaged in the manufacture, production, processing or repair of goods. Ordinance No. 14 of 1970 was promulgated on August 5, 1970. The provisions contained in the Ordinance were subsequently incorporated in U.P. Act No. 2 of 1971. The amended provisions of U.P. Act No. 2 of 1971 came into force from April 1, 1970. The Amendment Act ....
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.... commercial or residential purposes, or in or upon any other premises except in the construction, maintenance or operation of his or its works; or (c)consumed by any other person from his own source of generation ; a duty (hereinafter referred to as 'electricity duty') determined at such rate or rates as may, from time to time, be fixed by the State Government by notification in the Gazette, and such rate may be fixed either as a specified percentage of the rate charged or as a specified sum per unit : Provided that such notification issued after October 1, 1984, but not later than March 31, 1985, may be made effective on or from a prior date not earlier than October 1, 1984. (2) In respect of clauses (a) and (b) of sub-section (1), the electricity duty shall not exceed thirty-five per cent. of the rate charged : Provided that, in the case of one-part tariff where the rate charged is based on units of consumption, the electricity duty shall not be less than one paisa per unit or more than eight paise per unit. Explanation.-For the purposes of the calculation of electricity duty as aforesaid, energy consumed by a licensee or the Board or supplied free of charge or ....
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....son from his own source of generation,-by the person generating such energy (2) Where the amount of electricity duty is not paid to the State Government within the prescribed period as aforesaid, the licensee, the Board or other person mentioned in clause (c) of sub-section (1), as the case may be, shall be liable to pay within such period as may be prescribed, interest at the rate of eighteen per cent per annum on the amount of electricity duty remaining unpaid until payment thereof is made." Section 9 of the Act provides as follows : "Exemptions.-Nothing in this Act shall apply to any energy generated by a person for his own use or consumption or to energy generated by a plant having a capacity not exceeding two and a half kilowatts." Renusagar Power Co. Ltd. had, in the meantime, obtained sanction under section 28 of the Indian Electricity Act, 1910, to engage in the business of supply of electricity to the second respondent, Hindustan Aluminium Corporation Ltd. By virtue of section 2(f) which defines a licensee for the purposes of the Electricity (Duty) Act to mean any person licensed under Part II of the Indian Electricity Act, 1910, and includes any person who has....
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....ance, it was provided in the first proviso to section 3 of the Principal Act that no duty shall be leviable on the energy consumed by a consumer in a scheduled industry, including non-ferrous industries manufacturing aluminium like that of respondent No. 2, Hindalco. The aforesaid Ordinance was substituted by the U.P. Electricity (Duty) (Amendment) Act, 1959 (U.P. Act No. 12 of 1959). It substituted sub-clause (e) in the first proviso of section 3 which reads as follows : "(e) by a consumer in any industry engaged in the manufacture, production, processing or repair of goods". In the year 1959, respondent No. 2. looking to the profitability of establishing a factory for manufacture of aluminium, set up a plant at Renukut, District Mirzapur in the State of U.P. On or about October 29, 1959, an agreement was arrived at with the State Government and the Hindalco for supply of 55 mw. electrical power at the rate of Rs. 1.99 paise per unit inclusive of all charges, duties and taxes of whatever nature on electricity for 25 years. In the year 1962, Hindalco, respondent No. 2, started production of aluminium. On October 14, 1964, respondent No. 2 requested the State Government to ....
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....ty duty on the energy supplied by Renusagar Power Co. Ltd. According to the committee, the burden as a result of the imposition of electricity duty did not result in substantial or insufferable increase of the rate of duty for Hindalco. On August 27, 1971, a demand for payment of electricity duty amounting to Rs. 59,13,891.80 was raised on respondent No. 1. On March 29, 1972, the application of respondent No. 2 for grant of exemption was rejected by the State Government on the following reasons : (a)That the intention of the Legislature was clear, viz., to withdraw the exemption from payment of electricity duty on the industrial consumers with effect from September 1, 1970, the facility of which was being availed of for a period of more than 11 years. (b)That the applicant was never given any assurance that he will be exempted from electricity duty nor is the applicant entitled for any exemption as a matter of right under the provisions of the Amended Act. (c)That it was not in public interest to grant them exemption from electricity duty. (d)That the electricity duty is also being levied on the aluminium industries in other States also. (e)That the additional resour....
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....Shri B.B. Jindal. On September 6, 1978, the matter was got re-examined by the Chief Electrical Inspector to the Government of Uttar Pradesh. He submitted his report. The Chief Electrical Inspector, in his report, compared the cost of power of Hindalco with that of similar industries in other States. On December 5, 1978, the Secretary, Power, discussed the matter with Dr. R. Rajagopalan, Chief Adviser (Costs), Government of India. Then a note was prepared by the Secretary, Power, Government of U.P., in which a reference was made to the above report of the Chief Electrical Inspector to the Government of U.P. Thereafter, the Chief Secretary to the Government of U.P., on December 26, 1978, wrote a letter to the Secretary, Ministry of Finance, Government of India, requesting him that the matter may be got examined by the Chief Adviser (Costs), Government of India, expeditiously. After examination, on January 29, 1979, Dr. R. Rajagopalan, Chief Adviser (Costs), Government of India, submitted his report indicating that the effect of imposition of electricity duty on the margin of profit available to Hindalco has been very insignificant. It did not have any adverse effect on the profitabil....
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....mount within the stipulated time. On March 22, 1982, the District Magistrate, Mirzapur, was requested to recover the said amount as arrears of land revenue. Being aggrieved by the decision of the State Government, the respondent filed Writ Petition No. 3921 of 1982 in the High Court of Allahabad and the High Court issued a stay order directing the petitioners not to take any proceedings for the recovery of the impugned electricity duty. On September 26, 1984, the High Court allowed Writ Petition No. 3921 of 1982 and held that the impugne'd order of the State Government was not maintainable in law and hence quashed the order of the State Government as well as the notice of demand dated March 3, 1982. The State Government was also directed to consider the request of the respondents for exemption in accordance with the directions issued by the Division Bench in Writ Petition No. 4521 of 1972 and also in the light of the observations made in the judgment after affording an opportunity of personal hearing to the respondents. Being aggrieved thereby, the appellants have come up in appeal to this court. In the background of the facts and the circumstances set out hereinbefore, we have ....
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....fications issued thereunder? The question whether Renusagar was an "own source of generation" of Hindalco, is a mixed question of law and fact as correctly contended by Shri Palkhivala as well as by Shri Sen appearing on behalf of the respondents. Shri Palkhivala, appearing for the respondents, submitted before us the historical background of the setting up of Renusagar Power Plant. It was urged that for producing aluminium by Hindalco, electricity is a raw material. Hindalco was set up with a capacity of 20,000 tonnes per annum on the basis of sole assurance, according to the respondents, given by the State of U.P. that adequate power would be given at a very cheap and economical rate. The Government of U.P., in 1959, agreed to give 55 mw. of power at 1.99 paise per unit. This, according to the respondents, was in accordance with the policy of the Central Government and on the basis of the report of the various committees set up by the Government. Our attention was drawn to certain facts appearing in volume A, pages 8 and 9, which set out the averments made in the writ petition filed in the instant case. It was stated therein that aluminium is an essential raw material in a large ....
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....retary, Government of India, Ministry of Commerce and Industry, to Shri D.P. Mandelia of Hindustan Aluminium Corporation, New Delhi, where, on the question of the power plant, it was suggested that, as stated by Shri Mandelia, a separate company may be formed with the power plant project and the major portion of the capital subscribed by Hindalco. It was highlighted that setting up of a power plant project was part of the scheme for meeting the needs of Hindalco for electricity. All planning, designing, engineering, purchase of equipment and financing was done by Hindalco exclusively for Renusagar. See volume XVI, pages 20, 33, 49, 58 and 62 of the paper-book. The only object and purpose of the power plant was to supply power to suit the requirements of Hindalco. Reference may be made to pages 36 and 37 of volume XVI of the paper-book. According to Shri Palkhivala and Shri B. Sen, from the aforesaid background, the following facts emerge : (a)1967/1968 units 1 and 2 of Renusagar went into operation. (b)Renusagar was set up as part and parcel of aluminium expansion scheme. (c)All steps to set up Renusagar including expansion were taken by Hindalco. (d)Agency of Ren....
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....pand its aluminium production on the condition of its setting up its own power plant which was part and parcel of the expansion scheme. See in this connection volume XVI, pages 22 and 25 of the paper book. (c)When Hindalco decided to expand its aluminium plant again from 60,000 to 1,20,000 tonnes per annum, the expansion of the power house was a condition precedent to aluminium expansion. All negotiations, requests for permission, correspondence with authorities, intimation from the Government were done and received by Hindalco. In this connection, reference may be made to volume XVI, pages 129 to 134, 151, 157 and 180 of the paper book. (d)Renusagar was allowed expansion limited to the power require ments of Hindalco for captive use of Hindalco. See volume XVI, pages 145, 159, 161, 185, 187 and 189 of the paper book. (e)All Government authorities including the Central Government, State of U.P. and the U.P. State Electricity Board have always treated Renu sagar to be a "captive plant" as either "self-generation" or "own gene ration" or "own plant" or "own source of generation" or "generation for self-use" or "own use", etc., of Hindalco. In this connection, reference may b....
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....pages 26, 27 and 32 of the paper book. (e)Counter-affidavit in second petition. See volume XI, pages 93 and 130 of the paper book. (f)See the judgment of the Allahabad High Court. See volume A, pages 7, 10, 11, 13 and 19 of the paper book. (g)Petition of the U.P. Government under article 133. See volume XI, page 134 of the paper book. (h)It is also significant to note the special leave petition filed by the U.P. Government. Reference may be made to volume XI, pages 139 to 141 of the paper book. (i)Reference may be made to Rajagopalan Report. See volume A, pages 237 and 265 of the paper book. (j)See the affidavit of the State of U.P. in the Allahabad High Court in present proceedings. See volume A, pages 71, 72, 76 and 84 of the paper book. (k)The High Court's judgment dated September 26, 1984, in the present proceedings. See volume B, pages 391 to 397 of the paper book. All these factors have to be borne in mind in considering whether Renusagar was Hindalco's own source of generation. Counsel for the respondents drew our attention to the fact that, in the manufacture of aluminium, electrical energy is a raw material and between 16,000 to 20,000 units of ener....
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....missions and sanctions were first intimated to Hindalco even though Renusagar was in existence. See volume XVI, pages 129 to 134 and 149 of the paper book. Changes in the sanctions and/or permissions granted were obtained by Hindalco and not by Renusagar. See volume XVI, pages 157 and 180 of the paper book. The expansion of the power plant in Renusagar was to exactly match the requirements of Hindalco for the production of aluminium. The expansion of the power plant in Renusagar was part and parcel of the expansion of the aluminium plant of Hindalco. See volume XVI, pages 145, 159, 161, 185, 187 and 189 of the paper book. The third generating unit in Renusagar commenced in November, 1981, and the fourth generating unit in April, 1983. Hindalco consumes about 255 mw. power out of which 250 mw. comes from Renusagar and 5 mw. by way of main supply and 15 mw. by way of emergency supply is made by the Board. It was emphasised on behalf of Hindalco that the power plants at Renusagar were set up as part and parcel of the aluminium expansion scheme of Hindalco and the only object and purpose of the power plants in Renusagar was to supply power to suit the needs of Hindalco. All st....
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....e Electricity Duty Act or 1910 Act cannot be regarded as a term of art. The various documents and letters placed before the court and referred to hereinbefore indicate that all persons and authorities dealing and conversant with this matter had consistently treated Renusagar as an own source of generation of Hindalco. In the power cuts matter under section 22B of 1910 Act, 100 per cent cut was imposed on Hindalco on the footing that it has its own source of generation. All the authorities including the State and the Board have all along treated Renusagar as own source of generation of Hindalco. The High Court as well as this court had proceeded on that basis. In a note to the Advisory Council dated May 31, 1977, the Secretary, Power Department of the State Government, treated Renusagar as own source of generation of Hindalco. In the proceedings under the Electricity Duty Act itself, it was the case of the State that Renusagar generation was by Hindalco for its own use within the meaning of section 9 of the Electricity Duty Act. It was also the case of the State that Renusagar was own source of generation of Hindalco and since by its amendment in 1952, the Legislature had show....
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....h Malhur [1986] 2 SCC 237, at pages 241 and 246, State of Tamil Nadu v. Kodaikanal Motor Union P. Ltd. [1986] 3 SCC 91, at page 100 and D. Sanjeevayya v. Election Tribunal [1967] 2 SCR 489, at page 492. On behalf of the respondents and in support of their contention, it was urged that a harmonious construction would advance the purpose and object of the legislation inasmuch as it was clearly one of the purposes of the legislation to treat captive generation or self-generation as a separate category and to confer benefits on the same in public interest. Our attention was drawn to the notification dated March 17, 1973, which appears at volume XVIII, page 34. It was further contended on behalf of the respondents that interpretation of section 3(1)(c) of the Act would not depend on the manner in which a person might choose to organise his affairs. Further, that there was no rational distinction having a nexus with the object of the Electricity Duty Act, where a person generating electrical energy himself was consuming the same and a person who engaged another person to generate electrical energy exclusively for and on behalf of his complete control and who consumes all the electrica....
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....only two cases where the court had disregarded the separate legal entity of a company and that was done because the company was formed or used to facilitate the evasion of legal obligations. The learned editor of Pennington's Company Law, fifth edition, at page 49, has recognised that this principle has been relaxed in subsequent cases. He states that the principle of company's separate legal entity has, on the whole, been fully applied by the courts since Salomon's case [1897] AC 22 (HL). Corporate veil has been lifted where the principal question before the court was one of company law, and, in some situations where the corporate personality of the company involved was really only of secondary importance and the application of the old principle has worked hardship and injustice. In England, there have been only a few cases where the court had disregarded the company's corporate entity and paid attention to where the real control and beneficial ownership of the company's undertaking lay. While it did this, the court had relied either on a principle of public policy, or on the principle that devices used to perpetrate frauds or evade obligations will be treated as nullities, or ....
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....trol, election of directors, etc., of the foreign company. The remaining shares in the foreign company were, however, held by independent persons, and there was no evidence that the English company had ever attempted to control or interfere with the management of the foreign company, or had any power to do so otherwise than by voting as a shareholder. It was held that the foreign company was not carried on by the English company, nor was it the agent of the English company, and that the English company was not, therefore, assessable to income-tax. Renusagar was not the alter ego of Hindalco, it was submitted. On the other hand, these English cases have often pierced the veil to serve the real aim of the parties and for public purposes. See in this connection, the observations of the Court of Appeal in DHN Food Distributors Ltd. v. London Borough of Tower Hamlets [1976] 3 All ER 462. It is not necessary to take into account the facts of that case. We may, however, note that, in that case, the corporate veil was lifted to confer a benefit upon a group of companies under the provisions of the Land Compensation Act, 1961, of England. Lord Denning, at page 467 of the report, has made ce....
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....lf by saying that so far as this ground is concerned, I am relying on the facts of this particular case. I would not at this juncture accept that in every case where one has a group of companies one is entitled to pierce the veil, but in this case, the two subsidiaries were both wholly owned ; further, they had no separate business operations whatsoever ; thirdly, in my judgment, the nature of the question involved is highly relevant, namely, whether the owners of this business have been disturbed in their possession and enjoyment of it. I find support for this view in a number of cases from which I would make a few brief citations, first from Harold Holds-worth and Co. (Wakefield) Ltd. v. Caddies [1955] 1 All ER 725, 737, 738 ; [1955] 25 Comp Cas 205, 221 (HL), where Lord Reid said : 'It was argued that the subsidiary companies were separate legal entities, each under the control of its own board of directors, that in law the board of the appellant company could not assign any duties to anyone in relation to the management of the subsidiary companies, and that, therefore, the agreement cannot be construed as entitling them to assign any such duties to the respondent. My Lords, ....
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.... at page 473 as follows : "Even if this were not right, there is the further argument advanced on behalf of the claimants that there was so complete an identity of the different companies comprised in the so-called group that they ought to be regarded for this purpose as a single entity. The completeness of that identity manifested itself in various ways. The directors of DHN were the same as the directors of Bronze ; the shareholders of Bronze were the same as in DHN, the parent company, and they had a common interest in maintaining on the property concerned the business of the group. If anything were necessary to reinforce the complete identity of commercial interest and personality, clause 6, to which I have referred already, demonstrates it, for DHN undertook the obligation to procure their subsidiary company to make the payment which the bank required to be made. If each member of the group is regarded as a company in isolation, nobody at all could have claimed compensation in a case which plainly calls for it. Bronze would have had the land but no business to disturb; DHN would have had the business but no interest in the land." In this connection, it would be useful....
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....mercatoria, and it must be construed in the light of the facts and realities of the situation. The appellant company owned the whole share capital of British Textile Manufacturing Co., and, under the agreement of 1947, the directors of this company were to be the nominees of the appellant company. So, in fact, the appellant company could control the internal management of their subsidiary companies, and, in the unlikely event of there being any difficulty, it was only necessary to go through formal procedure in order to make the decision of the appellant company's board fully effective." Our attention was drawn by Shri Sen to Scottish Co-operative Wholesale Society Ltd. v. Meyer [1958] 3 All ER 66 ; [1959] 29 Comp Cas 1 , where Viscount Simonds of the House of Lords observed at pages 71 and 72 as follows (at page of 8 of 29 Comp Cas) : "My Lords, it may be that the acts of the society of which complaint is made could not be regarded as conduct of the affairs of the company if the society and the company were bodies wholly independent of each other, competitors in the rayon market, and using against each other such methods of trade warfare as custom permitted. But this is to p....
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.... Similarly, at page 84 of the report, Lord Keith's observations are also relevant to the facts of this case (at page 26 of 29 Comp Cas) : "My Lords, if the society could be regarded as an organisation independent of the company and in competition with it, no legal objection could be taken to the actions and policy of the society. Lord Carmont pointed this out in the Court of Session. But that is not the position. In law, the society and the company were, it is true, separate legal entities. But they were in the relation of parent and subsidiary companies, the company being formed to run a business for the society which the society could not at the cutset have done for itself unless it could have persuaded the respondents to become servants of the society. This the respondents were not prepared to do. The company, through the knowledge, the experience, the connexions, the business ability and the energies of the respondents, had built up a valuable goodwill in which the society shared and which there is no reason to think would not have been maintained, if not increased, with the co-operation of the society. The company was in substance, though not in law, a partnership consis....
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....character, for each company was a separate juristic entity for tax purposes. Almost on similar facts are the observations of P.B. Mukharji J. in Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd. [1969] AIR 1969 Cal 238, where he held that a holding company and its subsidiary are incorporated companies and in this context each has a separate legal entity. Each has a separate corporate veil but that does not mean that the holding company and the subsidiary company within it all constitute one company. Mr. Justice O. Chinnappa Reddy, speaking for this court in Life Insurance' Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548 ; [1985] Suppl 3 SCR 909, had emphasized that the corporate veil should be lifted where the associated companies are inextricably connected as to be, in reality, part of one conceren. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of public interest and the effect on the parties who may be affected. After re....
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.... noted. The veil of corporate personality, even though not lifted sometimes, is becoming more and more transparent in modern company jurisprudence. The ghost of Salomon's case [1897] AC 22 (HL), still visits frequently the hounds of company law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence. (Tagore Law Lectures, page 183). It appears to us, however, that, as mentioned, the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treating it as its own source of energy. The respondent is liable to duty on the same and on that footing alone ; this is evident in view of the principles enunciated and the doctrine now established by way of decision of this court in Life Insurance Corporation of India [1986] 59 Comp Cas 548 that, in the facts of this case, sections 3(1)(c) and 4(1)(c) of the Act are to be interpreted accordingly. The person generating and consuming energy were the same and the corporate veil should be lifted. In the facts of this case, H....
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....had been rejected by the State Government. Hindalco applied for an amendment of the writ petition. Reasons for rejection were intimated on June 15, 1972. Thereafter, Writ Petition No. 368 of 1972 was withdrawn. On July 21, 1972, Hindalco and Renusagar filed another Writ Petition No. 4521 of 1972 in the High Court of Allahabad challenging the order of rejection. On May 17, 1974, the High Court delivered judgment quashing the aforesaid rejection and asking the State Government to consider the matter afresh in accordance with law and in accordance with the directions contained in the said judgment. Another writ petition, being Writ Petition No. 3921 of 1982 out of which the present appeal arises, was filed by Renusagar and Hindalco on April 16, 1982. The High Court passed an order on September 26, 1984, quashing the order. The High Court was of the view that the Government was under a mandatory duty to consider certain factors. These were : (1) How did the cost of power to the Corporation compare with the cost of power to similar industries in other States ? (2) How the spending of huge sums by the Government of India in foreign exchange decreased and its keenness to attain self-suffi....
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....asised was that the matter should be far less cloudy and much more clear for courts to intrude upon. It is also, in this connection, necessary to observe that, if technical considerations are involved, the court feels shy to interfere. Reliance was placed on the observations of this court in Vincent Panikurlangara v. Union of India [1987] 2 SCC 165. There, the writ petition involved the claim for withdrawal of 7,000 fixed dose combinations and withdrawal of licences of manufacturers engaged in manufacture of about 30 drugs which have been licensed by the drugs control authorities ; the issues that fell for consideration were not only relating to technical and specialised matters relating to therapeutic value, justification and harmful side effects of drugs, but also involved examination of the correctness of action taken by respondents Nos. 1 and 2 therein on the basis of advice; the matter also involved the interest of manufacturers and traders in drugs as also the interest of patients who require drugs for their treatment. This court reiterated that, in view of the magnitude, complexity and technical nature of the enquiry involved in the matter as also the far-reaching implicatio....
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....Government did not address itself to the need for promoting aluminium industry for increasing production of aluminium which would, in the long run, save foreign exchange. We are unable to agree. What was paramount before introduction of the development programme and how the funds should be allocated and how far the Government considers anegligible increase and rise in the cost of aluminium for the purpose of raising monies for other development activities are matters of policy to be decided by the Government. It is true, as the High Court has pointed out, that the question regarding public interest and need to promote indigenous industrial production was related to the question of exemption of duty. But, what the High Court missed, in our opinion with respect, was that a matter of policy should be left to the Government. Reading the order of the Government, it appears to us that the Government had adverted itself to all the aspects of sub-section (4) of section 3 of the Act. It is true that certain amount of encouragement was given to Hindalco to start the industry in a backward area. After a considerable lapse of time, a very low rate of duty was charged. But, if we need other sec....
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....t objectively and in consonance with the principles of natural justice It is correct to say that, with regard to the nature of the power under section 3(4) of the Act when the power is exercised with reference to any class, it would be in the nature of subordinate legislation but, when the power is exercised with reference to an individual, it would be administrative. Reference was made in this connection to the cases of Union of India v. Cynamide India Ltd. [1987] 2 SCC 720 ; AIR 1987 SC 1802 and P.J. Irani v. State of Madras [1962] 2 SCR 169 at pages 179, 180, 181 and 182. If the exercise of power is in the nature of subordinate legislation, the exercise must conform to the provisions of the statute. All the conditions of the statute must be fulfilled. The High Court was right only to the limited extent that all the relevant considerations must be taken into account and the power should not be exercised on irrelevant considerations but singular considerations which the High Court, in our opinion, seems to have missed in the judgment under appeal, in these factors, namely, the prevailing charges for supply of energy in any area, the generating capacity of any plant, the need to....
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....uction of money rent, under section 168(2), he must be guided by the appropriate principles as set out in the Act, but there is no doubt that his settlement may embrace a much wider field of question and whenever he has not merely to adjust the lawful rent but to fix what is fair and equitable in variation from the lawful rent which can be exacted in a suit, his settlement is clearly something which no civil court could do unless specially empowered.' Their Lordships find themselves, on this matter, in agreement with the view taken by the majority of the Collective Board. It is not possible to peruse the proceedings of the Special Revenue Officer in this case without seeing that a number of matters besides the rise in prices of staple food crops were considered by him, and had to be considered by him, if he was to carry out his duty under Chapter 11. He observed in para 30 of the final proceedings dated 10th December, 1935 : 'I hold that the present settlement is also a fresh and initial settlement wherein everything has to be reclassified afresh and new rates of rent have to be fixed. It is not, therefore, a case of enhancement but of fixing and introducing a new rate of ren....
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.... Dr. Rajagopalan submitted his report to the State Government in January, 1979. Admittedly, Dr. Rajagopalan placed reliance on the report of the working group on aluminium projects set up by the Government of India in 1970 and various other reports of the Bureau of Industrial Costs and Prices (hereinafter referred to as "the BICP"), submitted to the Government from time to time. It is based on the balance-sheet of the appellants and had been made available to the respondents. We have examined the correspondence that passed between the parties and we are of the opinion that there was no violation of the principles of natural justice because the relevant data was made available to the appellants. It is true that principles of natural justice must be adhered to. In this connection, reference may be made to S.D. Hotop Principles of Australian Administrative Law, 6th edition, pages 210 to 212, Cases and Materials on Review of Administrative Action (second edition) by S.D. Hotop, Wade on Administrative Law, 5th edition, pages 506 and 507 and Bennion on Statutory Interpretation, 1984 edition, pages 140 and 141. The exercise of power, whether legislative or administrative, will be set asid....
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....e much more profits is not a consideration which must prevail over public interest and the Government having taken into consideration this factor, in our opinion, did not commit any error and the High Court was in error in setting aside the order of the Government. It is true that the cost of power to similar industries in other States was a relevant factor and the State was under a mandatory duty to consider the same. The State has taken note of all these factors and has observed that Hindalco is being supplied with electrical energy at a very nominal rate and taking into consideration the prevailing practice of levy of electricity duty in other States as well as the provisions stated in section 3(4), the "Government have come to the conclusion that there is no justification for allowing exemption from electricity duty to Hindalco. The Government did not commit any. error which required interference by the High Court in the manner it did. The assurance of cheap power factor was there. But the assurance of cheap power factor does not foreclose the public interest of raising public, revenue. In July, 1975, the Central Government fixed uniform prices for aluminium for all the prod....
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....imposing reasonable restrictions. Unreasonableness and natural justice have to be judged in that context. In that view of the matter, non-supply of the basis of the report of the BICP does not by itself, in our opinion, in the facts and circumstances of the case, make the order of the State Government vulnerable to challenge. In Laxmi Khandsari v. State of U.P. [1981] 3 SCR 92 ; AIR 1981 SC 873, this court was dealing with the Essential Commodities Act, 1955, and the Sugarcane (Control) Order, 1966, and observed that, in determining the reasonableness of restrictions imposed by law in the field of industry, trade or commerce, the mere fact that some of the persons engaged in a particular trade may incur loss due to the imposition of restrictions will not render them unreasonable because it is manifest that trade and industry pass through periods of prosperity or adversity on account of economic, social or political factors. At page 129 of the report (at page 893 of AIR 1981 SC), rejecting the plea that before fixing a price the rules of natural justice should be adhered to, this court emphasised, referring to the observations in the case of Saraswati Industrial Syndicate Ltd. v.....
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....se had been borne in mind. In our opinion, the Government did not act in violation either of the principles of natural justice or arbitrarily or in violation of the previous directions of the High Court. In the premises, the High Court was in error in setting aside the order of the State Government in its entirety. The High Court should have allowed the claim of Hindalco for the reduced rate of bill on the basis that Renusagar Power Plant was its own source of generation under section 3(1)(c) and the bills should have been made by the Board on that basis. But the High Court was in error in upholding the respondents' contention that the State Government acted improperly and not in terms of section 3(4) of the Act and in gross violation of the principles of natural justice. We, therefore, allow the appeal to the extent indicated above and set aside the judgment of the Allahabad High Court to that extent and restore the State Government's impugned order subject to the modification of the bills on the basis of own source of generation. We, therefore, direct that the electricity bills must be so made as to give Hindalco the benefit of the rate applicable to its own source of generati....