9911796707
TMI Blog1988 (7) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... negligible burden on the consumer and is a fruitful source of additional revenue. The Bill has been so prepared as to ensure that the tax payable by a person will be related to the quantity of electricity consumed by him. The Bill is being introduced with the above object." By virtue of the provisions of the U.P. Electricity (Duty) (Amendment) Ordinance, 1959, various amendments were carried out in the said Act. In section 2 of the Principal Act, a new clause, clause (hh) describing a scheduled industry, was inserted. By virtue of the aforesaid newly inserted clause, the expression "scheduled industry" meant any of the industries specified in the schedule. In the proviso to section 3 of the Principal Act, after clause (d), a new clause (e) was inserted which provided for non-levy or exemption from the payment of electricity duty on the energy consumed by a consumer in a scheduled industry. The expression which was added was "by a consumer in a scheduled industry". By virtue of section 8 of the Amending Act, a schedule was added to the Principal Act. In the schedule, non-ferrous metals and alloys were placed at serial No. 1 in Part B of the Schedule under a broad heading "Metallurg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f certain classes of consumption, the electricity duty would not exceed 25% of the rate charged. It may be expedient to refer to the Prefatory Note of the Act which, inter alia, is as follows : "Prefatory Note.--The minimum programme of development which this State must carry out within the next three or four years for the attainment of the objectives of a welfare State is set out in the Five Year Plans Irawn up by the Planning Commission. This plan provides for an expenditure of 13.58 crores of rupees on power development projects. Such a huge expenditure cannot be met from our present resources. It is, however, essential for the welfare of the people that the expenditure should be incurred and that nothing should be allowed to stand in the way of the progress of the plan. Additional resources have, therefore, to be found the bulk of which can be raised only by means of fresh taxation." Section 3 of the Act provides as follows : "3. Levy of electricity duty.--(1) Subject to the provisions hereinafter contained, there shall be levied for and paid to the State Government on the energy : (a)sold to a consumer by a licensee, the Board, the State Government or the Central Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction, maintenance or operation of any railway ; (d)by a cultivator in agricultural operations carried on in or near his fields such as the pumping of water for irrigation, crushing, milling or treating of the produce of those fields or chaff cutting ; (e)energy consumed in light upon supplies made under the Janata Service Connection Scheme. Explanation.--For the purposes of clause (e) 'Janata Service Connection Scheme' means a scheme approved by the State Electricity Board for supplying energy to Harijans, landless labourers, farmers (holding land not exceeding one acre), members of armed forces (whether serving or retired), war widows and other weaker sections in districts notified by the State Government." Section 4 of the Act reads as follows : "4. Payment of electricity duty and interest thereon.--(1) The electricity duty shall be paid, in such manner and within such period as may be prescribed, to the State Government-- (a)where the energy is supplied or consumed by a licensee,--by the licensee ; (b)where the energy is supplied by the State Government or the Central Government or is supplied or consumed by the Board,--by the appointed authority; and (c)whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ordinance (U.P. Ordinance No. 14 of 1970) the provisions of which were re-enacted in U.P. Act No. 2 of 1971, the Governor, on or about August 25, 1970, passed an order that, with effect from September 1, 1970, the electricity duty on industrial consumption would be levied at one paisa per unit. On August 28, 1970, the Governor ordered, in supersession of all the previous orders, that, with effect from September 1, 1970, electricity duty on the energy consumed by the consumers would be levied at the rates specified therein. There was a further notification dated September 30, 1970, issued in the name of the Governor modifying the terms of the notifications dated August 25, 1970, and August 28, 1970. On or about December 4, 1952, after the inauguration of the First Five Year Plan, electricity duty was imposed to gather additional revenue for attaining the objectives set out in the plan. The U.P. Electricity (Duty) Act, 1952, was enacted on December 4, 1952. On April 1, 1959, in order to mitigate the hardship which might be caused to certain industries in the State, the U.P. Electricity (Duty) (Amendment) Ordinance, 1959 (U.P. Ordinance No. 3 of 1959), was promulgated by the Governo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ordinance, electricity duty became leviable on industrial consumption as well as on the energy consumed by any person from his own source of generation. The provisions of section 3 have been set out earlier. Thereafter, a notification was issued on August 25, 1970, under which the rate of electricity duty on the energy consumed for industrial purposes was prescribed at one paisa per unit on consumption of electricity with effect from September 1, 1970. On September 1, the provisions of the Ordinance amending the U.P. Electricity (Duty) Act, 1952, came into force. Electricity duty became leviable on respondent No. 1 on the energy supplied to Hindalco, respondent No. 2, for industrial purposes. On September 28, 1970, respondent No. 2, Hindalco, made an application under sub-section (4) of section 3 of the Act to the State Government to grant exemption on the energy supplied by respondent No. 1 to respondent No. 2 for industrial purposes On January 17, Ordinance No. 14 of 1971 was substituted by the U.P. Electricity (Duty) (Amendment) Act, 1970. On February 26, 1971, a report was made by the three-man committee appointed to examine the request of Hindalco for grant of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication again to the State Government for reconsideration of their previous application for exemption from payment of electricity duty. In the meanwhile, the State Government filed a special leave petition to this court against the judgment and order of the High Court of Allahabad dated May 17, 1974, in Writ Petition No. 4521 of 1972. In the meantime, on November 13, 1976, an agreement was entered into between the State Electricity Board and Hindalco for supply of 85 mw. main supply. The rate fixed was 11 paise per unit inclusive of all taxes of whatever nature on electricity. The special leave petition was, however, dismissed on March 28, 1977. In compliance with the High Court's judgment dated May 17, 1974, on April 5, 1977, the respondents were given an opportunity of hearing by the State Government. For the purpose of considering the representation and to verify the correctness of the data and the profit and loss accounts furnished by Hindalco in their printed balance-sheets, the matter was got examined by Shri B.B. Jindal, Controller of Banking Operations, U.P. State Electricity Board, who submitted his report in 1977. The State Government, however, was not satisfied with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the directions issued by the High Court. The respondents were allowed to inspect the report of the Chief Electrical Inspector and other reports available with the State Government were shown to them and they submitted their comments on the report of Dr. Rajagopalan which were duly considered by the State Government. A personal hearing was again given to the respondents to submit their submissions in support of their application for exemption. The respondents were represented by counsel during the course of hearing. After giving full consideration to the submissions made in the original and additional representations and the comments dated August 23, 1980, on the report of Dr. Rajagopalan and to the entire material placed before the State Government, the State Government came to the conclusion that the claim for exemption from levy of electricity duty was not at all justified on any ground whatsoever. Accordingly, the request for exemption was disallowed. On March 3, 1982, respondent No. 1 was asked to pay Rs. 11,96,83,153.80 as the amount of electricity duty on the energy supplied by it to respondent No. 2 for industrial purposes. Respondent No. 1, however, failed to pay the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, resort should be had not to the scientific and technical meaning of the terms or expressions used but to the meaning attached to them by those dealing in them. See the observations of this court in Chiranjit Lal Anand v. State of Assam [1985] 60 STC 89 ; [1985] Suppl 2 SCR 385 ; AIR 1985 SC 1387. As mentioned hereinbefore, the application for exemption was made after disposal of the first Writ Petition No. 4521 of 1972 by the High Court on May 17, 1974. Thereafter, the respondent made another application for exemption under section 3(4) of the Act. The said application was ultimately rejected, which rejection was subsequently challenged. The High Court, in the judgment under appeal on September 26, 1984, has set aside the order of rejection passed by the State Government. Was the High Court right in so doing is the question involved in this appeal. Examination of this question involves two aspects, namely, what is the rate of duty under which various notifications were applicable to the energy consumed by Hindalco from Renusagar. Is Renusagar an "own source of generation" of Hindalco within the meaning of section 3(1)(c) of the Electricity Duty Act, 1952, and the various no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he location of a new aluminium plant. In that report, Shri Nagarajarao recommended Rihand as one of the places for setting up the aluminium plant. The U.P. Government was also keen to have the industry located in the State and persuaded Shri G.D. Birla to set up the plant with the assurance that sufficient electricity at a constant and concessional rate would be made available. Here, it was reiterated that the agreement dated October 29, 1959, was entered into called the parallel agreement so that, at any time, any one of the thermal power stations could be maintained independently. Hindalco was allowed to expand its aluminium production capacity from time to time on the condition that it would instal its own power plant subject to the further condition that this power plant could be taken over by the State at a later date. To avoid take-over complications, Hindalco decided to set up a captive power house through the instrumentality of Renusagar Power Co., a 100% subsidiary of Hindalco, fully controlled by Hindalco in all respects to supply power to Hindalco only. Reference may be made to page 28 of volume XVI which is a letter dated February 13, 1963, written by the Deputy Secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of public utilities but inapplicable to Renusagar were deleted from the sanction. See volume XVI, page 74, of the paper book. For the purpose of expansion of Hindalco as well as Renusagar, the Government of India and the State of U.P. specifically proceeded on the footing that Hindalco had its "own source of generation" in Renusagar, since Renusagar was the captive power plant of Hindalco. (a)Hence, for all practical purposes, Renusagar was treated as part and parcel of the Hindalco's expansion programme. In 1962, Hindalco decided to expand its capacity to 60,000 tonnes per annum. This meant need of extra power. The U.P. Government and the UPSEB expressed inability to give the extra power. The U.P. Government had no objection if Hindalco set up its own power house with an option to the U. P. Government to take over the power plant later. On this important basis, Hindalco was granted permission to set up a captive power plant. Reliance was placed, in this connection, on volume XVI, pages 4, 6, 7, 15 and 16 of the paper book. Also see sections 34, 36, 37 and 44 of the Electricity Supply Act, 1910. (b)Thus, Hindalco was allowed to expand its aluminium production on the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn source of generation. See volume XVI,, page 172 of the paper book. In court proceedings, Hindalco challenged the power cut. The Government filed affidavits, always asserting Renusagar to be "own source of generation" of Hindalco. See volume XXVI, pages 68 to 75 of the paper book. Indeed, it appears from the observations of this court in State of U.P. v. Hindustan Aluminium Corporation Ltd. [1979] 3 SCR 709 ; AIR 1979 SC 1459, that this court proceeded on the basis that Renusagar was its own source of generation. It is further said that the appellants have also admitted in the present proceedings the position that Hindalco had in Renusagar its own source of generation. Reliance has been placed on : (a)Section 9 of the Electricity Duty Act as it existed up to 1970. See volume XVIII, page 5 of the paper book. (b)The three-man committee report on exemption treated Renusagar as "own source of generation". See volume A, pages 158 to 163 of the paper book. (c)The Government of U.P. rejected the exemption application. See volume A, page 3 of the paper book. (d)Counter-affidavit in the first petition. See volume X, pages 26, 27 and 32 of the paper book. (e)Counter-affidavit in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hindalco, wholly owned and controlled by Hindalco, was incorporated in March, 1964. Hindalco established the power plant through the agency of Renusagar in order to avoid complications in the case of a take-over of the power plant by the State/Board of which there could be a possibility as power generation is generally not permitted in normal conditions in the private sector. In this background, what was highlighted on behalf of the respondents was that the sanction under section 28 of the 1910 Act given to Renusagar and its amendment established that Renusagar was not a normal type of sanction under section 23 of the 1910 Act, as the holder could supply power only to Hindalco. The first generating unit in Renusagar commenced production on September 9, 1967, and the second one commenced production on October 5, 1968. All steps for the expansion of the power in Renusagar so as to match the power requirement of Hindalco's expansion were taken by Hindalco even though Renusagar had been incorporated. Applications for all the necessary sanctions and permissions were made by Hindalco. Permissions and sanctions were first intimated to Hindalco even though Renusagar was in existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent, an analysis of the different provisions of the Amendment Act makes the position clear. Submissions were made on the construction of section 3 of the Act and also that the difference in language of section 2(g)( c) and old section 9 is significant. Ambit of section 3(1)(c) is wider than that of the old section in view of the addition of the words "source of generation" which must be given their full meaning. We have set out hereinbefore the provisions of sections 3(1)(c) and 9 of the Act. Rule 2(g) referred to in the order shows that the expression "any person" in section 3(1)(c) would mean a person other than a licensee of a Board who consumes energy from its own source of generation. Hindalco fits in the expression "any other person" under section 3(1)(c) and it consumes energy from its own source of generation. Generation being done by Renusagar, it was pointed out that rule 2(g) of the U.P. Electricity Duty Rules, 1952, supports this plea of the respondents. It should be borne in mind that the expression "own source of generation" which has not been defined in the Electricity Duty Act or 1910 Act cannot be regarded as a term of art. The various documents and letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat extent, the transaction should be excluded from the operation of section 3(1)(a). Alternatively, it was submitted that if the there clauses were to be treated as independent of each other, then the result of construction that each provision would yield to special provisions applied should be applied as a part and parcel of harmonious construction of this section. In this approach, clause (c) of section 3(1) ought to be regarded as dealing with the special situation, namely, a person consuming from its own source of generation while the provisions of clause (a) of section 3(1) should be regarded as general provisions dealing with the cases of sale and consumption generally. The aforesaid construction would be in harmony, it was urged, with the object and purpose of the legislation. Reliance was placed on the observations of this court in J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of U.P. [1961] 3 SCR 185, where, at page 193, this court insisted on a harmonious construction and not on a literal construction. Also see Girdhari Lal and Sons v. Balbir Nath Malhur [1986] 2 SCC 237, at pages 241 and 246, State of Tamil Nadu v. Kodaikanal Motor Union P. Ltd. [1986] 3 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Western Coalfields Ltd. v. Special Area Development Authority, Korba [1982] 2 SCR 1, 17 ; AIR 1982 SC 697, 705. The facts of that case were, however, entirely different and it is useless to refer to them but at page 17 of the report, Chandrachud C.J., speaking for the court, quoted the observations in Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524 ; [1964] 7 SCR 17, where this court had held that though the transport corporation was wholly controlled by the State Government, it had a separate entity and its income was not the income of the State Government. While delivering the judgment in that case, Gajendra-gadkar C. J. referred to the observations of Lord Denning in Tamlin v. Hannaford [1949] 2 All ER 327 ; [1950] KB 18 (CA), where Lord Denning had observed that the Crown and the corporation were different and the servants of the corporation were not civil servants. Chandrachud C.J. relied on the aforesaid observations and referred to Pennington's Company Law, fourth edition, pages 50 and 51, where it was stated that there were only two cases where the court had disregarded the separate legal entity of a company and that was done because the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on Western Coalfields Ltd. [1982] 2 SCR 1 ; AIR 1982 SC 697 in Rustom Cavasjee Cooper v. Union of India [ 1970] 40 Comp Cas 325 (SC) ; [1970] 3 SCR 530 at page 555, where this court held that a company registered under the Companies Act was a legal person, separate and distinct from its individual members. Property of the company was not the property of its shareholders. These propositions, in our opinion, do not have any application to the facts of the instant case. Shri Trivedi also drew our attention to Bank voor Handel en Scheepvaart N.V. v. Slatford [1952] 2 All ER 956 ; [1953] 1 QB 248, where, in the context of international law, property belonging to or held on behalf of a Hungarian national came up for consideration and the distinction between a shareholder and a company was emphasised and highlighted. In Kodak Ltd. v. Clark [1903] 1 KB 505, the Court of Appeal in England dealt with an English company carrying on business in the U.K. which owned 98 per cent. of the shares in a foreign company, which gave it a preponderating influence in the control, election of directors, etc., of the foreign company. The remaining shares in the foreign company were, however, held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deprived of the compensation which should justly be payable for disturbance. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one. So that DHN are entitled to claim compensation accordingly. It was not necessary for them to go through a conveyancing device to get it. I realise that the President of the Lands Tribunal, in view of previous cases, felt it necessary to decide as he did. But now that the matter has been fully discussed in this court, we must decide differently from him. These companies as a group are entitled to compensation not only for the value of the land, but also compensation for disturbance. I would allow the appeal accordingly." Lord Justice Goff proceeded with caution and observed as follows at pages 468 and 469 of the report: "Secondly, on the footing that that is not in itself sufficient, still, in my judgment, this is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil. I wish to safeguard myself 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. He said [1954] SC 381, 391 : "In my view, the section warrants the court in looking at the business realities of a situation and does not confine them to a narrow legalistic view.'" My third citation is from the judgment of Danckwerts L.J. in Merchandise Transport Ltd. v. British Transport Commission [1961] 3 All ER 495, 518 (CA), where he said that the cases-- 'show that where the character of a company, or the nature of the persons who control it, is a relevant feature the court will go behind the mere status of the company as a legal entity, and will consider who are the persons as shareholders or even as agents who direct and control the activities of a company which is incapable of doing anything without human assistance.' The third ground, which I place last because it is longest, but perhaps ought to come first, is that in my judgment, in truth, DHN were the equitable owners of the property. In order to resolve this matter, it will be necessary for me to refer in some detail to the facts." Shaw L.J. also observed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as they think fit. It is true that each company in the group is, in law, a separate entity, the business whereof is to be carried on by its own directors and managing director, if any ; but there is no doubt that the appellant company, by taking any necessary formal steps, could make any arrangements they pleased in regard to the management of the business of (for instance) British Textile. They owned all the issued capital and the directors were their nominees." Lord Reid at pages 737 and 738 observed as follows (at pages 221 of 25 Comp Cas) : "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 any one 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 Texti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court in looking at the business realities of a situation and does not confine them to a narrow legalistic view-point. The truth is that, whenever a subsidiary is formed as in this case with an independent minority of shareholders, the parent company must, if it is engaged in the same class of business, accept as a result of having formed such a subsidiary an obligation so to conduct what are in a sense its own affairs as to deal fairly with its subsidiary.' At the opposite pole to this standard may be put the conduct of a parent company which says 'our subsidiary company has served its purpose, which is our purpose. Therefore, let it die' and, having thus pronounced sentence, is able to enforce it and does enforce it not only by attack from without but also by support from within. If this section is inept to cover such a case, it will be a dead letter indeed. I have expressed myself strongly in this case because it appears to me to be a glaring example of precisely the evil which Parliament intended to remedy." 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 coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot, for the purposes of tax, disregard the fact that there are, in fact, two entities and two trades, that is to say, the trade of each company. It is normally a question of fact as to whether the disbursement in question is laid out wholly and exclusively for the purposes of the trade. In aid of this proposition and in furtherance, Shri Trivedi drew our attention to the profits of the two companies which were separately computed and also referred to volume C, page 641, where the profits of Renu-sagar were separately indicated and volume C, at page 642, where the profits of Hindalco were separately indicated. We are, however, of the opinion that these tests are not conclusive tests by themselves. Our attention was also drawn to the decision of the Madras High Court in Spencer and Co. Ltd. v. CWT [1969] 39 Comp Cas 212 ; AIR 1969 Mad 359, where Veeraswami J. held that merely because a company purchases almost the entirety of the shares in another company, there was no extinction of the corporate 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. Hungerf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Hindalco and is completely con trolled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has, at no point of time, indicated any inde pendent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order, the profits of Renusagar have been treated as the profits of Hindalco. In the aforesaid view of the matter, we are of the opinion that the corporate veil should be lifted and Hindalco and Renusagar be treated as one concern and Renusagar's power plant must be treated as the own source of generation of Hindalco and should be liable to duty on that basis. In the premises, the consumption of such energy by Hindalco will fall under section 3(1)(c) of the Act. The learned Additional Advocate-General for the State relied on several decisions some of which have been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be rejected. The electricity bill for arrears, subject to consideration of other aspects of the matter, that is to say, the validity of the order of rejection passed by the State on February 16, 1982, rejecting the claim for exemption, would be treated hereinafter. In order to appreciate the second aspect of the matter, that is to say, the challenge to the order which has been quashed by the High Court, it is necessary to recapitulate certain facts. Hindalco made an application to the State Government under section 3(4) of the Act for exemption on September 26, 1970. Inspite of repeated requests made by Hindalco, the State did not take any decision on the said application of Hindalco and also purported to raise and enforce demands under the Electricity Duty Act against Hindalco. Hindalco and Renusagar filed Writ Petition No. 368 of 1972 in the High Court of Allahabad on March 21, 1972. On that very date, Hindalco was informed that the application previously made by it 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1. Shri Trivedi, learned Additional Advocate-General, State of Uttar Pradesh, drew our attention to the case of Panama Canal Co. v. Grace Line (356 US 309 ; 2 Lawyers' Edition 788), where at page 793 of the report, while dealing with, the facts of that case, Justice Douglas observed that, as it was seen in that case, the conflict raged over questions that at heart involved problems of statutory construction and cost accounting : Whether an operating deficit in the auxiliary or supporting activities was a legitimate cost in maintaining and operating the canal for purpose of the toll formula. These are matters on which experts might disagree; these involve nice issues of judgment and choice which required the exercise of informed discretion. In those circumstances, Justice Douglas observed that the case was, therefore, quite unlike the situation where a statute created a duty to act and an equity court was asked to compel the agency to take the prescribed action. What was emphasised 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in its impugned judgment, referred to the order of the Government. The said order read as follows : "The Corporation has also emphasized that the Government of India is spending a huge sum of money in foreign exchange to meet the requirements of aluminium in India, with a view to increasing the aluminium production by Hindalco. Electricity should be made available at cheap rates and exemption should be granted to the Corporation from payment of electricity duty. In this connection it may again be pointed out that the imposition of electricity duty will not affect the production of aluminium by Hindalco as electricity duty is negligible as clearly made out in the earlier paragraphs. Accordingly, the electricity duty is not likely to have any adverse effect on the foreign exchange of the country." Referring to the aforesaid observations of the State Government, the High Court was of the view that the said observations of the State Government clearly showed that the State 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 paramoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative, or quasi-judicial decisions tend to merge in legislative activity and, conversely, legislative activity tends to fade into, and present an appearance of, an administrative or quasi-judicial activity. Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is "difficult in theory and impossible in practice". Reddy J. insisted that it is necessary that the line must at some time be drawn as different legal rights and consequences may ensue. It appears to us that sub-section (4 ) of section 3 of the Act in the set up is quasi-legislative and quasi-administrative in so far as it has power to fix different rates having regard to certain factors and in so far as it has power to grant exemption in some cases, in our opinion, is quasi-legislative in character. Such a decision must be arrived at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Judicial Committee observed at page 180 of the report as follows : "Having regard to the long time that had elapsed since the last tentative settlement of rent in 1867-68, to the prodigious rise in prices that had taken place since then, and to the general economic improvement of this part of the country, the Collective Board considered that an enhancement of 37½ per cent. would not be oppressive and directed the Revenue Officer to reduce to that figure the enhancement of 100 per cent. which he had made. This view of the effect of the direction to 'have regard to' the provisions of the Act for determining rates of rent payable by a ryot is supported by the decision of the High Court in 49 Mad 499 at 506. It is also confirmed by certain observations of Neilly J. in 63 MLJ 450 at page 485, where the learned judge said : 'Where the settling officer has to deal only with such questions as would arise in a suit for commutation, for enhancement, or reduction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment to fix the price "having regard to the estimated cost of production of sugar on the basis of the relevant schedule". The expression "having regard to" only obliges the Government to consider as relevant data material to which it must have regard to. In so far as the High Court held in this judgment that the power conferred on the State Government was of administrative nature, the High Court may not be in error. But the High Court held that it should be in consonance with the principles of natural justice, in our opinion--it must be in accordance with natural justice to a limited extent--and such principles of natural justice are enunciated by this court in several decisions, namely, A.K. Kraipak v. Union of India, AIR 1970 SC 150, Travancore Rayons Ltd. v. Union of India, AIR 1971 SC 862 and Amal Kumar Ghatak v. State of Assam, AIR 1971 Assam 32. Keeping in view the aforesaid principles, the High Court examined the petitioner's grievance. 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to agree. It was also submitted that the said assumption was made by the State Government and Dr. Rajagopalan on the basis of the reports of the BICP and the working group. The High Court, on a perusal of the reports of the BICP and the working group, came to the conclusion that the said assumption of the State and Dr. Rajagopalan is based on non-existent facts and/or is patently erroneous. Apparently, such examination by the High Court was not warranted. It was pointed out that Dr. Rajagopalan had determined the adequacy of the profits of Hindalco by relating the same to the original subscribed capital only and had completely ignored the reserves pf Hindalco. The aforesaid basis, it was held by the High Court, is contrary to the well-accepted principles of return on capital employed/net worth. It is true that Hindalco has made profits much more than it had earned before the imposition of the duty. The adequacy of the profits or whether it made 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y followed in fixing the price. Reference in this connection may be made to the observations of this court in Prag Ice and Oil Mills v. Union of India [1978] 3 SCR 293 ; AIR 1978 SC 1296, where at page 325 of the report, this court observed that, in the ultimate analysis, the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid. In this connection, reference may also be made to Shree Meenakshi Mills Ltd. v. Union of India [1974] 2 SCR 398 ; AIR 1974 SC 366, where this court dealing with the Cotton Textile (Control) Order, 1948, at page 415 of the report observed that if a fair price is to be fixed, leaving a reasonable margin of profit, there is never any question of infringement of the fundamental right to carry on business by 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 circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be followed. In such a case, a duty to act judicially does arise. This court in CIT v. Mahindra and Mahindra Ltd. [1983] 144 ITR 225 at page 237 ; [1983] 3 SCR 773, at page 785, of the report, dealt with the parameters of the court's power of judicial review of administrative or executive action or decision. Indisputably, it is a settled position that if the action or decision is perverse or is such that no reasonable body of persons, properly informed, could come to or has been arrived at by the authority misdirecting itself by adopting a wrong approach or has been influenced by irrelevant or extraneous matters, the court would be justified in interfering with the same. See also the observations at page 787 (at pages 237 and 238 of 144 ITR) of the report. In this case, the necessary parameters had been adhered to. All relevant factors had been borne in mind. It is true that each factor had not been independently considered, but these 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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