http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (civil)  5343 of 2002

PETITIONER: M/s Southern Ispat Ltd.

RESPONDENT: State of Kerala & Ors.

DATE OF JUDGMENT: 25/03/2004

BENCH: K.G. Balakrishnan & B. N. Srikrishna.

JUDGMENT: J U D G M E N T

SRIKRISHNA, J.

       The judgment of the Division Bench of the Kerala High Court  dismissing writ appeal no.2614/2001 of the  appellant is challenged before  us  in this appeal. The writ appeal itself was to impugn the judgment of the  single Judge dismissing O.P. No.9007/1999 by the appellant.         With a view to encouraging the industrial process in the State of  Kerala, and as a measure of incentive, the State Government decided as a  matter of policy that new industrial units established in the State would be  exempted for a  period of 5 years from payment of enhanced power tariff  which had come into effect on 1.1.1992.  This policy was reflected in the  G.O. (MS) No.4/92/ID dated 6.2.1992 which indicated that the concession  would be available:  "i.    to the units from the date of commercial  production which start such production between  1.1.1992 and 31.12.1996.

ii.     To manufacturing units only and not to service  and entertainments units;

iii.    To existing units for substantial expansion/  modernisation / diversification.  The concession  in such cases will be available only for the  consumption of the new machinery and  equipment which add to the capital asset, by not  less than 25 % of the existing fixed capital  investment excluding land and building the  installation of which is to be certified by the  competent authority.

iv.     For modernisation, to industrial units having a  contract demand not exceeding 500 KVA.  In  such cases, new equipments alone will be  eligible for the concession."

       The Government order also indicated that the eligibility for the  concessions would have to be certified by the Kerala State Industrial  Development Corporation (KSIDC) / Kerala Financial Corporation (KFC)  in respect of units funded by them, or by the Director  of Industries and  Commerce in other cases, and by the concerned General Manager, District  Industries Centres in respect of Small  Scale Industrial units.  It was also  declared in Government order that the industrial units  which set up their   captive power generating units  for their  own consumption would be  exempted from payment of electricity duty to the extent to which they  generate power for their own consumption.  The said concession was made  available to the units which may have started commercial production or set

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

up captive power generating units between 23.9.1991 and 31.12.1991.

       On 26/27.6.1995 the appellant company was registered with the  Registrar of Companies office at Palakkad in Kerala State.  The company  intended to manufacture  alloy steel M.S. Sections, C.T.D. Bars, Steel  Castings and allied products. The company had an authorised capital of  Rs.550 lakhs out of which shares worth Rs.205 lakhs were issued  to and  subscribed by the Directors and their friends and rest were issued to and  subscribed by the public.  The appellant company also raised loans from the  Kerala State Industrial Development Corporation and the Kerala Financial   Corporation for setting up the unit. According to the appellant, the total  project cost was Rs.820 lakhs. Land was purchased in Kottai village in  Palakkad District of Kerala and construction of  buildings and installation of  machinery for steel melting and re-rolling was commenced.          On 17.7.1995 the appellant made an application to the Chief Engineer,  Kerala State Electricity Board (’KSEB’) for allocation of 2450 KVA of  power.  The appellant requested for registration of its application and sought  a feasibility certificate for the allocation of power at the earliest to facilitate  sanction of loan from KFC /KSIDC and working capital from South Indian  Bank Ltd.   On or about 17.6.1996 the appellant made a representation to the  Ministry of Steel, Government of India to persuade  the KSEB to expedite   the sanction of power.  The Regional Development Commissioner for Iron  and Steel, Government of India, Ministry of Steel, addressed a D.O. letter  dated 3.7.1996 to the Chairman KSEB, strongly recommending the urgent  sanction of the power to the appellant. By a letter dated 16.7.1996 the  Chairman, KSEB, informed the Regional Development Commissioner for  Iron and Steel, Madras that the State of Kerala was facing acute shortage of  electrical energy and that the KSEB was resorting to all possible ways to tide  over the situation.  As a part of their efforts to bring down the energy  consumption, they had even banned new domestic connections.  Hence,  the  Chairman said, "in the present scenario I am not in a position to think of  giving power allocation to a power intensive industry like steel producing  unit" and said "if the situation improves, the application of M/s Southern  Ispat Ltd., can be taken up". The said reply was forwarded to the appellant  by the office of the Regional  Development Commissioner for Iron and  Steel.         By a letter dated 10.9.1996 addressed to the appellant the KSEB  sanctioned power allocation to the extent of 1950 KVA at 11 KV with  contract demand of 1950 KV to the appellant’s factory.  The allocation was  made subject to the following conditions:

"1.    Supply is liable to be restricted or cut of during  power shortage period after giving notice.

2.      Power should not be used for industrial purpose  between 6 P.M. to 10 P.M. or any other  restrictions necessitated by local condition or  otherwise when imposed should be strictly  complied with.

3.      Charges payable as minimum will have to be  paid even if power is not availed of within three  months from the date on which the readiness of  the Board to supply power to you is intimated.

4.      Specific provision regarding the above  condition will be incorporated in the service  connection agreement.

5.      You have to execute a power supply agreement  in the form to be specified by the Deputy Chief  Engineer, Ele. Circle, Palakkad and agree to pay  the tariff and other charges specified by the  Board from time to time as per rules in force in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

the Board within 6 months from the date of this  letter failing which the allocation sanctioned  will stand cancelled.

6.      You have to request remit the required amount  under OYEC scheme which may be ascertained  from the Assistant Executive Engineer,  Electrical Major section, Parali.

7.      The power allocated can be availed only after  drawing separate 11 KV feeder from Parali Sub  Station (Extentsion of 1.12 KM of S/C line and  duplicating 2.3 KM of the Kottayi feeder) for  which OYEC amount has to be remitted by the  applicant.

8.      The power allocated can be given only after  providing separate outlet in the 110 KC Sub  Station, Parali and the cost of work has to be  met by the application under OYEC Scheme."

       The Executive Engineer KSEB Palakkad informed the appellant  by a letter dated 3.10.1996 that an estimate  amounting to Rs.8,73,200  had been sanctioned  for the  power allocation work to the appellant  under Own Your Electric Connection (OYEC) basis. The appellant was  called upon to remit a sum of Rs.8,73,200/- in cash, at the earliest, to the  electrical section.  On 11.11.1996 the appellant wrote a letter to the  Executive Engineer, Electrical Division, KSEB Palakkad  informing him  that it had completed all civil works at the site  and erected over 50% of  plant and machinery  and that  other machines were in transit and were  expected to reach very shortly.  He, therefore, requested that instructions   be issued to the  Executive Engineer Electrical, Parali to accept the  amount of Rs.8,73,200 so that the KSEB electrical work may start to  meet the requirements.  On 12.11.1996 the Executive Engineer  Electric  Division Palakkad addressed a letter to the Deputy Chief Engineer,  Electrical Circle, Palakkad on the subject.  He pointed out that an  estimate for Rs.8,73,200 towards construction of 1.12 Kms 11 KV  overhead line  and duplicating 2.3 KM  of Kottayi feeder from 110 KV  sub station Parali for giving high tension  connection under OYEC basis  had been sanctioned in favour of the appellant. He also stated that the  appellant was ready to remit the amount on OYEC basis and requested  further instructions in the matter.         On or about 14.11.1996 the appellant sent a letter to the Deputy  Chief Engineer, Electrical Circle, Palakkad  thanking him for the  inspection of the work site on 12.11.1996.  It also enclosed a Charted  Accountant’s certificate detailing the investment of Rs.379.68 lakhs and  a photocopy of KSIDC’s letter dated 11.11.1996 giving full details.   Finally, the letter requested permission to deposit the amount of  Rs.8,73,200 at Electrical Major Section, Parali so that the construction  of line may begin.  A copy of the letter from KSIDC requesting  expedition and commission of the project was also forwarded.

       Apprehending that the KSEB was deliberately delaying the  matter, so that the appellant would not be able to carry out commercial  production before the cut off date of  31.12.1996, the appellant  submitted a scheme to the Government of Kerala for generation of 125  KVA electrical energy by installation of a diesel power generating set in  its factory. By the letter dated 6.12.1996 of the Chief Electrical Inspector  to the appellant sanction for the scheme was granted subject to the  following conditions:

"1.     Copy of Power allocation sanction for additional  loads if required should be obtained from the  K.S.E.Board/ Licensee and a copy of the same

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

forwarded to Electrical Inspector.

2.      Installation of all switch boards and distribution  boards should be in conformity with Rule 51 (1)  (c) of I.E. Rules, 1956.

3.      Fuses should be graded properly and selected  based on the rating of cables. Low watt loss  fuses shall be selected.

4.      Earthing of the installation should conform to  provisions in I.S.3043/87.

5.      Isolation facility should be provided for all  equipments within a distance of 3 meters from  equipments conforming to Rule 50(1)(d) of I.E.  Rules, 1956.

6.      M.V. installation should conform to I.S. 732.

7.      Installation of all cables should be as per  standards.

8.      An energy meter should be provided in the  generator circuit which should be got tested and  sealed by Kerala State Electricity Board/  Standards Laboratory attached to this  Department and a copy of the test report should  be forwarded to Electrical Inspector.

9.      Sanction from K.S.E.B. under Section 44 of  Supply Act 1948 should be obtained and copy  forwarded to the Electrical Inspector.

10.     Only materials with I.S. certification as required  under QCO should be used. The Electrical  Inspector should ensure this. 11.     Only energy efficient equipments shall be used  in the installation.

12.     Completion report should be submitted to this  office for arranging inspection.

13.     The voltmeter and frequency meter may be  provided before the breaker in the generator  control panel."

       On 6.12.1996 the appellant also applied to the Secretary of  Kottayi Gram Panchayat for permission to install and utilise a diesel  generator set of 125 KVA  for its factory with the help of which it was  proposed to use a 10 HP motor.   On 11.12.1996 the appellant forwarded a cheque for Rs.8,73,200  to the Assistant Executive Engineer, Electrical Major Section, Parli and  requested  him to accept it towards the estimate for the construction  work to be carried out. He was also requested to draw up an agreement  so that it can be executed and the  security amount be deposited.

       According to the appellant, it purchased stamp papers for  executing the agreement with KSEB for supply of electricity on  9.12.1996. On 11.12.1996 the Assistant Executive Engineer, Parali  accepted the cheque of Rs.8,73,200 towards the cost of construction of  electric line.  By an order made by the Chief Engineer Transmission  (North) Kozhikode, on 12.12.1996 sanction was accorded  for an  estimate amounting to Rs.13,10,000 for modification of sub-station for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

providing 11 KV Outlet at 110 KV sub-station, Parali and registered as  21/96-97. It was directed by the order that the cost  on account of this  had to be met from the deposit to be made by the beneficiary under  OYEC Scheme.   On 13.12.1996  the appellant gave a declaration to the KSEB that  the private generator set installed at the premises of its factory would  not be synchronised with KSEB board mains and that  a meter would be  installed.   On the same day the agreement on stamp paper of Rs.60 was  forwarded to the Assistant Executive Engineer, Electrical Major  Section, Parli, Palakkad for being processed.  He was also requested to  intimate the amount to be deposited towards security. On 16.12.1996   the appellant deposited a sum of Rs.13,10,000/- with the KSEB as  directed in the order of the Chief Engineer.         The appellant moved the High Court of Kerala by O.P.  No.6456/1997 seeking a writ of Mandamus directing the KSEB and its  officers to take urgent and immediate steps to give sanctioned power  connection to the appellant’s factory at Kottayi and also sought an  interim order for grant of power connection temporarily from the feeder  line to the neighbouring industrial unit,  M/s Elgi Tyre & Treads Ltd.  Kottayi, so as to enable the petitioner  to maintain nominal production  and marketing of its products and reduce the overheads and other losses.   This petition was disposed of by a learned single Judge of the Kerala  High Court by an order dated 11.4.1997 with the direction to the Deputy  Chief Engineer, Electrical Circle, Vydyuthi Bhavan, Palakkad, to  consider and take a decision on Exhibit P-15 (the appellant’s  representation dated 23.12.1996) addressed to him highlighting the  grievances of the appellant, with notice to the petitioner, within a period  of three weeks.         Pursuant to the directions made by the High Court, the KSEB  considered the grievances made by the appellant and the appellant was  informed as under by letter dated 23.5.1997 :

"I have been directed by the Secretary/ K.S.E.B.  Trivandrum-4 to intimate you the decision regarding  your representation vide Ex. P-15 in the above OP.   Accordingly I may inform that:

1)      Power allocation to the extent of 1950 KVA was  granted to you by the Chief Engineer (Distt.  North), Kozhikode on 12.9.1996 on the specific  conditions that

a)      The power can be availed only after  drawing separate 11 KV feeder from Parli  Sub-Station under OYEC; and

b)      The power can be given only after  providing separate outlet in the 110 KV  Sub-Station / Parli under OYEC.

The above conditions were stipulated taking into  consideration all technical aspects such as loading on  11 KV feeder, Voltage regulation, flexibility of 11 KV  lines, existing Power system/ line capacity etc. As you  have already remitted the OYEC for all the above  works (a) & (b) above, action has been taken by the  Executive Engineer/ Elec. Division/ Palakkad to  finalise the tenders for the construction of 11 KV new  feeder.

Taking into account the existing consumers in  the 11 KV Elgi Feeder and all technical aspects, I  regret to inform that it is not technically feasible to  connect your factory load from the existing Elgi  feeder.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

Further, I may inform that due to acute Power  shortage, the Board has ordered a total ban on new  connections to the Power Intensive units \026 during the  period of Power cut, w.e.f. 30.7.1996.

                          Yours faithfully                                           Sd/-                       EXECUTIVE ENGINEER IN/C."

       For a period of almost two years the appellant made no  grievance,  nor took any other steps.  The appellant moved a writ petition No.OP  9007/1999 before the High Court of Kerala challenging the bill for  charges for electrical energy supplied to the appellant’s industrial unit at  rates in excess of the pre-1992 tariff rates.  This writ petition was moved  on 31.3.1999 and challenged the invoice no.23602 dated 23.3.1999 by  which the appellant was called upon to pay a sum of Rs.2,28,578/-  towards consumption of electricity during the month of February, 1999.   By a judgment dated 3.7.2001 the learned single Judge who heard the  writ petition dismissed the writ petition holding generally that appellant  had not complied with the conditions subject to which power supply at  concessional tariff rates have to be made. Being aggrieved thereby, the  appellant filed writ appeal no.2614/2001 which was dismissed by the  Division Bench by the judgment impugned before this Court.         It is contended by the appellant that the delay in sanction and  supply of electric supply was only on account of the tardy manner in  which the KSEB functioned. It is also urged that, despite the lethargy  shown by the KSEB, to meet the deadline  the appellant had installed its  own diesel generator set and commenced "commercial production" on  14.12.1996.  The appellant relied on certain invoices for sales made to  customers in the month of December, 1996, a certificate  dated 11.9.1998  issued by the KSFC,  the copies of the nil return made to  the commercial  taxes department, declaration made to the superintendent of Central  Excise  and Register of daily stock  in support of its contention that it had  commenced ’commercial production’ in the month of December, 1996.   Reference was also made to the assessment order issued by the Sales Tax  Department and the Balance Sheet of the company as on 31.3.1997 for  this purpose.

       The respondents strongly refute the contentions urged and support  the judgment of the Division Bench of the High Court as being correctly  decided on the facts of the case.         As the Division Bench rightly pointed out, the question to be  decided in this case is essentially a question of fact, namely, whether the  appellant had started ’commercial production’ between 1.1.1992 and  31.12.1996 so as to be entitled to power supply at concessional tariff  rates. As a rule, it is not the practice of this Court to interfere with factual  findings which have been concurrently recorded by two courts below.  Both the learned single Judge and Division Bench have concurrently  answered all factual findings against the appellant. On that ground itself  the appellant must fail. Nonetheless, as the appeal was argued with some  seriousness, we propose to deal with the facts and examine the factual  findings only from the point of view of interference under our special  jurisdiction under Article 136.         The Division Bench of the High Court rightly pointed out that  though the policy of granting concessional tariff was announced by the  State Government on 6.2.1992, followed by the KSEB  order dated  27.3.1992, the appellant did nothing till or about June 1995.  It is only in   June 1995 that the appellant company was incorporated and an application  for power allocation was made on 17.7.1995. The appellant’s factory had  yet to be constructed and machinery to be transported and installed after  the construction  of the factory building .  Undoubtedly, the application  was moved on 17.7.1995 in anticipation. The material on record suggests  that there was acute shortage of electricity as a result of which even

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

domestic power connections were being refused. The high tension power  supply required by the appellant had to be specially arranged by drawing  the electrical lines on the OYEC basis by construction of  PSC polls along  the line at the Appellant’s cost.  This amount was deposited on 11.12.1996,  only a few days before the concession was about to lapse.  Having  examined  the correspondence on record, we are not in a position to accept  the contention of the appellant that the respondents had acted with undue  tardiness or lethargy.  Further,  the remittances of Rs.8,54,700/-  and  Rs.3,45,200/- made by way of  security deposit for executing the power  supply agreement were actually made on 1.2.1997 and 4.2.1997, after the  expiry of the period of concession.         The KSEB  made the power allocation on the specific condition that  power would be supplied subject to drawing of 11 KVA exclusive feeder  line from 110 KV Parali station under the OYEC scheme.  The electric  wiring was completed in the factory of the appellant and the wiring  contractor submitted completion certificate on 29.8.1998.  There were  some deficiencies which were rectified by the appellant only on 1.12.1998.   The electrical inspector is required to sanction the electrical wiring, and  this was done on 14.12.1998.  Power supply commenced only on  19.2.1999. Thus, upto and including 19.2.1999 the appellant had not  functioned with the power supplied by the KSEB either temporarily or on  permanent basis.         The contention of the appellant that commercial production had  commenced in December 1996 can hardly be accepted. The appellant was  setting up the factory for manufacturing of alloy steel M.S. Sections,  C.T.D. bars, Steel ingots and so on with a planed production of 24000 tons  of iron and steel ingots and 24000 tons of iron and steel bars, coils etc.. It  hardly stands to reason that "commercial production" of such a factory  could have commenced by using of a 125 KVA diesel generator set. There  is also no material on record to show that the appellant had run the factory  by using 125 KVA generator set during the period December 1996 to  February 1999.  It is pointed out by the High Court, and rightly in our  view, that even the diesel unit could also not be used until permission was  obtained under Rule 65 of the Indian Electricity Rules, 1956, from the  Chief Electrical Inspector. Such permission was obtained from the Chief  Electrical Inspector only on 14.12.1998.  Thus, it is clear that even the  order for energisation of the 125 KVA diesel generator set was accorded to  the appellant only in 1998.         In these circumstances, we find it difficult to accept the contention  of the appellant that ’commercial production" had started in December  1996 by using diesel generator set as alleged.         The appellant contends that the certificate issued by the Kerala  Financial Corporation dated 11.9.1998 is conclusive  evidence of the fact  that the appellant had commenced "commercial production" in December  1996.  Interestingly, the KFC’s certificate is very guarded and states: "This is to certify that Southern Ispat Limited has  commenced its commercial production of C.i. Shot  and grits with the help of Generator set as Kottayi in  Palakkad district on the 14th day of Decembr, 1996  as per records submitted by the company."

       (Emphasis is ours)

       In the first place, we are unable to accept that the certificate issued  by the KFC is conclusive in the matter.  At the highest, it may be one of  the facts to be considered by the KSEB in the light of all other relevant  material.         The High Court has pointed out a series of difficulties in accepting  this certificate as conclusive.  Firstly, the certificate  has been issued only  on 11.9.1998.  The certificate is issued "To whom so ever it may  concern". There is no reference to the electrical inspector’s findings on  the matter of conditions of appellant’s high tension installations, which  was a pre-requisite for the KFC to issue a proper certificate for the  purpose of entitlement to the pre-1992 tariff concessions.  There is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

nothing to show that the KFC had made any inquiry of their own.  On the  contrary, as the certificate shows, the certificate appears to have been  issued merely on the basis of record produced by the company. The  record produced  by the company could not have shown that the appellant  company had started  commercial production. The High Court has also  disbelieved and rejected the other documents relied upon in support of the  appellant’s case of commencing of commercial production prior to  31.12.1996.

       The High Court points out the fact that promoters of the appellant  company had a factory at Raipur in Madhya Pradesh and the possibility of  the Appellant having bought manufactured goods from  there and sold  them within the State of Kerala to create documents to show that the  production started before 1996 could not be ruled out.  Even the  documents produced by the appellant do not show any continuous  ’commercial production’ during the period December 1996 to February  1999.  We agree with the conclusion of the High court that it was not  sufficient for showing ’commercial production’ that some small items  were sold by the appellant in December 1996 and ’nil’ assessment of  sales tax was made and a small excise duty payment was also made.  We  agree with the High Court’s view that these were all self-serving  documents created as evidence for commercial production prior to the cut  off date of 31.12.1996.         Upon an overall assessment of the facts on record, we are not  satisfied that the view taken by the Division Bench of the High Court on  facts is so perverse  that it requires interference by this Court under  Article 136 of the Constitution.          In the result, the appeal is dismissed. However, there shall be no  order as to costs.