TMI Blog1992 (5) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; mso-bidi-font-size:10.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} <![endif]--><!--[if gte mso 9]> <![endif]--><!--[if gte mso 9]> <![endif]--> RAY, G.N and KASLIWAL, N.M. JJ. For the Appellants : K.Parasaran, A.K. Ganguli, K.R.D. Karanath and S. Sukumaran For the Respondent : P.P. Rao, R.N. Naransihma Murthy, S.K. Kulkarni, R.P. Wadhwani M.Veerappa and Kh. Nobin Singh The Judgment of the Court was delivered by G.N. RAY, J. This Civil Appeal arising out of Special Leave Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia that in 1966 the Government of Karnataka had undertaken the Sharvathy Valley Hydro Electric Project in the State of Karnataka. It had planned for constructing a hydroelectric generating system to generate a large quantity of electric power. The State was anticipating the generation of large surplus power. The aluminium industry particularly the smelter plant requires a large quantity of power for manufacturing operation. The Karnataka State Electricity Board, (hereinafter referred to as Board) and the State of Karnataka (hereinafter referred to as State) had invited the Indian Aluminium Company Limited (hereinafter referred to as the Company) to establish its aluminium smelter plant within the State of Karnataka by assuring that uninterrupted supply of electricity would be given to the smelter plant. Accordingly, the Company established a factory with its smelter plant at Belgaum. There was a tripartite agreement entered into between the Company, the Board and the State on March 26, 1966. Later on, a fresh tripartite agreement was entered into between the parties in modification of the aforesaid tripartite agreement and the latter agreement was entered into on Augu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion held between the parties. On July 15, 1980 the Government of India issued a notification inter alia refixing the retention price. On July 8, 1980, the Company received letter dated July 3, 1980 from the Board indicating that additional surcharge of 2 paise per unit had been enforced. On August 5, 1980 the Company, by way of abundant caution, had applied to the Central Government for increasing the retention price. The request made by the Company not to increase the tariff rate for the supply of power to its smelter plant however, was not acceded to by the Board. The power rate was increased to 19.59 paise per unit in 1980. The Board had also imposed surcharge of 10 paise per unit on June 30, 1980, and such surcharge was made effective from June 1, 1980. The Company contended that the Board had not given six months' notice for the surcharge and in the Writ Petition such change of surcharge effective from June 1, 1980 had also been challenged and the legality and validity of imposition of surcharge for the period between July 1, 1980 to November 1, 1980 before the promulgation of the said ordinance, were challenged in the Writ Petition. On November 21, 1980, the State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1976 was made in view of the industrial policy of the Government of India and the guidelines stated by the Government of India in the matter of electricity tariff to be applied to the aluminium plants. The Writ Petitioners contended that the smelter plant of the Company is fully dependent on power and for every tonne of aluminium produced, about 1900 units of electric energy are consumed by the said smelter plant. It is the specific case of the Writ Petitioners-appellants that production in the smelter plant depends mainly on the supply of uninterrupted electrical power and unlike in other industries where electricity is used as a motive power, in the smelter plant of the Company the electricity is not only a motive power but also an important raw material. Uninterrupted supply of power at a very high degree is essentially necessary for breaking the chemical bond for aluminium oxygen in the compound of aluminium oxide. The process of manufacture of primary alumina is done at two stages-first, alumina, i.e., pure oxide of aluminium is extracted from its ore, bauxite by a chemical process. Such alumina is further processed in the smelter plant. In this smelter plant, the alu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess is distinctively different in metallurgical-cum electrolytic process and the same cannot be compared with most of the other industries including power intensive industries where curtailments or interruptions of supply of power only affect the production during the interrupted period and not after the full power is resumed. Moreover, unlike in other industries, the power is itself a very important raw material for production of aluminium in the smelter plant. Accordingly, the smelter plant is not only a high power sensitive plant but it is absolutely dependent on power being its essential and primary raw material. It is contended that all over the world, aluminium has been given a special status with regard to the power and 'firm power' concept is the key note in this industry. Since aluminium industry requires a large amount of power not comparable with any other industry, cost of power is the most important element in the cost of production of aluminium. At the relevant time when the Writ Petition was presented the cost of power formed about 38% of the total cost of production and it is very strongly contended that in no other industry such large amount of power is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement could not repudiate the same under the cover of the amendment of Section 49 of the Electricity (Supply) Act. It was contended by the Writ Petitioners before the High Court that since this smelter plant was installed at Belgaum on the invitation by the State of Karnataka and Electricity Board by clearly assuring the Company that uninterrupted supply of electricity would be made at a reasonable rate and on the basis of the understanding between the parties as embodied in the first and the second agreement, the principle of promissory estoppel was squarely attracted in the facts of the case and any demand of tariff for electric supply to the smelter plant of the Company at Belgaum contrary to the existing agreement of 1976 is wholly illegal and inoperative. It was also contended that in the aforesaid circumstances amendment of Section 49 of the Electricity (Supply) Act, applicable to the Board and its consumers, was not applicable to the Company and the Company despite such amendment was entitled to enjoy the privileges emanating from the agreement of 1976. The validity of the amending Act was challenged by the Writ Petitioners before the High Court. It was contended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and does not constitute a class of its own from the point of view of power requirement and/or supply. Even if it is a class by itself, that would not confer any legal right on the petitioner to be accorded any pereferential treatment among industries or consumers of electricity. (iv) It is not correct to contend that the agreement entered into was by exercise of the statutory powers under Section 49(3) of the Act alone. (v) The clauses in the agreement were included after mutual discussion and consensus of the concerned parties. (vi) The clause relating to the giving of prior notice before revision of tariff is neither a condition precedent, nor constituted a fundamental term of the agreement. Similarly, such a clause does not amount to a solemn assurance or representation on the part of the State Government. However, such a term in the agreement will not bind the Board to revise the tariff in exercise of its statutory powers. (vii) Surcharge of 2 paise per unit was levied and collected by the Board, as applied to others. (viii) In view of the ordinance with effect from 22.11.1980 the tariff schedule H.T.1A (Electrical Power Tariff of 1978, with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction. The exercise of such concurrent jurisdiction would not deprive the provincial legislatures of similar powers which they had under the Provincial Legislature List and there would, therefore, be no question of legislative incompetence qua the Provincial Legislatures in regard to similar pieces of legislation enacted by the latter. The provincial Legislatures as well as the Central Legislature would be comptetent to enact such pieces of legislation and no question of legislative competence would arise. It also follows as a necessary corollary that, even though sugar industry was a controlled industry, none of these Acts enacted by the Centre was in exercise of its jurisdiction under Entry 52 of List I. Industry in the wide sense of the term would be capable of comprising three different aspects (1) raw materials which are an integral part of the industrial process (2) the process of manufacture or production, and (3) the distribution of the products of the industry. The raw materials would be goods which would be comprised in Entry 27 of List II. The process of manufacture or production would be comprised in Entry 24 of List II except where the industry was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table to the sugar industry and was, therefore, within the scope of S. 18G and the Central Government was thus authorised by notified order to provide for regulating the supply and distribution thereof and trade and commerce therein. Even assuming that sugarcane was an article or class of articles relatable to the sugar industry within the meaning of S. 18-G of Act of 1951, it is to be noted that no order was issued by the Central Government in exercise of the powers vested in it under that section and no question of repugnancy could ever arise because, as had been noted above, repugnancy must exist in fact and not depend merely on a possibility. The possibility of an order under S. 18-G being issued by the Central Government would not be enough. The existence of such an order would be the essential prerequisite before any repugnancy could ever arise. It may be noted here that for the purpose of finding that electricity was a raw material for the smelter plant, the High Court referred to relevant pleadings of the Writ Petitioners and also referred to the decision of this Court concerning the petitioner company itself inIndian Aluminium Co. v. Kerala State E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative power of the Parliament and the State. Entry 26 in List II is as follows: `Trade and commerce within the State subject to the provisions of Entry 33 of List III'. In the said case, this Court relied on the decision in Tika Ramji's case. The High Court also referred to the decision of this Court in the case of Hoechst Pharmaceuticals Ltd. and another etc. v. State of Bihar Ors., AIR 1983 SC 1019. It was contended in the said case that levy of surcharge of sale tax imposed by the State Legislature was without legislative competence as it impinged or affected the price of drugs fixed under Drugs (Price Control) Order, 1979 issued by the Central Government under the Essential Commodities Act. This Court has held in the said decision: In the case of a seeming conflict between the Entries in the two lists, the Entries should be read together without giving a narrow and restricted sense to either of them. Secondly, an attempt should be made to see whether the two Entries cannot be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation can be achieved by giving to the language of the Union Legislative List ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the limit of control so assumed by the declaration. Therefore, the degree and extent of control that would be acquired by Parliament pursuant to the declaration would necessarily depend upon the legislation enacted spelling out the degree of control assumed. A mere declaration unaccompanied by law is incompatible with entry 52 List I. A declaration for assuming control of specified industries coupled with law assuming control is a pre-requisite for taking legislative action under Entry 52, List I. The declaration and the legislation pursuant to declaration to the extent denude the power of State Legislature to legislate under Entry 24, List II. Therefore, the erosion of the power of the State legislature to legislate in respect of declared industry would not occur merely by declaration but by the enactment consequent on the declaration prescribing the extent and scope of control. The High Court also referred to few more decisions of this Court for the purpose of appreciating the contention whether the supply of electricity and tariff rates were controlled by Entry 52 of List I, thereby taking away legislative competence of the State Legislature and whether or not the Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch increase in the cost of production cannot be avoided. It has been held that the price of aluminium control order itself provides for restructure of aluminium for which the petitioner-Company has to approach the Central Government. Coming to the question of promissory estoppel raised by the petitioners, the High Court referred to paragraphs 91 and 92 of the Writ Petition where the pleading of promissory estoppel was made by the Writ Petitioners. The High Court has accepted the contention of the respondents as advanced by the learned Advocate-General appearing for the respondents that the doctrine of promissory estoppel is not attracted in the sphere of statutory power and since the impugned action was a consequence of the amended provision of Section 49, the question of promissory estoppel did not arise. The reference was made to the decision of this Court in Excise Commissioner, U.P. etc. etc. v. Ram Kumar etc. etc., AIR 1976 SC 2237 wherein it was observed by this Court to other following effect:- It is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industries in the State, if at all, was the motive force for the petitioner and other industries to establish various factories in the State to avail the advantages of the prevailing conditions in the State. The contentions of the Writ Petitioners that the bills containing the revised tariff even before the promulgation of ordinance amending Section 49 was illegal and unjustified, had not been gone into by the High Court in view of the specific statement by the learned counsel for the Board before the High Court that the Writ Petitioners should approach the Board with particulars in support of their contentions and the Board was prepared to revise the bills if there had been any error or omission on the part of the Board. Save as aforesaid, all other reliefs claimed by the petitioners in the Writ Petition were disallowed by the High Court and the Writ Petition was accordingly dismissed. Mr. Parasaran,the learned Senior Counsel appearing for the appellants in his usual fairness had indicated that detailed arguments had been advanced before the High Court of Karnataka at the hearing of the Writ proceeding on the question of vires of the amending Act, on the score of legislati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test could only be of palpable arbitrariness in the context of felt needs of the time and social exigencies informed by experience. There cannot be any precise or set formulae or doctrinaire tests or precise scientific principles of exclusion. Mr. Parasaran in his fairness has submitted that under the Electricity (Supply) Act, the Board is empowered to revise tariffs but he has contended that such revision cannot be made arbitrarily and capriciously. He has submitted that since the Board is the licencee for supply of electrical energy to various consumers in a particular area, the Board, as a matter of fact enjoys the privilege of monopoly to some extent. It is therefore necessary to consider whether in the exercise of revision of tariffs, the Board has acted reasonably and fairly and the action is well informed by reasons. He has also contended that the smelter plant has some special and peculiar features in its manufacturing mechanism of aluminium from alumina. He has drawn our attention to the pleadings in the Writ Petition where such mechanism and the key role of electricity have been elaborately high-lighted. Mr. Parasaran has also drawn our attention to the accepted pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter of adhering to the terms of agreement of 1976 have been made out by the petitioner- Company. He has submitted that the foundation of promissory estoppel lies in the legitimate expectation a person may have of being treated in a certain way by administrative authority. In this connection, Mr. Parasaran has referred to paragraph 81 at page 151 of Volume 1(1) of Halsbury's Laws of England, Fourth Edition (Reissue) dealing with Legitimate Expectation . It has been indicated in the treatise that a person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has not legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority including an implied representation or from consistent past practice. The existence of a legitimate expectation may have a number of different consequences and one of such consequences is that the authority ought not to act so as to defeat the expectation without some overriding reason of public policy to justify its doing so. It may also mean that if the authority proposes to defeat a person's legitimate expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, a case of promissory estoppel is attracted. He has contended that before annulling the agreement and making unjust demand of high tariff, the Board ought to have given reasonable opportunity to the petitioner-Company to establish that there was no occasion to resile from the obligation under the agreement. Mr. Parasaran has further submitted that if the Court comes to the finding that the action of the Board and the State are unjust and the Board has an obligation to abide by the agreement of 1976 in view of the promissory estoppel, there will be no difficulty in issuing appropriate writs for giving the reliefs claimed in the Writ Petition. Mr. Prasaran has submitted that even if it is accepted that in view of amendment of Section 49 of the Electricity (Supply) Act, the Board was required to charge tariff at uniform rate to all the consumers placed in a particular category, such amendment does not stand in the way of giving special privilege to the petitioner-Company in the matter of tariff for the supply of electricity in view of the fact that the smelter plant cannot be equated with other power intensive industries placed in the category HT IA and Section 49(3)of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that the High Court has discussed the contentions raised by the parties at the hearing of the Writ Petition at length and has not accepted the contentions that the amending Act was ultra vires on any account. He has submitted that the reasonings of the High Court should be accepted and the contentions on the question of the vires of the Act sought to be reiterated in this Appeal should be discarded by this Court. We have already indicated that decision of the High Court in upholding the vires of the amending Act should be accepted and we have endorsed the reasonings given by the High Court in that regard which we have referred to in some details. Mr. Narasimhamurthy has submitted that there is no conflict with the proposition that if a strong case of promissory estoppel is made out by a party and such promissory estoppel does not come in conflict with any statutory provision, the party having reasonable expectation flowing from a promise or representation may ask for enforcement of such legitimate expectation founded on representations or assurances on the part of the administrative body in appropriate cases. But in the instant case, the very foundation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company. In this connection, Mr. Narasimhamurthy has also referred to a decision of the High Court of Orissa in the case ofIndian Aluminium Company v. The Orissa Electricity Board and Anr., AIR 1975 Orissa page 100 where the Division Bench of the Orissa High Court has considered when the principle of promisory estoppel can be invoked. It has been held in the said decision that the State Electricity Board may revise the tariff fixed under the binding contract by relying on Section 49and 59 of the Electricity (Supply) Act. It has been held by the Division Bench that simply because the State Government had held out the assurances to the Company to supply hydro power fixed at low rate, a case of promissory estoppel is not made out. It has been held that if the agreement was the result of negotiations between the parties indicating that the Company was as much desirous of being supplied with electric power as the supplier was anxious and willing to supply the same, there is no case of promissory estoppel. Mr. Narasimhamurthy has submitted that facts and circumstances in the instant case clearly reveal that the State government was eager to have industries established in the State and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) calculated in accordance with the uniform tariff framed or modified from time to time, under sub-section (1) and applicable to the category to which such party belongs. (6) The party to any such agreement or arrangement entered into after the commencement of the Electricity (Supply) (Karnataka Amendment) Act, 1981, shall, notwithstanding anything contained inthis Act, or in such agreement or other arrangement, pay, in respect of electricity supplied by the Board, price (by whatever name called) calculated in accordance with the uniform tariff framed or modified from time to time under sub-section (1) and applicable to the category to which such party belongs. Mr. Narasimhamurthy has contended that the smelter plant of the petitioner-Company has always been categorised by the Board as industries included in HT-IA. He has drawn attention of the Court to tariff rates of 1974 and 1978. It appears that for 1978 tariff rates, the plant of the petitioner-Company was included in HT IA category. Mr. Narasimhamuarthy has contended that such categorisation by the electricity Board made as far back as in 1978 is not under challenge, and no protest had been made by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reements stood annulled in view of the amended provisions of Section 49 of the Act, the Board was empowered to ask for uniform tariff rate from the industries classified under one category. It is true that the smelter plant has distinctive features in its manufacturing mechanism and in the process of electrolytic operation. It also appears to us that the smelter plant is not only power intensive industry but the power assumes a very significant role and constitutes one of the important raw materials in the productive process. But it does not appear to us that categorisation of the smelter plant a high power intensive industry by itself is illegal or perverse, or without any basis and wholly unjustified. In the broader classification, smelter plant is certainly a high power intensive industry and such categorisation was made by the Board not for the purpose of enforcing of the amended Section 49with an object to annul the agreement but such categorisation was made even in 1978. In the circumstances, we are unable to accept the contention that the broader categorisation of the smelter plant is arbitrary, capricious and unreasonable resulting in treating the unequal as equal thereby o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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