TMI Blog1988 (7) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... lahabad 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. - 2966 OF 1986 - - - Dated:- 28-7-1988 - SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ. R.N. Trivedi, Mr. Gopal Subramaniam and Mrs. Shobha for the Appellant. B.Sen, D.P. Gupta, Palkhivala, Raja Ram Aggarwal, N.R. Khaitan, E.D. Desai, Y.K. Khaitan, Jijina, Sandeep Aggarwal and T.N. Sen for the Respondent. JUDGMENT Sabyasachi Mukharji, J. This appeal by special leave is directed against the judgment and order of the High Court of Allahabad dated September 26, 1984. The first appellant is the State of Uttar Pradesh impleaded through the Chief Secretary to the Government of Uttar Pradesh, Lucknow. The second appellant is the Secretary to the Government of Uttar Pradesh, Department of Energy Lucknow. The third appellant is one Shri Yogendra Narain, presently acting as Secretary to the Chief Minister, State of Uttar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in respect of 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 Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government or sold to that Government for consumption in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Hindustan Aluminium Corporation Ltd. In exercise of the powers conferred by the Amendment 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 (Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere were several amendments in various sections of the original Act. As a result of the promulgation 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for exemption in the light of the observations made in that judgment. On September 6, 1975, Hindalco submitted an application 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emergency supply. A rate of 28.42 paise per unit was fixed. A personal hearing was given to the respondents in compliance 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n statutes whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inium plant. The Government of India appointed a committee of experts headed by Shri Nagaraja-rao in the year 1956 for recommending the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I, page 64, of the paper book. ( b )Since Renusagar was not a public utility but only a captive plant of Hindalco, certain conditions applicable to normal sanction holders in the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served notice on Hindalco to reduce its drawal to zero. See volume XVI, page 167 of the paper book. The U.P. Government refused exemption from power cuts to Hindalco on the ground that it had its own 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 Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the basic planning of the power plant at Renusagar, the arrangement for its design, engineering, purchase and for importing the plant and for financing the whole project were done by Hindalco. Renusagar, which is a 100 per cent. subsidiary 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is determined according to the cash needs of Renusagar. This covenant also shows complete control of Hindalco over Renusagar. It was submitted before us that, if looked at properly, Renusagar was Hindalco's own source of generation and, according to the 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. Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 3(1)( c ). In the case of harmonious construction, what needs to be looked at is the dominant or the primary element in the provisions. Thus, section 3(1)( c ) should not be interpreted to cover all cases of own generation notwithstanding the fact that a sale may be involved and, to that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and the law does not warrant such an approach. We may say that Shri Trivedi mainly relied on the proposition that, normally, the court has disregarded the separate legal entity of a company only where the company was formed or used to facilitate evasion of legal obligations. He referred us to the observations of this court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Renusagar's power plant could not be treated as Hindalco's power plant. He referred us to the well-known case of Aron Salomon v. A. Salomon and Co. Ltd. [1897] AC 22, at pages 27, 30, 31, 43, and 56, to emphasise the distinction between a company and its shareholders. This point of view was emphasised by this court also in which Chandrachud C.J. relied 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 Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company says. A striking instance is the decision of the House of Lords in Harold Holdsworth and Co. (Wakefield) Ltd. v. Caddies [1955] 1 All ER 725 ; [1955] 25 Comp Cas 205. So here. This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point. They should not be 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves in a position in which the question would have been wholly unarguable. I also refer to Scottish Co-operative Wholesale Society Ltd. v. Meyer [1958] 3 All ER 66, 71. That was a case under section 210 of the Companies Act, 1948, and Viscount Simonds said : 'I do not think that my own views could be stated better than in the late Lord President Cooper's words on the first hearing of 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assign to the respondent duties in relation to the business of one only, or two only or all of the companies in the group, and to vary the assignment and the duties from time to time. Further, I think the clause leaves the board free to appoint another person to be 'managing director', and to divide the duties and powers referred to in the clause between the respondent and the other managing director in such manner 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol from within the operations of the company that it is illegitimate to regard the conduct of the company's affairs as a matter for which it had no responsibility. After much consideration of this question, I do not think that my own views could be stated better than in the late Lord President, Lord Cooper's words on the first hearing of this case. He said ([1954] SC 381 at page 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-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 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pennycuick emphasised that the reality of the situation must be looked into. Shri Trivedi drew our attention to the decision in Marshall Richards Machine Co. Ltd. v. Jewitt [1953-56] 36 TC 511 (Ch D), where, at page 525 of the report, Lord Upjohn J. observed that where you have a wholly-owned subsidiary, and both the parent company and the wholly-owned subsidiary enter into trading relationships, there is, of course, a dual relation, but you 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial licence of Hindalco through production of aluminium. It is also manifest from the facts that the model of the setting up of a power station through the agency of Renusagar was adopted by Hindalco to avoid com plications in case of take over of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for establishing and expanding the power station were taken by Hindalco, Renusagar is a wholly-owned subsidiary 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 sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, therefore, of the opinion that, in the facts of this case, the corporate veil must be lifted and Hindalco and Renusagar should be treated as one concern and, if that view is taken, the consumption of energy by Hindalco must be regarded as consumption by Hindalco from its own source of generation. Inasmuch as the High Court has upheld this contention of the respondent, we are in respectful agreement with its views and the appeal directed against this finding of the High Court must, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of consumption of energy or allow any exemption from payment thereof. Various grounds have been made out. Shri Sen, for the respondents, is right in saying that, in view of the ceilings prescribed, the power conferred upon the State under section 3(1) of the Act is valid by itself and does not amount to excessive delegation. See also in this connection the observations of this court in Devi Das Gopal Krishnan v. State of Punjab [1967] 3 SCR 557 and Ram Bachan Lal v. State of Bihar [1967] 3 SCR 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 judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Advocate-General for the State of U.P. contended and, in our opinion rightly, that the primary purpose of the Act, as stated in the preamble, was to raise revenue for development projects. Whether, in a particular situation, rural electrification and development of agriculture should be given priority or electricity or development of aluminium industry should be given priority or which of these is in public interest, in our opinion, are value judgments and the Legislature is the best judge. The High Court, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At page 741 of the report, Chinnappa Reddy J., speaking for the court, referring to a passage in the administrative law by Schwertz with approval, expressed the view that those powers were more or less legislative in character. Fixation of electricity tariff can also, to a certain extent, be regarded as falling in this category. Chinnappa Reddy J. observed, at page' 735 of the report, that price fixation is more in the nature of a legislative activity than any other. He referred to the fact that, due to the proliferation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollective Board of Revenue in making the order which is now complained of is that the requirement to "have regard to" the provisions in question has no more definite or technical meaning than that of ordinary usage, and only requires that these provisions must be taken into consideration. In their view, the prime duty of the Revenue Officer under Chapter 11 was to fix a fair and equitable rent, and though he must be guided by the principles underlying such provisions as were contained in Chapter 3, he was not strictly bound by such provisions. 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 37 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice or maximum price shall be fixed having regard to the estimated cost of production of sugar determined on the basis of the relevant schedule of cost given in the report of the Sugar Enquiry Commission (October, 1965), subject to the adjustment of such rise in cost subsequent to the report aforesaid as, in the opinion of the Central Government, can not be absorbed by the provision for contingencies in the relevant schedule to that report." Beg J., as the learned Chief Justice then was, observed that clause 7(2) set out above required the Government 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 enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples of natural justice. All relevant factors were given consideration but subject to public interest. The High Court considered whether electricity duty was included in the prices of aluminium fixed by the Central Government. On this aspect, our attention was drawn on behalf of the respondents at pages 372 to 387 of the judgment in volume B. It was submitted that the assumption that electricity duty was included in the prices of Hindalco fixed by the Central Government formed a basic and a very important consideration in the making of the impugned order. We are unable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical nature of the order. The impugned order does not suffer from the vice of non-application of mind or non-consideration of the relevant factors and the High Court was in error in interfering with the order of the Government. We are clearly of the opinion that the High Court was in error in interfering with the order in the manner it did. The High Court should not have interfered. For interference by the High Court, the matter should have been far less cloudy and far more clear. Natural justice in the sense that a party must be heard beforehand need not be directly 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 Meenaksh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application to the facts of this case. There has been no violation of the principles of natural justice to the extent applicable to an order of this nature. Reference was made to the observations in the case of India Sugars and Refineries Ltd. v. Amravathi Service Co-operative Society Ltd. [1976] 2 SCR 740 ; AIR 1976 SC 775, where, at page 746 of the report, this court observed that the power to grant exemption to factories from payment of additional price is intimately connected with the right of sugarcane growers to claim additional price. In the granting of such power, the principles of natural justice should 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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