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PETITIONER: INDIAN METALS AND FERRO ALLOYS LIMITEDAND ANR. ETC

       Vs.

RESPONDENT: STATE OF ORISSA & ORS. ETC. ETC.

DATE OF JUDGMENT06/05/1987

BENCH: ERADI, V. BALAKRISHNA (J) BENCH: ERADI, V. BALAKRISHNA (J) OZA, G.L. (J)

CITATION:  1987 AIR 1727            1987 SCR  (3) 265  1987 SCC  (3) 189        JT 1987 (2)   362  1987 SCALE  (1)1213  CITATOR INFO :  R          1988 SC1989  (12)

ACT:     Indian  Electricity  Act,  1910--Section  22B--Equitable distribution of energy--Benefit of clubbing--Whether can  be withdrawn with retrospective effect--’Domestic  unit’--Bene- fit of clubbing permitted-Whether can be denied to  industry classified us ’power intensive unit’.     Orissa  State Electricity Board (General  Conditions  of Supply) Regulations, 1981--Regulation 28--Classification  of service  to  consumers-Industries-Five    categories--Small, medium,   large,  power intensive and heavy--Separate  cate- gorisation of ’export oriented industries’--Not permissible.

HEADNOTE:     The   petitioner-company,  engaged  in  manufacture   of ferro-silicon,  silicon metal and silicon carbide, was  per- mitted  clubbing of electricity for the water years  1979-80 to  1983-84  for its units in an industrial complex  in  the State of Orissa, which utilised electricity as raw  material and  which were classified as ’power intensive  industries". During the water year 1984-85, clubbing of power supply from July 1984 onwards was allowed and bills for the period  from July  1984 to December 1984 were drawn up and served on  the basis that the company was entitled to the benefit of  club- bing. Though the position was subject to revision in October 1984 no revision took place. In December 1984, the  facility of clubbing was refused on the ground that one of the  units being  a lOO% export oriented industry, power supply  to  it had to he regulated separately for purposes of power alloca- tion  and  that clubbing had been allowed for the  month  of July 1984 only.     Under  Section 22B of the Indian Electricity Act,  1949, the  State  of Orissa issued an order on January  22,  1985, effective from July 1, 1984, directing the State Electricity Board to reduce supply of energy so as to allow consumers to avail of supply only to the extent specified in the Annexure to  the  order. There was a note to  the  order  prescribing certain conditions. All the units of the petitioner-company were shown in the 266

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Annexure  under the classification ’power  intensive  indus- tries’. The First three units were allotted energy  together and the fourth unit separately.     After  the  promulgation of the above order,  the  Board served  a revised bill on the company demanding  payment  at the  higher tariff rate for the period from October 1984  to June 1985, on the ground that there had been alleged  excess drawal by the company due to clubbing.     The  company  field a writ petition in  the  High  Court challenging  the aforesaid order and also the letter of  the Board  refusing clubbing for the entire water  year  1984-85 and praying for quashing the same. The company also sought a writ  of mandamus directing the Board and the State  Govern- ment  to permit clubbing for the water year 1984-85 as  well as  for  the  future years. On behalf of the  State  it  was contended  that clubbing had been allowed to the company  by the Board temporarily for the month of July 1984 only during the  water year 1984-85 and that the power allotted  to  the fourth  unit  could not be allowed to be clubbed  with  that allotted  to  the other three units since the former  was  a 100%  export  oriented unit and, it had,  therefore,  to  be treated separately for the allocation of power.     During  the  pendency  of the writ  petition  the  State Government  passed  another order  effecting  allocation  of power under Section 22B of the Act for the water year  1985- 86.  The company was served with a notice  of  disconnection for  non-payment of the bills prepared at the higher  tariff rate for the month of August, 1985. The company filed anoth- er  writ  petition  challenging the order  and  praying  for identical reliefs as in the previous petition. This petition was  opposed  by the State contending that  the  said  unit, being  a 100% export oriented unit, had to be treated  sepa- rately  for the purpose of power allocation. The High  Court passed  an interim order directing the State  Government  to dispose  of the company’s request for clubbing of the  power allotted for all the four units for the water year  1985-86. The State Government, thereafter passed an order,  rejecting the  application  without giving any reason.  The  company’s application  for amending the writ petition  by  challenging the Government’s refusal was allowed.     The  High Court held that under Section 22B of the  Act, the  State Government had the power to grant or  refuse  the request  of  a consumer for being allowed  the  facility  of clubbing,  and upheld the power of the State  Government  to impose  special tariff in case the allotted quota of  energy was exceeded. It however held that the State Government and 267 the Board had no power under the Act to impose  restrictions on the use of electric energy with retrospective effect  and quashed the demands made under the revised bills impugned in the first writ petition. It also held that the orders passed by the State Government under Section 22B of the Act did not show  that there was any application of mind by the  Govern- ment on the question as to whether or not clubbing should be allowed  with reference to relevent considerations and  that the plea raised by the State Government that the fourth unit should  be  treated separately from the  other  three  units since the former was an export oriented unit was without any substance. The High Court quashed the demands for additional tariff  made  in the revised bills challenged in  the  first writ petition and declared that the company would be  liable to  pay tariff only at the contractual rate for  the  supply made during the water year 1984-85. In respect of the  water year 1985-86, the High Court directed that the company shall enjoy  the  benefit of clubbing till  the  State  Government

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passed an appropriate statutory order rejecting its request.     For  the water year 1986-87 the State Government  passed an order dated 8th December, 1986 effecting an allocation of power  supply  on the same pattern as was  adopted  for  the previous  year and rejecting the request of the  company  to allow  the  facility  of clubbing to its  fourth  unit.  The company filed a writ petition in this Court challenging  the said order.     In  the  Special Leave Petitions of the company  it  was submitted. that the four electrical sub-merged arc  furnaces of the company producing ferro-alloys cannot be run at a low capacity  and  they required  continuous  and  uninterrupted supply  of energy to sustain production and also  to  ensure that the furnaces did not sustain damage, as electric  power was  used  as a raw material in the  manufacture  of  ferro- alloys,  that on account of frequent interruptions  and  the undependable nature of supply of power, the fourth unit  had suffered  very serious damage causing a great loss and  that the  benefit  of clubbing cannot be denied  to  the  company under Section 22B of the Act.     It  was  contended  in the Special  Leave  Petitions  on behalf of the State and the Electricity Board that the power availability  position in respect of each water year can  be reasonably  ascertained with some degree of  precision  only after the peak monsoon period and the High Court was, there- fore, not right in holding that the orders under Section 22B of the Act cannot be passed with retrospective effect in the middle of a water year. 268     Allowing  the  writ  petition to a  limited  extent  and disposing of the Special Leave Petitions of the company  and dismissing the Special Leave Petitions of the State and  the Board, this Court,     HELD:I. It is clear from a reading of Section 22B of the Electricity Act that what is contemplated by it is that  the State  Government should only lay down policy guidelines  to be  adopted by the Board for regulating,  supply,  jurisdic- tion,  consumption or use of energy. The  implementation  of the  policy after working out the details is a matter to  he carried out by the Board. It is, therefore, strange that the State Government had taken upon itself the task of  allocat- ing the quantum of power that may he consumed by the differ- ent industrial units in respect of the years 1984-85,  1985- 86 and 1986-87 under Section 22B of the Act. [283F-H]     2.  The High Court was right in holding that under  this Section, the Government may for purposes of securing equita- ble  distribution of energy regulate its consumption or  use and  decide  as a matter of policy whether  the  benefit  of clubbing  should he allowed to the consumers of energy.  The immediate consequence of denial of the facility of  clubbing will  he to restrict the quantum of permissible  consumption of  energy  by  each of the respective units  to  the  quota allotted  to it singly or jointly and this  necessarily  in- volves serious implications and repercussions, both economic and  otherwise,  on the viable functioning of  the  industry because  excessive drawals of energy by resort  to  clubbing would  necessarily invite liability for payment at a  higher tariff for the energy so drawn. [283H; 284A-B]     3. The High Court was right in holding that the  benefit of  clubbing which the company had enjoyed pursuant  to  the impugned order during the water year 1984-85 till the end of December,  1984  could  not he taken away  by  the  impugned letter  of  the Board dated 24-1-1985.  The  earlier  letter dated 12th July 1984 had made an allocation of power to  all the four units on a monthly basis commencing from 1st  July,

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1984  with  permission accorded to the company to  club  the drawal  subject  to the condition that  the  whole  position would be reviewed in October, 1984. There was no such review and it was only in the impugned letter of 24th January, 1985 that  the Board had incorporated its decision not to  permit clubbing. This decision could not operate retrospectively so as  to  cover the period during which the company  had  been enjoying the benefit of clubbing under the permission valid- ly granted to it by the Board and which had not been revised till then. [284F; 285B-D] 269     4. The High Court was right in holding that the  demands for  additional tariff made by the Board as per the  revised bills  issued  to  the company for the  year  1984-85,  were illegal  and  were liable to be quashed and  that  the  sole reason stated by the Board in its impugned letter for refus- ing the facility of clubbing to the company was  fallacious, illegal and untenable. [285D-E]     5.  The High Court was not right in observing  that  the orders under Section 22B of the Act imposing restrictions on consumption of power could not legally and validly be passed by the Government ’with retrospective effect’ in the  middle of a water year. [284D]     6.  If a consumer had been allowed the benefit of  club- bing  previously, that benefit could not be taken away  with retrospective effect thereby saddling him with heavy  finan- cial burden in respect of the past period where he had drawn and  consumed power on the faith of the orders extending  to him the benefit of clubbing. [284E]     7.  Inspite  of the express pronouncement  by  the  High Court to the effect that the reason stated by the Board  for refusing  the benefit of clubbing for the year  1984-85  was illegal and untenable, the State Government merely reiterat- ed  the  very  same reason in its  impugned  order  refusing benefit  of  clubbing  for the year  1986-87.  This  clearly indicated  lack  of due care and proper application  of  the mind  of  the Government to relevant aspects of  the  matter before the order was passed. [287C]     8.  There was no separate categorisation of export  ori- ented  industries  under Regulation 28 of the  Orissa  State Electricity Board (General Conditions of Supply) Regulations 1981. Under the scheme of the regulation, industries had  to fall under one or other of the five categories-small,  medi- um,  large, power intensive and heavy. In the orders  passed by the State Government under Section 22B of the Act for the years  1984-85,  1985-86 and 1986-87,  the  only  categories mentioned  were heavy industries and power intensive  indus- tries and all the four units of the company had been includ- ed under the category ’power intensive industries’. Clubbing had been allowed by the Board and was being allowed even now in respect of all the power intensive industries, other than export oriented industries. There is no justification at all for this differential treatment meted out to export oriented industries. The note appended to the Government’s orders for the  years 1985-86 and 1986-87 did not in any way  lay  down that  an export oriented industry was to he made a  separate allocation 270 of power and was to be denied the benefit of clubbing merely on  account of its being engaged in an export oriented  ven- ture.  It  continues to be classified as a  power  intensive industry  for  purposes  of allocation  of  power.  [285G-H; 286A-C]     9.  So long as no additional power allocation  had  been made  and  no preferential treatment had been given  to  the

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particular  power intensive industry on the ground  that  it was a 100% export oriented industry, it cannot be meted  out a  prejudicial  treatment different from what was  given  to other  power  intensive  industries,  termed  as   "domestic units". [286G]     10. When all other power intensive industries were being allowed  the  benefit of clubbing it would  not  be  legally permissible  nor proper to deny the facility of clubbing  to an  industry classified as ’power intensive unit’ merely  on the  ground that the particular power intensive unit was  an export  oriented unit, so long as it had not been given  any special  allotment of power on the said ground on the  basis of  its  fulfilment of the conditions specified for  a  100% export  oriented  unit in the note appended to  the  Govern- ment’s  order  passed  under Section 22B of  the  Act.  Such differential treatment would amount to arbitrary discrimina- tion, violative of Article 14 of the Constitution. [287F]     The  Court quashed the impugned order of the State  Gov- ernment  for  the year 1986-87 and directed that:  ,(a)  the respondents  allow  the petitioner-company the  facility  of clubbing of the energy supply to the four units; [288E]     (b)  the impugned order for the year 1986-87  passed  by the State Government under Section 22B of the Act insofar as it fixes the energy allocation for the different units shall not  be  treated  or construed as denying  the  facility  of clubbing to the company; and [288F]     (c)  that  nothing, contained in the  judgment  of  this Court  is to be construed as laying down a general  proposi- tion  that industrial consumers of electrical energy  having more than one unit are entitled, under all circumstances, as of  right,  to club the power allotted  to  their  different units. [288B]

JUDGMENT:     EXTRA  ORDINARY JURISDICTION: Writ Petition No. 1753  of 1986 etc. (Under Article 32 of the Constitution of India). 271     K.K.   Venugopal,   Gauri Shankar,   Kapil  Sibal,   Ms. Lira  Goswami, D.N. Misra, D.P. Mohanty and R.K.  Mehta  for the appearing parties. The Judgment of the Court was delivered by     BALAKRISHNA ERADI, J. M/s Indian Metals and Ferro Alloys Ltd.--the  petitioner in Writ Petition No. 1753 of 1986  and in  S.L.P. (C) Nos  14923-14924 of 1986 is a public  limited company incorporated under the Indian Companies Act which is engaged, inter alia, in the manufacture of ferro silicon and silicon  metal which are said to be a valuable  raw-material used by the Defence establishments in India and also export- ed  out of the country. The second petitioner in the  afore- said  Writ Petition and the Special Leave Petitions  is  the Managing Director of the company. The company has  installed three  units  namely, 11 KV, 33 KV and 132  KV  furnaces  in which it is manufacturing ferro alloys and silicon metal  in a  composite industrial complex in a place called  Therubali in the State of Orissa. The company has also a subsidiary by name M/s Indian Metal and Carbide Ltd. engaged in the  manu- facture of silicon carbide and its factory is also  situated in  the same industrial complex. All the four units  utilise electricity as raw material and they are, therefore, classi- fied  as ’power intensive industrial units’--the four  units shall  hereinafter  referred  to as "11 KV  IMFAL",  "33  KV IMFAL",  "11 KV  IMCL" and "132 KV IMFAL".--The company  has

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entered  into  separate  agreements with  the  Orissa  State Electricity  Board  (hereinafter  called  the  ’Board’)  for supply of electric energy to these four different units  and the  rates  of  tariff to be charged for  such  supply.  The agreement  in respect of 11 KV IMFAL was entered  into  ini- tially  on  3.4.1967 and subsequently renewed  on  1.8.1983, that  in respect of 33 KV IMFAL on January 2, 1974  and  the agreement  for  supply  of 11 KV IMCL was  entered  into  on January  28,  1975. The agreement in respect  of  supply  of energy to 132 KV IMFAL was entered into on 4.12.1982.  These agreements show that the Board had agreed to supply 78.8  MU for  11  KV  IMFAL  unit  for  the  manufacture  of  silicon metal/charge  chrome by the company, 197.1 MU for the 33  KV IMFAL  unit  for the manufacture of ferro  silicon/  silicon metal,  15.8  MU for the 11 KV IMCL for the  manufacture  of silicon  carbide and 262.8 MU for the 132 KV IMFAL unit  for the  manufacture  of  charge  chrome/ferro   silicon/silicon metal.  As already indicated, all the above furnaces of  the company are located in the same complex and are adjacent  to one  another. The tariff fixed for supply of the  energy  to the first three units is the same and that for the KV  IMFAL is 0.5 paise less per unit. 272     Supply  of energy was made to the company  regularly  as per the agreements in respect of the first three units  till the year 1979-80. The unit of time for supply of electricity adopted by the Board is the ’water year’ which commences  on the  1st  of July of a year and ends with 30th June  of  the succeeding  year. In the year 1979-80, the State  of  Orissa resorted  to  power cuts on account of  non-availability  of sufficient  power in the State to meet in full the  require- ments of the various categories of consumers. It accordingly passed  orders allocating restricted quotas of power to  the four  units of the company for the water year 1979-80.  This order,  however, permitted the clubbing of  the  electricity supplied  to the 11 KV IMFAL, 33 KV IMFAL IMCL  furnaces  of the company. The 132 KV IMFAL furnace of the company had not been  commissioned  at  that time.  The  aforesaid  position continued for the water years 1981-82 and 1982-83.     The  company’s 132 KV IMFAL furnace was commissioned  on 20th February, 1983 but the agreement of supply of energy to this  unit had been executed on December 4, 1982 itself.  On July  16, 1983, the company addressed a letter to the  Board requesting  the facility of clubbing of the power  allocated to its four furnaces for the water year 1983-84. By a  tele- printer  message  dated  August 4, 1983 sent  by  the  Chief Engineer of the Board to the Superintending Engineer, Teach- er, it was intimated that IMFAL and IMCL may be permitted to draw the power allotted to the four units taken together  as requested by the company in its letter dated July 17,  1983, subject to the condition that the company’s drawal of  power at  its 132 KV IMFAL furnace in excess of the  allotment  of the said unit shall be made at the tariff applicable to  the supply  at  132 KV IMFAL . It was also made clear  that  the said order will be effective from July 16, 1983, that  being the date of the company’s letter of request. Pursuant to the above permission the company clubbed the supply of power  to all its units for the water year 1983-84. On July 23,  1984, the Chief Engineer addressed a letter to the company inform- ing the latter that with effect from July 1, 1984 the drawal of power by the company against the different units will  be regulated  separately and as such the company was  requested to  limit  its  drawal for the different units  as  per  the allotment indicated in that letter with effect from July  1, 1984; in other words, the facility of clubbing was withdrawn

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by the said letter with effect from July 1, 1984. On July 2, 1984, the company wrote to the Board pointing out the  hard- ship involved in the denial of the facility of clubbing  and requesting  for  permission to club the energy for  all  the four units for the water year 1984-85. In reply thereto  the Chief Engineer of the 273 Board sent a communication dated July 12, 1984 informing the company as follows:-          "ORISSA STATE ELECTRICITY BOARD                    BHUBANESHWAR No. Com-V-            /4238        Dated 12.7.1984 From: Sri N.K. Das, Chief Engineer and Member (TDC) To: M/s Indian Metals and Ferro Alloys Ltd., Bomikhal, P.O. Rasulgarh, Bhubaneshwar-75 10 10 Sub: Restriction in power supply. Ref: Your letter No. 82/12/01-Exp. 130 dated 2.7.1984.               Dear Sirs,                         As  requested in your  letter  cited               above,  you  are permitted to  draw  22.64  MW               average  and  27.75  MW peak  from  1-7-84  to               31.7.84  for IMFAL (11 KV, 33 KV and  132  KV)               and IMCL, Theruvalli taken together subject to               the condition that drawal at 162 KV in  excess               of  10.80 MW average and 13.501 MW peak  shall               be  billed at the tariff applicable  to  power               supply at 11 KV/33 KV. This will be revised in               October, 1984.                         In  case  your  drawal  exceeds  the               energy  and/or the demand as indicated  above,               you will be liable to pay at double the normal               tariff rate.               Yours faithfully,                                                         Sd/                                          CHIEF ENGINEER AND                                          MEMBER      (TDS)."     One  of the points raised before this Court  relates  to the  correct construction to be placed upon this letter.  We shall advert to that 274 aspect  later on. For the present, it is sufficient to  men- tion  that on the basis of the said letter the  company  was permitted  to club the power supply made to its  four  units from  July, 1984 onwards and the bills for the  period  from July, 1984 to December, 1984 were drawn up by the Board  and served  on  the company on the basis that  the  company  was entitled to the benefit of clubbing in respect of the  power allotted  to the four units. Though the letter  stated  that the position would be subject to revision in October,  1984, no revision was effected till December, 1984 and the company continued  to enjoy the benefit of clubbing till the end  of the calendar year.     However, on December 11, 1984, the Chief Engineer of the Board  wrote  to  the company stating inter  alia  that  the combined  drawal  of power for purposes  of  flexibility  of operation  had been permitted to the company at its  request only for the month of July, 1984 by the Board’s letter dated July 12, 1984 and the clubbing could no longer be  permitted since power supply to 132 KV IMFAL which was a 100%  ’export oriented  industry’ was to be regulated separately for  pur-

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poses  of  energy allocation. It may be  mentioned  at  this stage that in the agreement entered into regarding supply of power to the 132 KV IMFAL unit, there was no mention whatev- er of the fact that the said unit was a 100% export oriented industry. It was treated only as, a ’power intensive  indus- try’  just  like the other three units of the  company.  The aforesaid  letter  was  followed  by  another  communication addressed by the Chairman of the Board to the Company  stat- ing inter alia as follows:-               "Since  it has been decided by the  Government               to  treat  allotment of power to  100%  export               oriented  industries separately, allotment  of               power to your 100% export oriented unit at 132               KV  cannot  be permitted to  be  utilised  for               other  purposes  unless  specific   Government               permission  is necessary for the same. As  you               are   aware,  the  allocation  of  power   for               IMFAL--11  KV, IMFA1--33 KV and IMCL had  been               combined together for the purpose of flexibil-               ity in operation and hence you should have  no               difficulty regarding the same."     It  will  thus be seen that the sole  reason  given  for refusing  the facility of clubbing to the company  was  that the  State Government had taken a decision that 100%  export oriented  industries  should be treated separately  for  the purposes  of  power allocation Significantly,  no  statutory order of the State Government incorporating such a policy 275 decision  has been placed on record either before  the  High Court or before this Court.     It  is worthy of note that the scheme of according  spe- cial  priority  and preferential treatment  to  100%  export oriented  industries  in the matter of  supply  of  electric energy was evolved by the Government of India for the  first time  only  in  June, 1983 and it was  implemented  only  in 1984-85,  All that the said scheme envisaged was to  provide for  supply  of  additional power to  such  export  oriented industries  in the event of their satisfying certain  condi- tions relating to their export performance.     On January 22, 1985, the State of Orissa issued an order under Section 22B of the Indian Electricity Act (hereinafter called  the ’Act’) directing the Board to reduce  supply  of energy  so as to allow the consumers to avail of the  supply only  to  the extent specified in the Annexure to  the  said order.  All the four units of the company were shown in  the Annexure  under the classification "power  intensive  indus- tries."  The  11 KV IMFAL, 33 KV IMFAL and 11 KV  IMCL  were together allotted 57.60 million Kwh and the 132 KV IMFAL was separately  allotted 52.56 million Kwh. There was a note  to the order which was in the following terms:-               "Every  hundred percent export  oriented  unit               will,  however, be provided additional  supply               of energy if:                        (i) It exported not less than 95%  of               its  entire  production during  the  preceding               year or made no internal sale during the  same               period.                        (ii)  It has export  commitment  from               foreign buyers for at least 95% of the produc-               tion during the current year.                       (iii) It obtains specific  recommenda-               tion of the Union Commerce Ministry  regarding               its  export  performance during  the  previous               year and export commitment during the  current               year."

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   The  aforesaid order was to be effective from  the  com- mencement of the water year 1984-85, i.e. from July 1, 1984. As already stated, the petitioner-company had been permitted to  enjoy the benefit of clubbing from July, 1984  till  the end of December, 1984 on the basis of the permission granted as Board’s letter dated July 12, 1984 and the bills 276 issued  to the company for the said period were all  on  the basis that it was entitled to club the supply allotted to it in respect of the four different units. After the  promulga- tion of the order dated January 22, 1985, grouping  together only the three units of the company other than 132 KV  IMFAL unit, the Board served revised bills on the company on  July 8, 1985 demanding payment at the higher tariff rate for  the period  from October, 1984 to June, 1985 on the  basis  that there  had been alleged excess drawal by the company due  to clubbing.     Aggrieved  by  the said action taken by  the  Board  the company filed Writ Petition No. OJC 1549 of 1985 in the High Court of Orissa challenging the order dated January 22, 1985 passed by the State Government in purported exercise of  its powers  under  Section 22B of the Act, as  also  the  letter dated  January 24, 1985 of the Board refusing  clubbing  for the entire water year 1984-85. Besides seeking the  quashing of the aforesaid letter as well as the revised bills of  the higher  tariff  issued to the company on July 8,  1985,  the company  also sought a writ of mandamus directing the  Board and  the State Government to permit clubbing for  the  water year  1984-85 as well as the future years. In  the  counter- affidavit  filed by the State of Orissa the stand  taken  by the State was that clubbing had been allowed to the  company by  the Board temporarily for the month of July,  1984  only during the water year 1984-85. It was further contended that the power allotted to the 132 KV IMFAL furnace could not  be allowed to be clubbed with that allotted to the other  three units  since  the  132 KV IMFAL furnace was  a  100%  export oriented unit and, therefore, it had to be treated separate- ly for the allocation of power.     While the aforesaid Writ Petition was pending, the State Government  passed  another  order dated  August  31,  1985, effecting  allocation of power under Section 22B of the  Act for the water year 1985-86. On October 11, 1985, the company was  served with a notice of disconnection by the Board  for non-payment of the bills prepared at the higher tariff  rate for  the month of August, 1985. It may be mentioned at  this juncture  that the High Court of Orissa by an interim  order passed in the Writ Petition No. OJC 1549 of 1985 had  stayed the  demand made by the Board as per the revised  bills  for the  months of October, 1984 to June, 1985 and had  directed the Board not to take any action to disconnect power  supply to the petitioner-company. The notice dated October 11, 1985 was apparently issued by the Board on the basis that it  was in  respect  of  the subsequent water year  covered  by  the Government order dated August 31, 1985. 277     Aggrieved by the said notice dated October 11, 1985, the company filed another Writ Petition OJC No. 2496 of 1985  in the High Court of Orissa challenging the Government’s  order dated August 31, 1985 passed for the water year 1985-86  and praying for identical reliefs in the previous Writ  Petition regarding  directions  to allow clubbing for  all  the  four furnaces.  In  the counter affidavit filed by the  State  of Orissa in this Writ Petition also the only reason given  for refusal  to allow the benefit of clubbing to  the  company’s 132  KV  IMFAL furnace was that the said unit being  a  100%

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export  oriented unit had to be treated separately  for  the purpose of power allocation.     On  December 12, 1985, the High Court passed an  interim order  in  the aforesaid Writ Petition directing  the  State Government  to  dispose of the company’s  application  dated November 9, 1985 wherein the company had requested for being allowed  the benefit of clubbing of the power  allotted  for all the four furnaces for the water year 198586. On December 18, 1985, the State Government through its Deputy  Secretary wrote a letter to the company stating as follows:-               " Sir,                         In  inviting  a  reference  to  your               letter No. Proj. 4103/ 1920 dated 9.11.1985 on               the  subject noted above I am directed to  say               that after due consideration, Government  have               been pleased to reject your request for  club-               bing of power allocation during the water year               1985-86.                         2.  You  are allowed  to  draw  only               57.60 Million K.W.H. of energy of 11 KV and 33               KV and 52.66 Million KW of energy on 132 KV as               allotted  in this department order  No.  37477               dated  31.8.1985 for the period from  1-7-1985               to 30-6-1986.                                           Yours faithfully,                                                          Sd/-                                 DEPUTY SECRETARY TO GOVT." It will be noticed that no reason whatever was given by  the Government in this order for/rejecting the company’s request for clubbing of power allocation. After receipt of the  said communication, the company moved the High Court by a miscel- laneous petition for amending the Writ Petition OJC No. 2496 of 1985 by incorporating a challenge against the said letter of the State Government refusing clubbing for 278 the  water year 1985-86. That prayer for amendment  was  al- lowed by the High Court.     Ultimately  the  two Writ Petitions O.J.C. No.  1549  of 1985  and  O.J.C. No. 2496 of 1985 were disposed of  by  the High  Court by a common judgment dated August 7,  1986.  The High Court held that under Section 22B of the Act the  State Government had the power to grant or refuse the request of a consumer  for  being allowed the facility of  clubbing.  The High  Court negatived the contention of the company that  it was  beyond  the  power of the State  Government  to  impose special  tariff in case the allotted quoa of energy  is  ac- ceeded. It however upheld the contention of the company that the  State Government and the Board had no power  under  the Act to impose restrictions on the use of the electric energy with  retrospective effect. The demands made under  the  re- vised bills impugned in the first Writ Petition were, there- fore, quashed by the High Court. The High Court further held that the orders passed by the State Government under Section 22B  of the Act did not show that there was any  application of  mind  by the Government on the question  as  to  whether clubbing should be allowed or not with reference to relevant considerations.  In the opinion of the High Court  the  plea raised in the counter-affidavits filed by the State  Govern- ment  and the Board that the 132 KV IMFAL should be  treated separately  from the other three units since the former  was an export oriented unit was without any substance. The  High Court held that the only classification which appeared  from the  record was of "power intensive industries" and  others. Since all the units of the company had been classified under the  heading "power intensive units" and the only  privilege

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available  to  an export oriented unit as indicated  in  the note  to the Government’s order passed under SeCtion 22B  of the  Act was that such unit would be entitled to  additional power,  if  it satisfied the conditions laid  down  therein, there  was no justification at all for refusing the  benefit of clubbing in respect of the 132 KV IMFAL unit on the  mere ground that it was an export oriented unit. Accordingly, the Writ  Petitions were allowed to the extent of  quashing  the demands  for  additional tariff made in  the  revised  bills produced  as Annexure-II series in O.J.C. No. 1549  of  1985 and  it was declared that the company will be liable to  pay tariff  only  at the contractual rate for  the  supply  made during the water year 1984-85. In respect of the water  year 1985-86, which formed the subject matter of O.J.C. No.  2496 of  1985,  the High Court directed that  the  company  shall enjoy  the benefit of clubbing till the State Government  in exercise of its power under Section 22B of the Act passed an appropriate statutory order rejecting its request. The  Writ Petitions were disposed of by granting the aforesaid reliefs to the company. 279     Subsequent to the judgment of the High Court, the  State Government  passed an order dated October 31, 1986  in  pur- ported  exercise of its power under Section 22B of  the  Act effecting  an allocation of power supply for the water  year 1986-87.  The  allocation followed the same pattern  as  was adopted for the previous year by making a joint allotment in respect of the three units of the company other than the 132 KV IMFAL unit and a separate allotment in respect of the 132 KV  IMFAL  unit. The order also contained a  note  in  terms identical  with  the note that was contained  in  the  order relating  to the water year 1985-86, the text of  which  has been already reproduced supra.     By its letter dated November 22, 1986, the company  made a  request to the State Government to allow clubbing of  the power allotted to its four units for the water year  1986-87 and requested also for a personal hearing before a  decision was  taken in the matter. The State Government  refused  the said  request  by its letter dated December 8,  1986,  which reads as follows:-                           "Government of Orissa                          Irrigation and Power Department            No. 53250/IP           Dated 8th December, 1986.            EL. III. 299/86             To           The Executive Vice President,           M/s Indian Metals and Ferro Alloys Ltd.,           Bomikhal, Bhubaneshwar.                Sir,                         Please  refer  to  your  letter  No.               OSEB/ELECT/IMFA/ BBSR/86/025 dated 22nd Novem-               ber, 1986 enclosing your letter dated November               15,  1986 to Superintending Engineer  (Commer-               cial)  O.S.E.B. It is found from  your  letter               that  you have assumed that power allotted  to               IMFAL  (11 and 33 KV) and IMCL can be  availed               in  a  clubbed manner with power  allotted  to               IMFAL  (132  KV). This is to inform  you  that               Government after careful consideration of  the               difficult  power situation during the  current               water  year  and also in view of the  fact  of               IMFAL (132 KV) unit being a               280                100% export oriented unit, for which  special               provisions  have  been made in  the  power-cut

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             order   No.  46885/EL.111115/85,  dated   31st               October,  1986,  there  is no  merit  in  your               request for clubbing.                         2. Accordingly, it is clarified that               you are eligible to receive power in terms  of               the order dated 31.10.1986 as aforesaid  sepa-               rately for IMFAL (11 KV and 33 KV) and IMCL to               the  extent of 57.60 M.Us and  separately  for               IMFAL  (132  KV) to the extent of  52.56  M.Us               during the current water year.                         3. Please note therefore that  club-               bing  as assumed in your letters has not  been               allowed.                         4.  Please also note that  your  re-               quest  for allocation of additional power  for               IMFAL  (132  KV) can only be  considered  upon               your fulfilment of the conditions specified in               the order dated 31.10.1986.                                                     Yours               faithfully,                                                     Sd/                                              Commissioner-               cum-Secretary                                               to               Government." No  personal hearing was afforded to the company before  the decision  incorporated in the said letter was taken  by  the Government.  It  will be seen that despite  the  clear  pro- nouncement  by Government regarding invalidity of  the  said reason,  the sole ground stated by the State  Government  in the  said letter for denying the benefit of clubbing to  the company  is that IMFAL 132 KV unit being a 100% export  ori- ented unit for which special provisions had been made in the ,power cut order dated October 31, 1986, there was no  merit in the company’s request for dubbing. Aggrieved by the  said action  taken by the State Government rejecting the  request for  clubbing, the company has filed Writ Petition No.  1753 of 1986 in this Court seeking to quash the said order.     S.L.P.  (C) Nos. 13848-13849 of 1986 have been filed  by the State of Orissa challenging the correctness of the above mentioned  judgment of the High Court in O.J.C. No. 1549  of 1986 and O.J.C. No. 2496 of 1985. S.L.P.  (C)  Nos. 14173-14174 of 1986 have  been  separately filed 281 by the Board challenging the very same judgment.     The company has filed S.L.P.(C) Nos. 14923-14924 of 1986 questioning the correctness of the High Court’s judgment  in so  far  as the High Court has turned down  its  contentions regarding  the competence. of the State Government  to  pass orders  under  Section 22B of the Act making  allocation  of power supply to individual consumers and to deny the benefit of  clubbing and to prescribe for levy of higher tariff  for excessive drawal.     It was submitted before us by Counsel appearing for  the company  that the four electrical submerged arc furnaces  of the  company producing ferro alloys cannot be run at  a  low capacity  and  they  require  continuous  and  uninterrupted supply  of energy to sustain production and also  to  ensure that  the  furnaces do not sustain damage.  It  is  electric power  that is used as a raw material in the manufacture  of ferro  alloys.  The electrical energy is converted  to  heat energy which generates the requisite temperature for  reduc- tion of the ore to the metal and unless that temperature  is attained the necessary reaction will not take place and  the

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desired  product will not be obtained. According to  learned Counsel for the company, in view of the unsatisfactory power situation in the State and the consequent drastic power cuts imposed on the industrial units, the extension of the facil- ity of clubbing becomes very vital because that would render possible  for the multiple unit industries  concerned  which are having more than one unit to decide to operate a reduced number of furnaces with the available allocation of power by diverting  the quota allotted to some of the units to  those which are to be continuously worked. By this process  alone, it is said, it will be possible for such industries to avert damage to the furnaces and to avoid large scale retrenchment of the labour force. The petitioner-company has averred both before the High Court and before this Court that on  account of  frequent  interruptions and the undependable  nature  of supply  of  power, the company’s 132 KV  IMFAL  furnace  had suffered very serious damage causing a loss of about Rs.  16 crores to the company. But this averment has been  seriously controverted by the Board and the State Government. For  the purposes of this case it is not necessary for this Court  to enter  into the merits of this controversy and to  determine which  version is correct. It would suffice merely to  state that  the  denial of clubbing to such industrial  units  has very  serious implications and repercussions, both  economic and otherwise, on the viable functioning of the industry. We  shall first proceed to deal with the contentions  raised by the 282 State Government and the Board in their Special leave  peti- tions.               Section  22B  of the Act is in  the  following               terms:-                     "22B(1)  If the State Government  is  of               opinion  that it is necessary or expedient  so               to do, for maintaining the supply and securing               the  equitable distribution of energy. it  may               by  order provide for regulating  the  supply,               distribution, consumption or use thereof.                        (2) Without prejudice to the general-               ity of the powers conferred by sub-section (1)               and  order  made  thereunder  may  direct  the               licensee  not to comply, except with the  per-               mission of the State Government with--               (i) the provisions of any contract,  agreement               or  requisition whether made before  or  after               the  commencement  of the  Indian  Electricity               (Amendment)  Act, 1959, for the supply  (other               than  the resumption a supply) or an  increase               in the supply of energy to any person, or               (ii)  any  requisition for the  resumption  of               supply of energy to consumer after a period of               six  months, from the date of its  discontinu-               ance, or               (iii)  any requisition for the  resumption  of               supply of energy made within six months of its               discontinuance,   where   the   requisitioning               consumer  was not himself the consumer of  the               supply at the time of its discontinuance."                   It  is also necessary to refer to  Section               49  of the Electricity (Supply) Act,  1948  as               amended in 1967. That Section reads--               "49. (1) Subject to the provisions of this Act               and  of  regulations,  if any,  made  in  this               behalf,  the Board may supply  electricity  to               any  person  not being a  licensee  upon  such

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             terms  and conditions as the Board thinks  fit               and may for the purposes of such supply  frame               uniform tariffs.               283                        (2)  In fixing the  uniform  tarrifs,               the  Board shall have regard to all or any  of               the following factors, namely--                       (a)  the nature of the supply and  the               purposes for which it is required;                       (b)  the co-ordinated  development  of               the  supply  and distribution  of  electricity               within  the  State in the most  efficient  and               economical  manner, with particular  reference               to such development in areas not for the  time               being  served  or  adequately  served  by  the               licensee;                       (c) the simplification anti standardi-               sation  of  methods and rates of  charges  for               such supplies;                       (d)  the extension and  cheapening  of               supplies of electricity to sparsely  developed               areas.                        (3)  Nothing in the foregoing  provi-               sions of this section shall derogate from  the               power of the Board, if it considers it  neces-               sary or expedient to fix different tariffs for               the  supply of electricity to any  person  not               being  a licensee, having regard to  the  geographic al position of  any area, the nature of the supply and purpose for which  supply is required and any other relevant factors.          (4)  In fixing the tariff and terms and  conditions for  the  supply of electricity, the Board  shall  not  show undue preference to any person."     It appears to us to be clear on a reading of Section 22B of the Act that what is contemplated by it is that the State Government  should  only lay down policy  guidelines  to  be adopted  by the Board for regulating, supply,  jurisdiction, consumption  or  use of energy. The  implementation  of  the policy  after  working  out the details is a  matter  to  be carried  out by the Board. It is therefore somewhat  strange that the State Government has taken upon itself the task  of allocating the quantum of power that may be consumed by  the different industrial units mentioned in the Annexures to the Government  Orders passed in respect of the  years  1984-85, 1985-86  and 1986-87 under Section 22B of the Act.  However, the High Court is in our opinion right in holding that under the aforesaid section, the Government may for the pur- 284 poses of securing equitable distribution of energy  regulate its  consumption  or use and decide as a  matter  of  policy whether  the  benefit of clubbing should be allowed  to  the consumers of energy. The immediate consequence of dental  of the facility of clubbing will be to restrict the quantum  of permissible consumption of energy by each of the  respective units to the quota allotted to it singly or jointly and this necessarily involves serious financial implications  because excessive  drawals  of energy by resort  to  clubbing  would necessarily invite liability for payment at a higher  tariff for the energy so drawn.     It was contended before us by the Counsel appearing  for the State and the Board that the power availability position in respect of each water year can be reasonably  ascertained with  some degree of precision only after the  peak  monsoon period  and  hence the High Court was not right  in  holding

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that  the  orders  under Section 22B of the  Act  cannot  be passed  with retrospective effect in the middle of  a  water year.  We find there is some force in this argument  and  we hold that the High Court was not right in observing that the orders under Section 22B of the Act imposing restrictions on consumption of power could not legally and validly be passed by  he Government "with retrospective effect" in the  middle of a water year. But the position regarding disallowance  of clubbing  stands  on  an entirely different  footing.  If  a consumer had been allowed the benefit of clubbing  previous- ly,  that  benefit cannot be taken away  with  retrospective effect  thereby saddling him with heavy financial burden  in respect  of the past period where he had drawn and  consumed power on the faith of the orders extending to him the  bene- fit  of clubbing. The High Court was,  therefore,  perfectly right  in  holding that the benefit of  clubbing  which  the company  had  enjoyed pursuant to the order dated  July  12, 1984 during the water year 1984-85 till the end of December, 1984  could  not be taken away by the letter  of  the  Board dated January 24, 1985. We find no merit at all in the stand taken by the said Electricity Board that by the letter dated July  12, 1984, the Board had permitted clubbing only for  a limited period of one month i.e. the month of July, 1984. It is  to  be remembered that right from the inception  of  the power  cut in the State of Orissa, the benefit  of  clubbing had  been  allowed to the company in respect  of  the  three units which were classified as "power intensive units".  The same  position continued in the year 1983-84 after the  com- missioning of the company’s fourth unit namely, 132 KV IMFAL and  the benefit of clubbing was allowed in respect  of  all the  four units during that year as is clear from the  tele- printer  message sent by the Chief Engineer of the Board  to the  Superintending Engineer, Teacher granting  the  request for clubbing made by the company in respect of its 285 four units by its letter dated July 16, 1983. It was  there- after  that the Board issued order as per its  letter  dated July  12, 1984 in reply to the company’s request  for  being given the benefit of clubbing for the year 1984-85. The text of this letter has been reproduced by us. In our opinion the correct construction to be placed on this letter is that  it only makes an allocation of power to all the four units on a monthly basis commencing from 1st July, 1984 with permission accorded  to the company to club the drawal subject  to  the condition that the whole position will be reviewed in  Octo- ber,  1984. In actual point of fact however, no such  review was  made  in October, 1984 and it was only on  January  24, 1985 that the Board addressed a letter to the company incor- porating its decision not to permit clubbing. This  decision taken  on  January  24, 1985, even if it  is  assumed  to-be valid,  could not operate retrospectively during any  period prior  to  the  date of issue of the  said  letter,  because during  the  said period the company had been  enjoying  the benefit of clubbing under the permission validly granted  to it  by  the  order dated July 12, 1984 which  had  not  been revised  till  then. We accordingly uphold  as  correct  the conclusion  reached by the High Court that the  demands  for additional tariff made by the Board as per the revised bills issued  to the company produced in the High Court as  Annex- ure-Il  series in O.J.C. No. 1549 of 1985 were  illegal  and were liable to be guashed.     We are in complete agreement with the view expressed  by the  High Court that the sole reason stated by the Board  in its letter dated January 24, 1985 for refusing the  facility of clubbing to the company is not valid or tenable.

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   On  a  reference to the Orissa State  Electricity  Board (General Conditions of Supply) Regulations, 1981, it is seen that  the Regulation 28 which deals with  classification  of service to consumers, classifies consumers under 15  differ- ent categories namely, domestic lighting and power,  commer- cial lighting and power, cinema, theatre etc., street light- ing,  railway traction, irrigation pumping and  agriculture, public  water  works and sewerage pumping,  general  purpose tariff,  small industries, medium industries,  large  indus- tries,  power  intensive industries,  heavy  industries  and temporary  supply.  There is no separate  categorisation  of ’export oriented industries’. Under the scheme of the  Regu- lation,  industries have to fall under one or other  of  the five  categories small, medium, large, power  intensive  and heavy.  This position is further confirmed by the fact  that in  the orders passed by the State Government under  Section 22B  of the Act for the years 1984-85, 1985-86  and  1986-87 also there is no separate categorisation of export 286 oriented industries. The only categories mentioned are heavy industries  and power intensive industries and all the  four units  of the company had been included under  the  category "power   intensive  industries."  It  is  admitted  in   the counter-affidavit  and it is not disputed before us  at  the time of heating the arguments that clubbing has been allowed by  the  Board and is being allowed even now in  respect  of power intensive industries other than export oriented indus- tries. We see no justification at all for this  differential treatment meted out to export oriented industries. The  note appended to the Government’s orders passed under Section 22B of the Act for the years 1985-86 and 1986-87 does not in any way  support the contention of the State and the Board  that an export oriented industry is to be made a separate alloca- tion  of power and is to be denied the benefit  of  clubbing merely on account of its being engaged in an export oriented venture. It continues to be classified as a power  intensive industry  for  purposes  of allocation of  power.  The  only effect  of  the note is that in case  such  export  oriented industry  fulfils the conditions mentioned in the  note,  it will  be entitled to additional allocation of power  on  the ground of its being entitled to preferential treatment as an incentive  for  export promotion. This is only  an  enabling provision which would entitle an 100% export oriented indus- try to claim additional allotment of power if it is able  to satisfy  the Board and the State Government that the  condi- tions  mentioned in the note are fulfilled by it.  The  only consequence  of  said condition not being  satisfied  by  an export oriented industry is that it will be treated only  as an  ordinary  "power  intensive industry" and  will  not  be entitled  to  any additional allocation of energy.  For  the mere  reason that it has not fulfilled the  conditions  pre- requisite  for  claiming additional allocation of  power,  a power intensive industry which is export oriented cannot  be subjected  to treatment otherwise than at a par  with  other power  intensive  industries. If  additional  allocation  of power  has been granted to an export oriented  industry,  it may well be that to the extent of such additional allocation which  is specifically granted for the purpose of  promotion of export, diversion of supply to the other units may not be permitted.  So  long as no additional power  allocation  has been  made and no preferential treatment has been  given  to the  particular power intensive industry on the ground  that it  is a 100% export oriented industry, it cannot  be  meted out a prejudicial treatment different from what is given  to other power intensive industries which are termed as "demos-

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tic  units". We have therefore, no hesitation to uphold  the conclusion reached by the High Court that the reason  stated by the Board in its letter to the company dated January  24, 1985 for refusing the benefit of clubbing to the company for the  year 1984-85 was fallacious, illegal and untenable.  We have already 287 held  that  the High Court was not right in  observing  that orders under Section 22B of the Act imposing restrictions on consumption of power could not legally and validly be passed by the State Government in the middle of a water year. There is no merit in the rest of the contentions raised in  S.L.P. (C)  Nos. 13848-13849 of 1986 filed by the State  Government of  Orissa and S.L.P.(C) Nos. 14173-14174 of 1986  filed  by the  Board. Subject to our above observation  regarding  the competence  of  the State Government to  pass  orders  under Section  22B of the Act even after the commencement  of  the water  year  these four Special Leave Petitions  will  stand dismissed.     In  Writ  Petition  No. 1753 of 1986,  the  company  has challenged  the action of the State Government  in  refusing the company’s request for clubbing as per the State  Govern- ment’s  letter  dated  December 8, 1986. It  appears  to  us rather strange that inspite of the express pronouncement  by the  High Court to the effect that the reason stated by  the Board in its communication to the company dated January  24, 1985,  namely that the company’s 132 KV IMFAL unit  being  a 100%  export oriented unit it had to be  treated  separately for the purpose of power allocation and hence the benefit of clubbing could not be allowed was illegal and untenable, the State Government has merely reiterated the very same  reason in its impugned letter dated December 8, 1986. This  clearly indicated  lack of due care and proper application the  mind of  the Government to relevant aspects of the matter  before the order was passed. We have already indicated that we  are in full agreement with the view expressed by the High  Court that it is not legally permissible to refuse the facility of clubbing merely on the ground that a particular power inten- sive  unit is an export oriented unit so long as it had  not been given any special allotment of power on the said ground on  the basis of its fulfilment of the conditions  specified for a 100% export oriented unit in the note appended to  the Government’s order passed under Section 22B of the Act. When all  other power intensive units termed as "domestic  units" are  being allowed the benefit of clubbing, it would not  be legally  proper  to deny the same facility  to  an  industry classified  as ’power intensive unit’ merely on  the  ground that being an export oriented unit, it has failed to  fulfil the  conditions pre-requisite for allocation  of  additional power. Such differential treatment would amount to arbitrary discrimination, violative of Article 14 of the  Constitution and it cannot be permitted. A power intensive unit which has not been extended any advantage in the nature of  allocation of  additional power on the ground that it is a 100%  export oriented  industry  must be treated on the same  footing  as other  power  intensive industries called  "domestic  indus- tries" and so long as 288 the benefit of clubbing is allowed to domestic ’power inten- sive’  units,  such benefit cannot be denied  to  an  export oriented  unit which has not been allocated  any  additional power on the basis of its export performance.     We make it clear that nothing contained in this judgment is  to be construed as laying down as a general  proposition that  industrial  consumers having more than one  unit  are,

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under  all circumstances, entitled as of right to  club  the power  allotted  to their different units since we  are  not called upon to consider or pronounce upon the said  question in this case. The observations and the conclusions  recorded in  our judgment are based on the special facts and  circum- stances  of the instant case before us where admittedly  all power intensive industries in the State of Orissa other than export  oriented industries had been allowed the benefit  of clubbing  by the Board and the limited question arising  for consideration has been whether the denial of said benefit to some  of the power intensive industries on the  sole  ground that  they  are  export oriented industries  which  had  not complied  with the conditions specified in the note  to  the Government order issued under Section 22B of the Act for the three years in question was legally valid and permissible.     We  accordingly quash the order of the State  Government dated  December 8, 1986 and direct the respondent  to  allow the  petitioner  company  the facility of  clubbing  of  the energy  supply to 11 KV IMFAL unit, 33 KV IMFAL unit, 11  KV IMCL  and 132 KV IMFAL unit. We see no reason to  grant  the prayer  of the company for quashing the order dated  October 31, 1986 passed by the State Government under Section 22B of the Act in so far as it fixes the energy allocation for  the different  units but the said order shall not be treated  or construed  as  denying  the  facility  of  clubbing  to  the company.     The  Writ  Petition  is allowed to  the  limited  extent indicated  above.  The parties will  bear  their  respective costs in all these petitions. S.L.P. Nos..14923 and 14924 of 1986 will also stand disposed of as above. N.P.V. 289