9911796707
TMI Blog1988 (7) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 manufacture of aluminium was commissioned. Ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stan 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 It was further stated that the U.P. Electricity (Duty) (Amendment) Ordinance, 1959, was repealed and the provisions were incorporated into an amending Act, viz., U.P. Act No. 12 of 1959, and termed as the U.P. Electricity (Duty) (Amendment) Act, 1959.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 The Amendment Act repealed the provisions of the U.P. Electricity (Duty) (Amendment) Ordinance, 1959.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 was preceded by U. P. Ordinance No. 14 of 1970. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at concessional rates to his or its partners, directors, members, officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obtained sanction from the State Government under section 28, Renusagar Power Co. Ltd., the first respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 grant sanction to the Renusagar Power Co. Ltd. to supply electricity to respondent No. 2. On November 12, 1964, respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position 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 resources are taken into account to give the final shape of the State Development Plans and with a view to fulfil the requirement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desh. 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 profitability of Hindalco since such a levy has been included in the cost of fixing the selling prices of Hindalco's products by the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 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 now to examine the correctness of the judgment and order of the High Court which is under appeal. There are two different aspects. One is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 number of industries of strategic national importance and its production is of vital public interest. 60 per cent, of the production of Renusag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Renusagar was set up by Hindalco because of take-over option by the State. (e)Renusagar is a 100 per cent subsidiary of Hindalco. (f)Borrowings of Renusagar arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 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 be made to volume XVI, pages 81, 90, 91, 112, 135A, 139, 140, 146, 150, 152, 160, 163, 167, 169, 172, 183A and 184 of the paper book. It further appears that 100 per cent, power cuts-stoppage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 energy are required for the production of one tonne of aluminium. The impact of the imposition of duty on energy at one paisa per unit would be an increase in the cost of production of aluminium by Rs. 160 to Rs. 200 per tonne. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 steps to set up the power plant in Renusagar and its further expansion were taken by Hindalco. The power plant was set up by Hindalco through the agency of Renusagar (100 per cent. subsidiary and wholly owned and controlled by Hindalco) to avoid com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently 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 shown an intention to levy duty on own source of generation, Hindalco was not entitled to exemption. It was, therefore, submitted that Renusagar must be regarded as the alter ego of Hindalco, i.e., own source of generation of Hindalco within the meaning of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention, 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 electrical energy so generated. Accordingly, it was urged that such a distinction being arbitrary and irrational, it would be violative of article 14 of the Constitution. Hence, it was contended that a construction of the Electricity Duty Act which would make such a disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on a presumption of agency or trusteeship which at first sight Salomon's case [1897] AC 22 (HL) seems to prohibit. Again, at page 36 of the same book, the learned author notes a few cases where the courts have disregarded the separate legal entity of a company and inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn 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 certain interesting observations which are worth repeating in the context of the instant case. The Master of the Rolls said at page 467 as follows : "Third, lifting the corporate veil. A further very interesting point was raised by counsel for the claimants on company law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holly 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, in my judgment, this is too technical an argument. This is an agreement in re 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 Mfg. Co., and, under the agreement of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleteness 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 to refer to Harold Holdsworth and Co. (Wakefield) Ltd. v. Caddies [1955] 1 All ER 725 ; [1955] 25 Comp Cas 205 (HL), where Lord Horton of Henryton in England at page 734 of the report, observed as follows (at page 216 of 25 Comp Cas) : "My Lords, this clause refers to a group of companies consisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pursue a false analogy. It is not possible to separate the transactions of the society from those of the company. Every step taken by the latter was determined by the policy of the former. I will give an example of this. I observed that, in the course of the argument before, the House, it was suggested that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 consisting of the society and the respondents. Whatever may be the other different legal consequences following on one or other of these forms of combination one result, in my opinion, followed in the present case from the method adopted, which is common to partnership, that there should be the utmost good faith between the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text 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 referring to several English and Indian cases, this court observed that ever since A. Salomon and Co. Ltd.'s case [1897] AC 22 (HL), a company has a legally independent existence distinct from its individual members. It has since been held that the corporate veil may be lifted and the corporate personality may be looked in. Reference w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kharji 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, Hindalco and Renusagar were inextricably linked up together. Renusagar had, in reality, no separate and independent existence apart from and independent of Hindalco. In the aforesaid view of the matter, we are of the opinion that consumption of energy by Hindalco is clearly consumption by Hindalco from its own source of generation. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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-sufficiency in the country by increasing its indigenous production in public interest attained ? (3) The commitment made by the Government of Uttar Pradesh to Hindalco to supply power at cheap rates as noticed in the report of Dr. Nagarajarao. (4) The effect of imposition of duty on the margin of profit available to Hindalco. The provisions of sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 implications of the total ban on certain medicines for which the petitioner had prayed, a judicial proceeding of the nature initiated was not an appropriate one for determination of such matters. The technical aspects which arose for consideration in a matter of that type could not be effectively handled by a court. This court also reiterated that, similarly, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sectors of growth and development, for example, food, shelter, water, rural electrification, the need for encouragement to the aluminium industry has to be subordinated by a little higher cost because that is a matter on which the Government, as representing the will of the people, is the deciding factor. Price fixation, in our opinion, which is ultimately the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative. 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 promote industrial production generally or any specified class thereof and other relevant factors cannot be judged disjointedly. These must be judged in adjunct to the public interest and that the public interest is, as mentioned in the preamble, to raise revenue. Reference was also made to the observations of the Judicial Committee in Ryots of Garabandho v. Za ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rent based on the principles of equity and fairness as laid down in Chapter 11, Estates Land Act'." The High Court, in the impugned judgment, commented that it was a mandatory duty to separately consider these relevant factors and has committed the error against which the Judicial Committee had cautioned. The High Court was of the view at page 10 of its judgment that there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 aside if there is a manifest error in the exercise of such power or the exercise, of the power is manifestly arbitrary. Similarly, if the power has been exercised on non-consideration or non-application of mind to relevant factors, the exercise of power will be regarded as manifestly erroneous. If a power, (whether legislative or administrative), is exercised on the basis of facts which do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory 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 producers of aluminium. The Central Government also fixed uniform sale prices of aluminium applicable to all producers. The Central Government also fixed individual retention prices (based, inter alia, on the cost of production) for each individual producer. All producers of aluminium were to sell aluminium at uniform sale prices. Any producer whose retention prices were lower than the sale pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Union of India [1975] 1 SCR 956 ; AIR 1975 SC 460, that price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. There is scope for trial and error in such a sphere. Judged by that standard, the impugned order in this case, in our opinion, is not bad. In support of the proposition that the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 generation from Renusagar Plant. The appeal is disposed of in those terms. The electricity bills must be computed as indicated above. After recomputation and presentation of such bills, the respondents will pay the same within two months thereof. In view of the facts and circumstances of the case, the parties will pay and bear their own costs. Ranganathan J.-I agree. On the second issue, I think, it is diff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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