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PETITIONER: STATE OF U.P. AND ORS.

       Vs.

RESPONDENT: RENUSAGAR POWER co. AND OTHERS

DATE OF JUDGMENT28/07/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 1737            1988 SCR  Supl. (1) 627  1988 SCC  (4)  59        JT 1988 (3)   141  1988 SCALE  (2)238  CITATOR INFO :  R          1990 SC 334  (112)  F          1990 SC 820  (31)  R          1990 SC1277  (29,39,44,45)

ACT:      U.P. Electricity  (Duty)  Act,  1952-Whether  Renusagar Power Co.,  respondent No.  1, is ’own’ source of generation of electricity  of Hindalco,  respondent No. 2 under section 3(1)(c) of-Whether  Hindalco is  liable to  pay  electricity duty on  that.  footing-Whether  corporate  veil  should  be lifted in the facts of the case-Whether Hindalco is entitled to exemption from levy of electricity duty under sub-section (4) of section 3-Of.

HEADNOTE:      Disallowing  request   for  exemption   from  levy   of electricity duty  under sub-section  (4) of section 3 of the U.P. Electricity Duty Act, 1952 (’the Act’), as amended, the appellants issued  notice of demand asking respondent No. 1, Renusagar Power  Co., to  pay electricity duty on the energy supplied by it to respondent No. 2, Hindalco, for industrial purposes. Being  aggrieved by  the  decision  of  the  State Government, the  respondents filed  a writ  petition in  the High Court.  The  High  Court  allowed  the  writ  petition, holding that  the impugned order of the State Government was not maintainable  in law,  and quashing the order as well as the notice  of demand  abovesaid. The  State Government  was also directed to consider the request of the respondents for exemption in  accordance with  the directions  issued by the High Court  in the  earlier Writ  Petition No.  4521 of 1972 filed by the respondents. Being aggrieved by the decision of the High Court the appellants moved this Court for relief.      Disposing of the appeal, the Court, ^      HELD: Per Sabyasachi Mukharji, J.      There were  two different  aspects of  the case  to  be considered. One  was  whether  the  respondent  No.  1,  the Renusagar Power  Co. Ltd., was ’own’ source of generation of electricity  for  respondent  No.  2,  the  Hindalco,  under section 3(1)(c)  of the  Act. The  second aspect was whether the order  passed by  the State Government was in accordance

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with the principles of natural justice in so far as the same were applicable to the case. [646C] 628      From 1952  to 1970,  no duty was payable if electricity was generated  from own source of energy. From 1970 to 1973, duty of  one paisa  was payable  in respect  of  electricity supplied from  own source of generation. After 1973, no duty was payable  in respect  of electricity  supplied  from  own source of generation. [646D]       Renusagar, a 100% subsidiary of Hindalco, wholly owned and controlled by Hindalco, was incorporated in March, 1964. Hindalco had  established the power plant through the agency of Renusagar  to  avoid  complications  in  the  case  of  a possible  take-over   of  the   power  plant  by  the  State Electricity Board  as  power  generation  is  generally  not permitted in  normal conditions  in the  private sector. The respondents highlighted  that the  sanction under section 28 of the  Indian Electricity Act, 1910, given to Renusagar and its amendment  established that  Renusagar was  not a normal type of  sanction under  Section 23  of the  1910 Act as the holder could  supply power only to Hindalco. All these steps for the  expansion of  the power in Renusagar so as to match the power  requirement of Hindalco’s expansion were taken by Hindalco  even   though  Renusagar  had  been  incorporated. Applications for all the necessary sanctions and permissions were made  by Hindalco. Permissions and sanctions were first intimated  to   Hindalco  even   though  Renusagar   was  in existence. Changes  in the sanctions and/or permissions were obtained by Hindalco and not Renusagar. The expansion of the power  plant   in  Renusagar   was  to   exactly  match  the requirements of  Hindalco for  the production  of Aluminium. The expansion  of the  power plant in Renusagar was part and parcel of  the expansion of the aluminium plant of Hindalco. All the steps to set up the power plant in Renusagar and its expansion were  taken by  Hindalco. Hindalco  consumed about 255 MW power out of which 250 M W came from Renusagar. There was only  one transmission  line going  out of Renusagar and that went  to Hindalco,  which  had  complete  control  over Renusagar. The  agreement  between  Renusagar  and  Hindalco indicated this  was not  a  normal  sale-purchase  agreement between two independent persons at arms length. The price of electricity was  determined according  to the  cash needs of Renusagar. This  covenant also  showed complete  control  of Hindalco over Renusagar. All persons and authorities dealing and conversant  with this  matter had  consistently  treated Renusagar as  own source  of generation  of Hindalco. In the power-cuts matter  under section  22B of  1910 Act, 100% cut was imposed  on Hindalco  on the footing that it had its own source of  generation. All  the  authorities  including  the State and  Board had  all along  treated  Renusagar  as  own source of generation of Hindalco. It was thus contended that Renusagar must he treated as alter ego of Hindalco, i.e., 629 Own source  of generation  of Hindalco within the meaning of section 3(1)(c)  of  the  Duty  Act,  and  that  consumption clearly fell within that section. [653C-H; 655C-F]      ’Own source  of generation’  is an expression connected with the question of lifting or piercing the corporate veil. The appellants  contended that  in this  case there  was  no ground for lifting the corporate veil, urging that there was no warrant  either in  law or  in fact to lift the corporate veil and treat Renusagar’s plant as Hindalco’s own source of generation. [657B-C]      In  the  expanding  horizon  of  modern  jurisprudence, lifting of  corporate veil is permissible. Its frontiers are

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unlimited.  It   must,  however,  depend  primarily  on  the realities of  the situation. The aim of legislation is to do justice to  all the  parties. The horizon of the doctrine of lifting  corporate   veil  is   expanding.  In   this  case, indubitably, it  is correct  that Renusagar was brought into existence by  Hindalco in  order to  fulfil the condition of industrial  licence   of  Hindalco   through  production  of aluminium. It  was also  manifest from  the facts  that  the model of  the setting up of power station through the agency of Renusagar  was adopted by Hindalco to avoid complications in case of takeover of the power station by the State or the Electricity  Board.  All  the  steps  for  establishing  and expanding the  power station  were  taken  by  Hindalco  and Renusagar was  wholly owned  subsidiary  of  and  completely controlled  by   Hindalco.  Even   the-today  affairs   were controlled  by   Hindalco.  Renusagar  had  never  indicated independent volition.  Whenever felt necessary, the State or the Board  themselves had  lifted  the  corporate  veil  and treated Renusagar  and  Hindalco  as  one  concern  and  the generation in  Renusagar as  the own source of generation of Hindalco. Indubitably, the manner of treatment of the power- plant of  Renusagar as  the power-plant  of Hindalco and the Government taking  full advantage of the same in the case of power cuts  and denial  of supply  of 100% power to Hindalco underlined the  facts and  implied acceptance  and waiver of the position  that Renusagar  was a  power  plant  owned  by Hindalco. In  this view  of the  matter, the  corporate veil should be  lifted and  Hindalco and  Renusagar be treated as one concern  and Renusagar’s  power plant must be treated as the own  source of  generation of  Hindalco  and  should  be liable  to   duty  on   that  basis.  In  the  premises  the consumption of  such energy  by  Hindalco  will  fall  under section 3(1)(c) of the Act. [667E-H; 688A-B]      The veil  of  corporate  personality  even  though  not lifted sometimes  is becoming  more and  more transparent in modern company juris- 630 prudence. The  ghost of  the case  of  Aron  Salomon  v.  A. Salomon & Co. Ltd., [1897] AC 22 at 27, 30, 31, still visits frequently the  hounds of  Company Law but the veil has been pierced in  many cases.  However, the concept of lifting the corporate veil  is a  changing concept  and is  of expanding horizon. [668C-D]      The appellant  was in error in not treating Renusagar’s power plant  as the power plant of Hindalco and not treating it as the own source of energy. The respondent was liable to duty on the same and on that footing alone; this was evident in view  of the  principles enunciated  and the doctrine now established by  way  of  decision  of  this  Court  in  Life Insurance Corpn.  Of India  v. Escorts  Ltd. &  ors., [1985] Suppl. 3 S.C.R. 909, that in the facts of this case sections 3(1)(c) and  4(1)(c)  of  the  Act  are  to  be  interpreted accordingly. The person generating and consuming energy were the same  and the  corporate veil should be lifted. Hindalco and  Renusagar   were  in-extricably   linked  up  together. Renusagar  had   in  reality  no  separate  and  independent existence  apart   from   and   independent   of   Hindalco. Consumption of energy of Hindalco is consumption of Hindalco from its  own source of generation. Rates of duty applicable to own  source of  generation had  to  be  applied  to  such consumption-1 paisa  per unit  for the  first two generating sets and nil rate in respect of 3rd and 4th generating sets. In the facts of this case, the corporate veil must be lifted and Hindalco  and Renusagar should be treated as one concern and the  consumption of  energy by Hindalco must be regarded

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as consumption  by Hindalco  from own  source of generation. The appeal  directed against  this finding of the High Court was rejected. [668D-H;669A-B]       Coming  to the  challenge to  the order quashed by the High Court,  the dominance of public interest is significant according to the provisions of sub-section (4) of Section 3. In view of the ceilings prescribed, the power conferred upon the State  under Section  3(1) of the Act by itself is valid and does  not amount  to excessive  delegation. The  primary purpose of  the Act was to raise the revenue for development projects.  Whether,   in  a   particular  situation,   rural electrification and  development of  agriculture  should  be given priority  or electricity  or development  of aluminium industry should  be given  priority or  which is  in  public interest, are  value judgments  and the  legislature is  the best judge.  What was  paramount before  introduction of the development programme  and how the funds should be allocated and how  far the  government considers a negligible increase and rise in the cost of aluminium for the purpose of raising monies for  other  development  activities  are  matters  of policy to be decided by the Government. It is 631 true that the question regarding public interest and need to promote indigenous  industrial production  was related  with the question  of exemption  of duty,  but a matter of policy should  be  left  to  the  Government.  In  its  order,  the Government had  adverted itself  to all  the aspects of sub- section (4)  of section  3 of  the Act.  Certain  amount  of encouragement was given to Hindalco to start the industry in a backward  area. After considerable period, a very low rate of  duty  was  charged.  If  other  sectors  of  growth  and development are  needed, for  example, food, shelter, water, rural  electrification,   the  need   for  encouragement  to aluminium industry  had to  be subordinated by a little high cost because  it is  a matter  on which  the  Government  as representing the  will of the people is the deciding factor. Price fixation,  which is  ultimately the  basis of  rise in cost because  of the  rise of  the electricity duty is not a matter  for  investigation  of  Court,  Sub-section  (4)  of section 3  of the Act in the set up is quasi-legislative and quasi-administrative in  so far  as  it  has  power  to  fix different rates  having regard  to certain factors and in so far as  it has  power to  grant exemption  in some cases, is quasi-legislative in  character. Such  a  decision  must  be arrived at objectively and in consonance with the principles of natural  justice. With  regard to the nature of the power under section  3(4) of  the Act when power is exercised with reference to  any  class  it  would  be  in  the  nature  of subordinate legislation but when the power is exercised with reference to  individual it  would be administrative. If the exercise  of   power  is   in  the   nature  of  subordinate legislation the  exercise must  conform to the provisions of the statute.  The High  Court was  right only to the limited extent that  all the  relevant considerations  must be taken into account  and the  power  should  not  be  exercised  on irrelevant considerations,  but singular consideration which the High  Court had  missed in  this case  is  the  factors, namely, the  prevailing charges  for the supply of energy in any area,  the generating capacity of any plant, the need to promote industrial  production generally  or  any  specified class thereof  and other  relevant factors  cannot be judged disjointly. These  must be  judged in  adjunct to the public interest and  that public  interest is  as mentioned  in the preamble to  raise revenue. All that the section requires is that these factors should be borne in mind but these must be

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subordinate to the executive decision of the need for public interest. The  power conferred  on the  State Government  of administrative  nature   must  be  in  accordance  with  the principles of  natural justice to a limited extent. [671F-G; 672D-E; 673D-H]      The  exercise   of   power   whether   legislative   or administrative will  be set aside if there is manifest error in the  exercise of  such power or the exercise of the power is manifestly arbitrary. Similarly,if the power has 632 been exercised  on a non-consideration or non-application of mind to  relevant factors,  the exercise will be regarded as manifestly   erroneous.   If   a   power,   legislative   or administrative, is  exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power  will   stand  vitiated.  This  case  related  to  the particular  facts   and  circumstances   of  an  individual- Hindalco. The  facts and  circumstances of the case had been examined  in  consonance  with  the  principles  of  natural justice and  considered subject to public interest. Hindalco had made profits much more than it had before the imposition of the  duty. The adequacy of the profits or whether it made much more  profits is not a consideration which must prevail over public  interest and  the Government  having taken into consideration this  factor, did not commit any error and the High Court  was in  error in  setting aside the order of the Government. The cost of power to a similar industry in other States was  a relevant  factor and  the State  was  under  a mandatory duty  to consider  the same.  The State  had taken note of  all these  factors, and  considering the prevailing practice of levy of electricity duty in other States as well as the  provisions of  section 3(4),  the Government came to the conclusion  that there was no justification for allowing exemption from  electricity duty  to Hindalco,  and did  not commit any  error. The factor of assurance of cheap power by the Government  did not  fore-close the  public interest  of raising public  revenue. The  impugned order  did not suffer from  the   vice  of   non-application  of   mind  or   non- consideration of the relevant factors. The High Court was in error in interfering with the order of the Government in the manner it did. [676G-H; 677A-H; 678A]      Natural justice in the sense that a party must be heard before hand  need not  be directly  followed in  fixing  the price. l  here is scope for trial and error in the sphere of price fixation  which is more in the nature of a legislative measure. Judged by that standard, the impugned order in this case was  not bad.  The Government  did not act in violation either of  the principles  of natural justice or arbitrarily or in  violation of  the previous  directions  of  the  High Court. [678F; 679D; 680C]      The High  Court  should  have,  allowed  the  claim  of Hindalco for  the reduced  rate of  bill on  the basis  that Renusagar Power plant was its own source of generation under section 3(1)(c)  and the  bills should have been made by the Board on  that  basis.  The  High  Court  was  in  error  in upholding  the   respondents’  contention   that  the  State Government acted improperly and not in terms of section 3(4) of the  Act and  in violation  of the  principles of natural justice. The Judgment of the High Court was set aside to the extent indicated above and State Government’s impugned order was restored subject to the modification of the bills on 633 the basis  of own  source of  generation; Hindalco  must  be given the  benefit of  the rate applicable to its own source of generation from Renusagar plant. [680D-F]

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    Per  S.  Ranganathan,  J  (Concurring):  Agreeing,  his Lordship held  that on  the second issue it was difficult to define the  precise nature  of the  power conferred  on  the State under  Section 3(4)  of the  Electricity Duty Act, and expressed doubts  whether the  sub-section could  at all  be interpreted as conferring a right on individual consumers to require that,  in the light of the material adduced by them, the  rates   applicable  to  them  should  have  been  fixed differently or that they should have been exempted from duty altogether. However,  his  Lordship  observed  that  it  was unnecessary to  pursue this  aspect further  as his Lordship agreed with  the conclusion  of Sabyasachi Mukharji, J. that in this case the respondent’s representations had been fully considered and  the requirements of natural justice had been fulfilled and  that there  was no  warrant to interfere with the order of the State Government. [680H; 681A-B]      Chiranjit Lal  Anand v.  State of  Assam & Anr., [1985] Suppl. 2  S.C.R. 385;  State of  U.P. v. Hindustan Aluminium Corpn. Ltd.,  [1979] 3  SCR 709;  J. K.  Cotton  Spinning  & Weaving Mills Co. Ltd. v. State of V.P. & Ors., [1961] 3 SCR 185;M/s. Girdharilal  & Sons  v.BalbirNath  Mathur  &  Ors., [1986] 2  SCC 237  at 241,  246;  State  of  Tamil  Nadu  v. Kodaikanal Motor  Union (P) Ltd., [1986] 3 SCC 91 at 100; D. Sanjeevayya v.  Election Tribunal, A.P. & Ors., [1967] 2 SCR 489,  492;   Western  Coalfields   Ltd.  v.   Special   Area Development Authority,  Korba &  Anr., [1982] 2 SCR 1 at 17; Andhra Pradesh  State Road  Transport Corpn. v. The l.T.O. & Anr., [1964]  7 SCR  17; Tamlin  v. Hannaford, [1950] KB 18; Aron Salomon  v. A.  Salomon & Co. Ltd., [1897] AC 22 at 27, 30, 31; Western Coalfields Ltd. in Rustom Cavasjee Cooper v. Union of  India, [1970]  3 SCR  530 at  555; Bank Voordel En Scheepvaart N. V. v. Stalford, [1953] 1 Q.B. 248; Kodak Ltd. v. Clark,  [1903] 1  K.B. 505;  DHN Food Distributors Ltd. & Ors. v.  London Borough  of Tomer Hamlets, [1976] 3 AER 462; Harold Holdsworth & Co. (Wakefield) v. Caddies, [1955] 1 All E.R. 725;  Scottish Co-operative  Wholesale Society  Ltd. v. Meyer and  Anr., [1958]  2 All E.R. 66; Charterbridge Corpn. Ltd. v.  Lloyds Bank  Ltd. &  Anr., [1969]  2 All E.R. 1185; Mrs. hall  Richards  Machine  Co.  Ltd.,  v.  Jewitt  (H.M.) Inspector of  Taxes, 36  TC 511, 52, 525, M/s. Spencer & Co. Ltd., Madras  v. The  Commissioner of  Wealth Tax,  AIR 1969 Madras 359;  Turner  Morrisson  &  Co.  Ltd.  v.  Hungerford Investment Trust  Ltd., AIR  1969 Cal.  238; Life  Insurance Corpn. Of India v. Escorts Ltd. & Ors., [1985] 634 Suppl. 3 SCR 909; Devi Das Gopal Krishnan & Ors. v. State of Punjab & Ors., [1967] 3 SCR 557; Ram Bachan Lal v. The State of Bihar,  [1967] 3  SCR 1;  Panama Canal  Company v.  Grace Line,  356   U.S.  309   2  Lawyers’   Edn.   788;   Vincent Panikurlangara v.  Union of  India & others, [1987] 2 S.C.C. 165; Union  of India  & Anr.  v. Cynamide India Ltd. & Anr., [1987] 2  SCR 720;  P.J. Irani  v. State of Madras, [1962] 2 SCR 169  at 179-180,  181, 182; Ryote of Garabandho and Ors. v. Zamindar  of Parlakimedi  &  Anr.,  AIR  1943  P.C.  164; Saraswati Industrial  Syndicate Ltd. etc. v. Union of India, [1975] 1  SCR 956; A. K. Kraipok v. Union of India, AIR 1970 S.C. 150; M/s. Travancore Rayons Ltd. v. Union of India, AIR 1971 S.C.  862; Amal  Kumar Ghatak v. State of Assam & Ors., AIR 1971  Assam 32; Commissioner of Income Tax v. Mahindra & Mahindra Ltd. & Ors., [1983] 3 SCR 773 at 786, 787; Prag Ice JUDGMENT: 293; Shree  Meenakshi Mills Ltd. v. Union of India, [1974] 2 SCR 398;  Laxmi Khandsari,  etc. v.  State of  U.P. &  Ors., [1981] 3  SCR 92;  State of  Orissa v. (Miss) Binapani Devi, [1967] 2  SCR 625;  Mohd. Rashid  v. State of U.P., AIR 1979

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S.C. 592;  S. L.  Kapoor v.  Jagmohan &  Ors., AIR 1979 S.C. 592; Maneka  Gandhi v.  Union of  India, AIR  1978 S.C. 597; India  Sugars   &  Refineries   Ltd.  v.  Amrawathi  Service Co-operative Society  Limited &  Ors.,  [1976]  2  SCR  740, referred to.

&      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2966 of 1986.      From the  Judgment and  Order dated  26.9.1984  of  the Allahabad High Court in Writ Petition No. 3921 of 1982.      R.N.  Trivedi,   Additional  Advocate   General,  Gopal Subramaniam and Mrs. Shobha Dikshit for the Appellants.      B. Sen,  D.P.  Gupta,  N.A.  Raja  Ram  Aggarwal,  N.R. Khaitan, E.D.  Desai, Y.K. Khaitan, Jijina, Sandeep Aggarwal and T.N. Sen for the Respondents.      The following Judgments of the Court were delivered:      SABYASACHI MUKHARJI, J. This appeal by special leave is directed against the judgment and order of the High Court of Allahabad dated 26th September, 1984. The first appellant is the State  of Uttar  Pradesh  impleaded  through  the  Chief Secretary to  the Government  of Uttar Pradesh, Lucknow. The second appellant is the Secretary to the Government of Uttar Pradesh, Department of 635 Energy, Lucknow.  The third  appellant is  one Shri Yogendra Narain, presently acting as Secretary to the Chief Minister, State of  Uttar Pradesh,  Lucknow. At  a particular point of time  Shri   Yogendra  Narain   was  the  Secretary  to  the Department of  Energy. The fourth appellant is the Assistant Electrical  Inspector,   a  functionary   under   the   U.P. Electricity (Duty)  Act, 1952,  Mirzapur Zone,  Rani  Patti, Mirzapur. The fifth appellant is the Collector of Mirzapur.      There are  four respondents  in this  appeal. The first respondent  is  Renusagar  Power  Company  Ltd.  The  second respondent  is  M/s  Hindustan  Aluminium  Corporation  Ltd. Respondent No.  3 is  Shri D.M.  Mimatramka who  resides  at Hindalco  Administrative   Colony,  Renukut,  Mirzapur.  The fourth  respondent  is  Shri  Rajendra  Kumar  Kasliwal  who resides at  Hindustan Aluminium  Corporation Ltd.,  Renukut, District Mirzapur.  Respondents 3  and 4 mentioned above are the shareholders  of the  first respondent  and  the  second respondent,  that  is,  Renusagar  Power  Company  and  M/s. Hindustan Aluminium  Corporation Ltd.  respectively.  It  is stated  that   M/s  Hindustan  Aluminium  Corporation  Ltd., established and  aluminium factory  at Renukut  in  Mirzapur District, U.P.  in 1959.  It is  the case of the respondents that it  was induced  to do  so on  the assurance that cheap electricity  and  power  would  be  made  available  at  the relevant time.  In 1962,  a  plant  of  Hindustan  Aluminium Corporation  Ltd.   for  manufacture   of   aluminium,   was commissioned. M/s  Renusagar Power  Co. Ltd.  a wholly owned subsidiary of  M/s Hindustan  Aluminium Corporation Ltd, was incorporated in  1964. M/s  Renusagar Power Company Ltd. was incorporated separately  and had its own separate Memorandum and Articles  of Association.  On 9th  September, 1967,  the first  generating   unit  of   67.5  MW   in  Renusagar  was commissioned by  M/s Renusagar Power Company Ltd. The second generating unit  of the  company  was  commissioned  on  5th October,  1968.   The  U.P   Electricity  (Duty)  Act,  1952 (hereinafter called  ’the Act’)  came into  force from  15th January,  1953   and  it  sought  to  levy  a  duty  on  the consumption of  electrical energy  in  the  State  of  Uttar

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Pradesh.      In the  Statement of  Objects and  Reasons,  which  was published in U.P. Gazette, it was stated that the programmes of development  of the  State involved  enormous expenditure and. thus additional resources had to be raised, the bulk of which could  only be  raised by  means of fresh taxation. It was stated that the object of the Bill, inter alia, provided as follows:           "A tax  on the  consumption of  electrical  energy           will impose 636           a negligible  burden on  the  consumer  and  is  a           fruitful source  of additional  revenue. The  Bill           has been  so prepared  as to  ensure that  the tax           payable  by  a  person  will  be  related  to  the           quantity of  electricity consumed by him. The Bill           is being introduced with the above object. "       By  virtue of  the provisions  of the U.P. Electricity (Duty) (Amendment)  ordinance, 1959  various amendments were carried out  in the  said Act. In section 2 of the principal Act, a  new  clause,  clause  (hh)  describing  a  scheduled industry was  inserted. By  virtue of  the  aforesaid  newly inserted clause,  the expression  ’scheduled industry’ meant any of  the industries  specified in  the schedule.  In  the proviso to section 3 of the principal Act, after clause (d), a new clause (e) was inserted which provided for non-levy or exemption from the payment of electricity duty on the energy consumed  by  a  consumer  in  a  scheduled  industry.  The. expression which was added was "by a consumer in a scheduled industry". By  virtue of  section 8  of the  Amending Act, a schedule was  added to  the principal  Act. In the schedule, non-ferrous metals and alloys were placed at serial No. 1 in Part of  the schedule  under a  broad heading ’Metallurgical Industries’. It  appears, therefore,  that by  virtue of the aforesaid provisions electricity duty on the energy consumed by M/s  Hindustan Aluminium  Corporation Ltd.  was  exempted from 1st  April, 1959,  the date on which the ordinance came into force.  It was further stated that the U.P. Electricity (Duty) (Amendment)  ordinance, 1959  was  repealed  and  the provisions were  incorporated into  an amending  Act,  viz., U.P. Act  No. 12  of 1959 and termed as the U.P. Electricity (Duty) (Amendment)  Act, 1959.  By virtue of sub-section (2) of section  1, the Amendment Act provided that the Act would be deemed  to have  come into  force with  effect  from  1st April, 1959.  The amendment  Act repealed  the provisions of the U.P.  Electricity (Duty) (Amendment) ordinance, 1959. In section 2,  after clause  (d), the clause which was inserted as a new clause (e) provided that electricity duty would not be leviable  on the  consumption of  energy by a consumer in any  industry   engaged  in   the  manufacture,  production, processing, or repair of goods. Ordinance No. 14 of 1970 was promulgated on 5th August, 1970. The provisions contained in the ordinance were subsequently incorporated in U.P. Act No. 2 of  1971. The amended provisions of U.P. Act No. 2 of 1971 came into  force from 1st April, 1970. The Amendment Act was preceded by U.P. Ordinance No. 14 of 1970. The ordinance was described  as   "the  Uttar  Pradesh  Taxes  and  Fees  Laws (Amendment) ordinance 1970. "By virtue of Chapter III of the said ordinance,  amendments were  sought to  be made  to the Act. Section 3 of the principal Act was 637 substituted by a new section which provided that there would be levied  and paid  to the  State Government  a duty called electricity duty  on the  energy sold  to a  consumer  by  a licensee/Board/the State  Government the Central Government;

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there would  be a  duty on  the consumption  of energy  by a licensee or  the Board  in or  upon the  premises  used  for commercial or  residential purposes, or in or upon any other premises  except   "in  the   construction,  maintenance  or operation of  his or  its works",  and there would be a duty upon the consumption of electricity by any other person from "his own  source of generation." It was provided that a duty was to be determined at such rate or rates as may, from time to time, be fixed by the State Government by notification in the official  gazette. Sub-section (2) of section 3 provided that in  respect  of  certain  classes  of  consumption  the electricity duty would not exceed 25% of the rate charged.      It may  be expedient  to refer to the Prefatory Note of the Act which, inter alia, is as follows:           "Prefatory  Note:   The   minimum   programme   of           development which this State must carry out within           the next three or four years for the attainment of           the objective of a welfare State is set out in the           Five  Year   Plan  drawn   up  by   the   Planning           Commission. This  plan provides for an expenditure           of 13.58  crores of  rupees on  power  development           projects. Such  a huge  expenditure cannot  be met           from  our   present  resources.  It  is,  however,           essential for  the welfare  of the people that the           expenditure should  be incurred  and that  nothing           should be  allowed to  stand in  the  way  of  the           progress of  the plan.  Additional resources  have           therefore to  be found,  the bulk, of which can be           raised only by means of fresh taxation."      Section 3 of the Act provides as follows:           "3. Levy  of electricity  duty.-(1) Subject to the           provisions hereinafter  contained, there  shall be           levied for and paid to the State Government on the           energy:           (a) sold  to a  consumer by a licensee, the Board,           the State Government or the Central Government; or           (b) consumed by a licensee or the Board in or upon           premises  used   for  commercial   or  residential           purposes, or in or 638           upon   any    other   premises   except   in   the           construction, maintenance  or operation  of his or           its works; or           (c) consumed  by any  other person  from  his  own           source of generation; a duty (hereinafter referred           to as  ’electricity duty’) determined at such rate           or rates  as may from time to time be fixed by the           State Government  by notification  in the Gazette,           and such  rate may  be fixed either as a specified           percentage of  the rate  charged or as a specified           sum per unit.                Provided that  such notification issued after           October 1,  1984 but not later than March 31, 1985           may be  made effective on or from a prior date not           earlier than October 1, 1984.                (2) In respect of clauses (a) and (b) of sub-           section (  1),  the  electricity  duty  shall  not           exceed thirty-five per cent of the rate charged.                Provided that  in the case of one-part tariff           where the  rate  charged  is  based  on  units  of           consumption, the  electricity duty  shall  not  be           less than  one paisa  per unit  or more than eight           Paisa per unit.                Explanation-For   the    purposes   of    the           calculation  of  electricity  duty  as  aforesaid,

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         energy consumed  by a  licensee or  the  Board  or           supplied free  of charge  or at  the  concessional           rates to  his or its partners, directors, members,           officers or  servants shall be deemed to be energy           sold to consumers by the licensee or the Board, as           the case  may be, at the rates applicable to other           consumers of the same category.                (3) In  respect of  clause (c) of sub-section           (1), the  electricity duty  shall not be less than           one paisa or more than six paisa per unit.                (4) The  State Government  may, in the public           interest, having  regard to the prevailing charges           for supply  of energy  in any area, the generating           capacity  of   any  plant,  the  need  to  promote           industrial production  generally or  any specified           class thereof  and other  relevant factors, either           fix 639           different rates of electricity duty in relation to           different classes  of  consumption  of  energy  or           allow any exemption from payment thereof.                (5) No electricity duty shall be levied on-                (a) energy consumed by the Central Government           or sold  to the Central Government for consumption           by that Government; or                (b) x          x         x                (c)  energy  consumed  in  the  construction,           maintenance or  operation of  any railway  by  the           Central Government  or sold to that Government for           consumption in  the construction,  maintenance  or           operation of any railway;                (d)   by   a   cultivator   in   agricultural           operations carried  on in  or near his fields such           as the  pumping of water for irrigation, crushing,           milling or treating of the produce of those fields           or chaffcutting.                (e) Energy  consumed in  light upon  supplies           made under the Janta Service Connection Scheme.           Explanation.-For the purposes of clause (e) "Janta           Service Connection Scheme" means a scheme approved           by  the  State  Electricity  Board  for  supplying           Energy to  Harijans, landless  labourers,  farmers           (holding land  not exeeeding one acre), members of           armed forces  (whether serving  or  retired),  war           widows  and  other  weaker  sections  in  district           notified by the State Government."      Section 4 of the Act read as follows:           "4.  Payment  of  electricity  duty  and  interest           thereon.-(1) The  electricity duty  shall be paid,           in such  manner and  within such  period as may be           prescribed, to the State Government.           (a) where  the energy is supplied or consumed by a           licensee,-by the licensee; 640           (b) where  the energy  is supplied  by  the  State           Government  or   the  Central   Government  or  is           supplied  or   consumed  by   the  Board,-by   the           appointed authority; and           (c) where  the energy  is consumed  by  any  other           person from  his own  source of generation,-by the           person generating such energy.                (2) Where  the amount  of electricity duty is           not  paid  by  the  State  Government  within  the           prescribed period  as aforesaid, the licensee, the           Board or  other person  mentioned in clause (c) of

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         sub-section (1),  as the  case may  be,  shall  be           liable. to  pay  within  such  period  as  may  be           prescribed, interest  at the  rate of eighteen per           cent per  annum on  the amount of electricity duty           remaining unpaid until payment thereof is made. "       Section 9 of the Act provides as follows:           "Exemptions. Nothing  in this  Act shall  apply to           any energy  generated by  a person for his own use           or consumption  or to  energy generated by a plant           having a  capacity not  exceeding two  and a  half           killowatts."      M/s. Renusagar  Power Company  Ltd. had in the meantime obtained  a   sanction  under   section  28  of  the  Indian Electricity Act, 1910 to engage in the business of supply of electricity  to   the  second   respondent,  M/s.  Hindustan Aluminium Corporation  Ltd. By  virtue of section 2(f) which defines a  licensee for the purposes of the Duty Act to mean any person  licensed under Part II of the Indian Electricity Act, 1910  and includes any person who has obtained sanction from the  State Government under section 28. Renusagar Power Company Ltd.,  the first respondent herein, was deemed to be a-licensee for  the purposes  of the U.P. Electricity (Duty) Act. By  virtue of  section 2(d)  of the Act, M/s. Hindustan Aluminium Corporation  Ltd. was  a  consumer  since  it  was supplied  energy  by  the  licensee,  M/s.  Renusagar  Power Company Ltd., the first respondent. Thus, the consumption of electricity by  M/s. Hindustan  Aluminium  Corporation  Ltd. under a  contract of  sale by  the licensee  was exigible to duty. In  other words,  clause (a)  of  sub-section  (1)  of section 3  of the Act, as amended, came into operation and a levy of  duty would  take place  on the  energy sold,  to  a consumer by  a licensee.  Clause (a)  of sub-section  (1) of section 4  as newly added provided that where the energy was supplied by a 641 licensee, the  licensee would  be liable  to pay electricity duty. Thus,  by virtue  of the  amended  provisions  of  the Electricity (Duty)  Act, M/s.  Renusagar Power  Co. Ltd. the first respondent  herein was  liable to pay electricity duty in respect.  Of its  supplies to  M/s.  Hindustan  Aluminium Corporation Ltd.      In exercise  of the  powers conferred  by the Amendment Ordinance (U.P.  Ordinance No. 14 of 1970, the provisions of which were  re-enacted in  U.P. Act  No.  2  of  1971),  the Governor on  or about 25th August, 1970 passed an order that with effect from 1st September, 1970 the electricity duty on industrial consumption  would be  levied at  one  paisa  per unit.  On   28th  August,  1970,  the  Governor  ordered  in supersession of  all the  previous orders  that with  effect from 1st  September, 1970  electricity duty  on  the  energy consumed by  the consumers  would be  levied  at  the  rates specified therein. There was further notification dated 30th September,  1970,   issued  in  the  name  of  the  Governor modifying the  terms of the notifications dated 25th August, 1970 and 28th August, 1970.      On or  about 4th  December, 1952 after the inauguration of the First Five Year Plan, electricity duty was imposed to gather additional  revenue for  attaining the objectives set out in  the plan.  The U.P. Electricity (Duty) Act, 1952 was enacted on  4th December,  1952. On 1st April, 1959 in order to mitigate  the hardship  which might  be caused to certain industries  in   the  State,  the  U.P.  Electricity  (Duty) (Amendment) Ordinance,  1959 (U.P.  Ordinance No. 3 of 1959) was promulgated  by the  Governor of  U.P. By  the aforesaid ordinance it  was provided in the first proviso to section 3

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of the  principal Act  that no duty shall be leviable on the energy consumed  by a  consumer  in  a  Scheduled  Industry, including  Non-ferrous  Industries  manufacturing  Aluminium like that  of respondent  No.  2,  Hindalco.  The  aforesaid ordinance was  substituted by  the U.P.  Electricity  (Duty) (Amendment)  Act,  1959  (U.P.  Act  No.  12  of  1959).  It substituted sub-clause (e) in the first proviso of section 3 which reads as follows:           "(e) by  a consumer in any Industry engaged in the           manufacture, production,  processing or repairs of           goods".      In the  year 1959  respondent  No.  2  looking  to  the profitability of  establishing a  factory for manufacture of aluminium, set  up a  plant at Renukut, District Mirzapur in the State  of  U.P.  On  or  about  29th  October,  1959  an agreement was  arrived at  with the State Government and the Hindustan Aluminium Corporation Ltd. (Hindalco) for supply 642 of 55  M.W. electrical  power at  the rate of 1.997717 paise per unit  inclusive of  all charges.  duties  and  taxes  of whatever nature on electricity for 25 years.      In the  year 1962  Hindalco, respondent  No. 2, started production of  aluminium. On  14th October,  1964 respondent No. 2  requested the  State Government  to grant sanction to the Renusagar  Power Company  Ltd., to supply electricity to respondent No.  2. On  12th November,  1964 respondent No. 1 Renusagar Power  Company Ltd.  was  granted  sanction  under section 28 of the Indian Electricity Act, 1910, to engage in the business  of supply  of electricity  to respondent No. 2 Hindalco. There was an agreement on 29th December, 1967 with Hindalco and U.P. State Electricity Board to supply 5.5 M.W. and 7.5  M.W. Of  power. The rate of charges along with levy of sales  tax, etc.  were to be paid by the consumer. On 1st July, 1970,  there was  an agreement  between  Hindalco  and State Electricity  Board to  supply 7.5  M.W. Of  power. The rate of  charges including  levy such as Sales Tax etc. were to be  paid by  the consumer.  On 5th August, 1970, the U.P. Ordinance No.  14 of  1970 was  promulgated further to amend the U.P.  Electricity (Duty) Act, 1952 which came into force from  1st   September,  1970.  By  the  aforesaid  amendment provisions of  sections 3,  4 and  7 were substituted by new sections, sections  3A and  9 were  omitted and  there  were several amendments  in various sections of the original Act. As  a   result  of   the  promulgation   of  the  ordinance, electricity  duty   became  leviable   on   the   industrial consumption as  well as on the energy consumed by any person from his own source of generation. The provisions of section 3 have  been set  out before.  Thereafter  notification  was issued on  25th August, 1970 under which rate of electricity duty on  the energy  consumed for  industrial  purposes  was prescribed  at   one  paisa   per  unit  on  consumption  of electricity with  effect from  1st September,  1970. On  1st September, 1970,  the provisions  of the  ordinance amending U.P.  Electricity   (Duty)  Act,   1952  came   into  force. Electricity duty  became leviable on the respondent No. 1 on the energy  supplied to  Hindalco, respondent  No. 2 for the industrial purposes.  On 28th September, 1970 respondent No. 2, Hindalco,  made an  application under  sub-section (4) of section 3  of the  Act to  the  State  Government  to  grant exemption on  the energy  supplied by  respondent No.  1  to respondent No.  2 for  industrial purposes. On 17th January, 1971 ordinance  No. 14  of 1970  was substituted by the U.P. Electricity (Duty)  (Amendment) Act, 1970. On 26th February, 1971 report was made by the Three-Men Committee appointed to examine the  request of Hindalco for grant of exemption from

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payment of  electricity  duty  on  the  energy  supplied  by Renusagar Power Company Ltd. According to 643 the Committee  the burden  as a  result of the imposition of electricity  duty   did  not   result  in   substantial   or insufferable increase  of the  rate of duty for Hindalco. On 27th August,  1971 a  demand for payment of electricity duty amounting to Rs.59,13,891.80 was raised on respondent No. 1. On 29th  March, 1972  application of  respondent No.  2  for grant of  exemption was  rejected by the State Government on the following reasons:           "(a) That  the intention  of the  legislation  was           clear to  withdraw the  exemption from  payment of           electricity duty  on the industrial consumers with           effect from  1.9.1970 the  facility of  which  was           being availed for a period of more than 11 years.           (b)  That   the  applicant  was  never  given  any           assurance  that   he   will   be   exempted   from           electricity duty nor the applicant is entitled for           any exemption  as a  matter  of  right  under  the           provisions of the amended Act.           (c) That  it was  not in  public interest to grant           them exemption from electricity duty.           (d) That the electricity duty is also being levied           on the Aluminium Industries in other States also.           (e) That  the additional  resources are taken into           account to  give the  final  shape  of  the  State           Development Plans  and with  a view  to fulfil the           requirement  of   these  Development   Plans   the           Electricity Duty  Act was  amended  in  1970.  The           expected income  from this  duty is  essential for           the execution of State Government plans.                (f) It cannot be inferred that the imposition           of electricity  duty will  be an unbearable burden           on Hindalco."      Aggrieved by  the aforesaid  rejection, the respondents filed Writ  Petition No.  4521 of 1972 before the High Court of Allahabad.  On 17th  March,  1973  the  State  Government granted exemption  from payment  of electricity  duty on the energy consumed  by  any  person  from  his  own  source  of generation. Exemption was also granted on the energy sold to a consumer  establishing a factory having capital investment upto Rs.25 laks in the backward district for five years. 644      The High Court by its judgment on 17th May, 1974 in the Writ Petition  No. 4521  of 1972  quashed the  order of  the State  Government  and  directed  the  State  Government  to reconsider the  application of the respondents for exemption in the  light of  the observations made in that judgment. On 6th September,  1975 Hindalco submitted an application again to  the   State  Government  for  reconsideration  of  their previous  application   for  exemption   from   payment   of electricity duty.  In the  meanwhile, the  State  Government filed a  special leave  petition to  this Court  against the judgment and order of the High Court of Allahabad dated 17th May, 1974 in Writ Petition No. 4521 of 1972. In the meantime of 13th November, 1976 an agreement was entered into between the State  Electricity Board  and Hindalco  for supply of 85 M.W. main  supply. The  rate fixed  was 11  paise  per  unit inclusive of  all taxes  of whatever  nature on electricity. Special leave  petition  was,  however,  dismissed  on  28th March, 1977.  In compliance  with the  High Court’s judgment dated 17th  May, 1974,  on 5th  April, 1977 respondents were given an opportunity of hearing by the State Government. For the purpose  of considering the representation and to verify

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the correctness of the data and the profit and loss accounts furnished by  Hindalco in  their printed  Balance Sheets the matter was  got examined  by Shri B.B. Jindal, Controller of Banking  operations,   U.P.  State   Electricity  Board  who submitted his report in 1977. The State Government, however, was not  satisfied with  the report  of Shri B.B. Jindal. On 6th September,  1978 the  matter was  got re-examined by the Chief Electrical  Inspector to Government, Uttar Pradesh. He submitted his  report. The Chief Electrical Inspector in his report compared  the cost  of power of Hindalco with similar industries in  other States. On 5th December, 1978 Secretary of Power discussed the matter with Dr. R. Rajagopalan, Chief Advisor (Costs),  Government  of  India.  Then  a  note  was prepared by  the Secretary,  Power, Government  of  U.P.  in which reference  was made  to  the  above  report  of  Chief Electrical Inspector  to the  Government of  U.P. Thereafter the Chief  Secretary to  the  Government  of  U.P.  On  26th December, 1978  wrote a letter to the Secretary, Ministry of Finance, Government of India, requesting him that the matter may be got examined by the Chief Advisor (Costs), Government of India,  expeditiously. After examination on 29th January, 1979 Dr.  R. Rajagopalan,  Chief Advisor (Costs), Government of India, submitted his report that the effect of imposition of electricity  duty on  the margin  of profit  available to Hindalco has  been very  insignificant. It  did not have any adverse effect on the profitability of Hindalco since such a levy has  been included  in the  cost in  fixing the selling prices of  Hindalco’s products  by the  Government of India. Imposition of  electricity duty  did not  result in reducing the 645 normal profits  of Hindalco  to either  an absolute  loss or such a  small margin of profit that Hindalco was turned into an uneconomic  unit. According  to him the claim of Hindalco for exemption  from levy of electricity duty is not based on justifiable  grounds   of  either   low   profitability   or incapacity of  resources with which to pay. Personal hearing was given to the respondents in view of the directions given by the  High Court.  Report  of  Dr.  Rajagopalan  was  made available to  the respondents. On 28th January, 1980 rate of electricity duty  on  the  energy  consumed  for  industrial purposes was  revised from  one paisa  to two paise per unit applicable from the date of notification, that is, from 16th February, 1980.  There was  an agreement on 24th April, 1980 between  the   State  Electricity  Board  and  the  Hindalco regarding 85 M.W. main supply and 60 M.W. stand by Emergency Supply. Rate  of 28.42  paise per unit was fixed. A personal hearing was  given to the respondents in compliance with the directions  issued  by  the  High  Court.  Respondents  were allowed to  inspect  the  report  of  the  Chief  Electrical Inspector  and   other  reports  available  with  the  State Government were  shown to  them  and  they  submitted  their comments on  the report  of Dr.  Rajagopalan which were duly considered by  the State  Government. A personal hearing was again given  to the  respondents to submit their submissions in support  of their  application for exemption. Respondents were represented  by counsel  during the  course of hearing. After giving  full consideration  to the submissions made in the original and additional representations and the comments dated 23rd August, 1980 on the report of Dr. Rajagopalan and to the  entire material  placed before the State Government, the State  Government came  to the conclusion that the claim for exemption  from levy  of electricity duty was not at all justified on  any ground whatsoever. Accordingly the request for exemption  was disallowed. On 3rd March, 1982 respondent

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No. 1  was asked  to pay Rs.11,96,83,153.80 as the amount of electricity duty  on the energy supplied by it to respondent No.. 2  for industrial  purposes. Respondent No. 1. however, failed to  pay the  aforesaid amount  within the  stipulated time.  On   22nd  March,   1982,  the  District  Magistrate, Mirzapur, was  requested  to  recover  the  said  amount  as arrears of  land revenue. Being aggrieved by the decision of the State  Government, the  respondent filed a Writ Petition No. 3921 of 1982 in the High Court of Allahabad and the High Court issued  stay order  directing the  petitioners not  to take any  proceedings  for  the  recovery  of  the  impugned electricity duty.  On 26th  September, 1984  the High  Court allowed the Writ Petition No. 3921 of 1982 and held that the impugned order  of the State Government was not maintainable in law  and hence  quashed the order of the State Government as well  as the  notice of demand dated 3rd March, 1982. The State 646 Government was  also directed to consider the request of the respondents for  exemption in accordance with the directions issued by  the Division  Bench in  Writ Petition No. 4521 of 1972 and  also in  the light of the observations made in the judgment after  affording an opportunity of personal hearing to the  respondents. Being  aggrieved thereby the appellants have come up in appeal to this Court.      In the  background of  the facts  and the circumstances set-out.  hereinbefore,   we  have   now  to   examine   the correctness of  the judgment  and order  of the  High  Court which is  under appeal. There are two different aspects. One is whether the Renusagar Power Co. Ltd., was ’own’ source of generation of electricity for the Hindalco, in the facts and circumstances of  the case. The second aspect is whether the order passed  by the  State Government, having regard to the nature of  the order  passed, was  in  accordance  with  the principles of  natural justice  in so  far as  the same were applicable to  the facts  of this case. As it is apparent on the state of law mentioned hereinbefore from 1952 to 1970 no duty was  payable if  electricity  was  generated  from  own source of  energy. From  1970 to  1973 duty of one paisa was payable in  respect of  electricity supplied from own source of generation.  However, after  1973 no  duty was payable in respect  of   electricity  supplied   from  own   source  of generation.      ’Own source  of generation  is an  expression connected with the question of lifting or piercing the corporate veil. It is  well-settled that  in interpreting  items in statutes whose primary  object is  to raise  revenue  and  for  which purpose  they   classify  diverse   products,  articles  and substances, resort  should be  had not to the scientific and technical meaning  of the  terms or  expressions used but to the meaning  attached to  them by those dealing in them. See the observations  of this  Court in  Chiranjit Lal  Anand v. State of Assam & Anr., [1985] Suppl 2 SCR 385.      As  mentioned   hereinbefore,   the   application   for exemption was made after disposal of the first writ petition No. 4521/72 by the High Court on 17th May, 1974. Thereafter, the respondent  made another application for exemption under section 3(4) of the Act. The said application was ultimately rejected, which  rejection was  subsequently challenged. The High Court  in the  judgment under appeal on 26th September, 1984 has set aside me order of rejection passed by the State Government.      Was the  High Court  right, is the question involved in this appeal. 647

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Examination of  this question  involves two aspects, namely, what is  the rate  of duty under which various notifications were applicable  to the  energy consumed  by  Hindalco  from Renusagar.  Is  Renusagar  "own  source  of  generation"  of Hindalco within  the  meaning  of  section  3(1)(c)  of  the Electricity Duty  Act, 1952  and the  various  notifications issued thereunder.  The question  whether Renusagar was "own source of  generation" of  Hindalco, is  a mixed question of law and  facts as  correctly contended by Shri Palkhiwala as well as  by Shri Sen appearing on behalf of the respondents. Shri Palkhiwala  appearing  for  the  respondents  submitted before us  the historical  background of  the setting  up of Renusagar Power  Plant. It  was  urged  that  for  producing aluminium by  Hindalco, electricity  is a raw-material.. The Hindalco was set up with a capacity of 20,000 tons per annum on the  basis of sole assurance according to the respondent, given by  the State  of U.P.  that adequate  power would  be given at a very cheap and economical rate. The Government of U.P. in 1959 agreed to give 55 m.w. Of power @1.99 paise per unit. This,  according to the respondents, was in accordance with the  policy of  Central (Government and on the basis of the  report   of  the  various  Committees  set  up  by  the Government.  Our   attention  was  drawn  to  certain  facts appearing in  Vol. A  pages 8-9  which set out the averments made in  the writ petition filed in the instant case. It was stated therein  that aluminium  is an essential raw material in a  large  number  of  industries  of  strategic  national importance and  its production  is of vital public interest. 60% of  the production  of Renusagar  goes to  the  electric industries and  an extra  16% of  the production goes to the utensils manufacturing unit and all the remaining production goes  to   defence,  ordnance,   mint,  transportation   and packaging industry.  Aluminium is, therefore, a commodity of national importance and, as such, is mentioned in Schedule 1 of the  Industries (Development  and Regulation)  Act,  1951 which contains only such industries which have been declared by the  Parliament to  be  of  public  interest.  The  Union Government was anxious to set up new units in private sector as for  want of sufficient foreign exchange such units could not be  set up  in the  public sector.  In  this  connection reliance  was   placed  on  the  report  of  the  Industrial Licensing Enquiry  Committee known  as ’Data  Committee’. In this background  Shri G.D.  Birla who eventually floated the Corporation was prevailed upon to explore the possibility of setting up  of aluminium  plant.  The  Government  of  India appointed a  Committee of Experts headed by Shri Nagarajarao in the  year 1956  for recommending  the location  of a  new Aluminium Plant.      In that  report Shri  Nagarajarao recommended Rihand as one of 648 the places  for setting  up the  Aluminium Plant.  The  U.P. Government was also keen to have the industry located in the State and persuaded Shri G.D. Birla to set up the plant with the assurance  that sufficient  electricity at  constant and concessional  rate   would  be   available.  Here,   it  was reiterated that  the agreement  dated 29th October, 1959 was entered into  called the  parallel agreement  so that at any time  any  one  of  the  Thermal  Power  Stations  could  be maintained independently.      Hindalco was allowed to expand its aluminium production capacity from  time to  time on  the condition that it would instal its  own power plant subject to the further condition that this  power plant could be taken over by the State at a later  date.   To  avoid  take-over  complications  Hindalco

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decided  to   set  up   captive  power   house  through  the instrumentality of Renusagar Power Co., a 100% subsidiary of Hindalco fully  controlled by  Hindalco in  all respects  to supply power to Hindalco only. Reference may be made to page 28 of  Vol. XVI  which is a letter dated 13th February, 1963 written by the Deputy Secretary, Govt. Of India, Ministry of Commerce &  Industry, to  Shri D.P.  Mandelia  of  Hindustan Aluminium Corporation,  New Delhi,  where on the question of power plant it was suggested that as stated by Shri Mandelia a separate  Company may  be  formed  with  the  power  plant project and  the major  portion of the capital subscribed by Hindalco. It  was highlighted  that setting  up of  a  power plant project  was part  of the scheme for meeting the needs of Hindalco for electricity.      All  planning,   designing,  engineering,  purchase  of equipments financing  was done  by Hindalco  exclusively for Renusagar. See  Vol. XVI  Pages 20,  33, 49,  58 & 62 of the paper-book.      The only  object and  purpose of  power  plant  was  to supply  power   and  suit   the  requirements  of  Hindalco. Reference may  be made  to pages  36 & 37 of Vol. XVI of the Paper Book.  According to  Shri Palkhiwala  and Shri  B. Sen from the aforesaid background the following facts emerge:      (a) 1967/1968  Unit  1  &  2  of  Renusagar  went  into      operation.      (b) Renuagar was set up as part and parcel of Aluminium      Expansion Scheme.      (c) All  steps to  set up Renusagar including expansion      were taken by Hindalco. 649      (d) Agency  of Renusagar was set up by Hindalco because      of Take over option by the State.      (e) Renusagar is 100% subsidiary of Hindalco.      (f) Borrowings  of Renusagar arranged and guaranteed by      Hindalco.      (g) Renusagar supplies power to Hindalco only.      (h) There  is only one transmission line from Renusagar      to Hindalco.      (i)  Renusagar  generates  power  only  to  the  extent      required by Hindalco.      (j)  Hindalco  has  complete  control  over  Renusagar.      Hindalco has  undertaken various  obligations  for  the      running of Renusagar.      (k) The agreement between Renusagar and Hindalco is not      a normal  sale purchase agreement. This agreement shows      complete control of Hindalco over Renusagar.      THE CONDITIONS  UNDER THE  INDIAN ELECTRICITY ACT, 1910 APPLICABLE To NORMAL SANCTION HOLDERS AND LICENSEES WERE NOT APPLIED To  RENUSAGAR  BECAUSE  IT  WAS  HINDALCO’S  CAPTIVE SOURCE OF GENERATION. For Instance:           (a) After  the incorporation in 1964 Renusagar was      granted sanction  u/s 28 of the Electricity Supply Act,      1910 to  supply power  to Hindalco  only. See  Vol. XVI      page 64 of the Paper Book.           (b) Since  Renusagar was  not public utility but a      captive plant of Hindalco certain conditions applicable      to normal  sanction holders  in the  nature  of  public      utilities but  inapplicable to  Renusagar were  deleted      from the  sanction. See  Vol. XVI  page 74 of the Paper      Book.      FOR THE  PURPOSE OF  EXPANSION OF  HINDALCO AS  WELL AS RENUSAGAR THE GOVT. OF INDIA AND THE 650 STATE OF  U.P. SPECIFICALLY  PROCEEDED ON  THE FOOTING  THAT HlNDALCO HAD  ITS "OWN  SOURCE OF  GENERATION" IN RENUSAGAR,

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SINCE RENUSAGAR WAS THE CAPTIVE POWER PLANT OF HINDALCO.      (a) Hence,  for all  practical purposes  Renusagar  was treated as  part and  parcel  of  the  Hindalco’s  expansion programme. In  1962 Hindalco  decided to  expand capacity to 60,000 tons  per annum.  This meant need of extra power. The U.P. Government  and the  UPSEB expressed  inability to give the extra power. The U.P. Govt. had no objection if Hindalco set up  its own power-house with an option to the U.P. Govt. to take  over the power plant later. On this important basis Hindalco was  granted permission  to set  up  captive  power plant. Reliance  was placed  in this connection on Vol. XVI, pages 4,  6, 7,  15 and  16 of  the  Paper  Book.  Also  see sections 34,  36, 37,  & 44  of the  Electricity Supply Act, 1910.      (b) Thus  Hindalco was  allowed to expand its aluminium production on  the condition of its setting up its own power plant which was part and parcel of the expansion scheme. See in this  connection Vol.  XVI, pages  22 &  25 of  the Paper Book.      (c) When Hindalco decided to expand its aluminium plant again from  60,000 to 1,20,000 tons per annum, the expansion of the  powerhouse was  a condition  precedent to  aluminium expansion.  All   negotiations,  requests   for  permission, correspondence with  authorities, intimation from Government were done  and received  by  Hindalco.  In  this  connection reference may  be made  to Vol. XVI, pages 129 to 134, 15 1, 157 & 180 of the Paper Book.      (d) Renusagar  was allowed  expansion limited  to power requirement of  Hindalco for  captive use  of Hindalco.  See Vol. XVI, pages 145, 159, 161, 185, 187 and 189 of the Paper Book.      (e) All Government authorities including Central Govt., State of  U.P. and  U.P. State Electricity Board have always treated Renusagar  to be  "Captive Plant"  as  either  "Self Generation" or  "own generation"  or  "own  Plant"  or  "own Source of  generation" or  "Generation for self-use" or "own use" etc.  Of Hindalco.  In this connection reference may be made to  Vol. XVI, pages 81, 90-91, 112, 135A, 139-140, 146, 150, 152,  160, 163,  167, 169, 172, 183A & 184 of the Paper Book. It  further appears  that 100%  power-cuts-stoppage of electricity from  the State  grid-were imposed  on those who had 651 50% or  more of  their "own  source of generation". Hindalco suffered 100%  power cuts  precisely on this account. It was submitted on  behalf of  the respondents  and in our opinion rightly that  the words "own source of generation" could not have one  meaning for  power cuts  and another  meaning  for concession/exemptions under the same law.      It further  appears that  the  Secretary,  Power,  U.P. Govt.  submitted   a  note   to  the  Advisory  Council  for recommending 100% powercuts on Hindalco as Hindalco had more than 50% power supply from its own source of generation i.e. Renusagar. See Vol. XVI, page 163 of the Paper Book.      Notification under  section 22B of the Act as appearing in Vol. XIII of the Paper Book was accordingly issued.      The U.P.S.E.B.  served notice  on  Hindalco  to  reduce drawal to zero. See Vol. XVI, page 167 of the Paper Book.      The U.P. Government refused exemption from power-cut to Hindalco on  the ground  that  it  had  its  own  source  of generation. See Vol. XVI, page 172.      In Court proceedings Hindalco challenged power-cut. The Government filed  affidavits, always  asserting Renusagar to be "own  source of  generation" of  Hindalco. See Vol. XXIV, pages 68 to 75 of the Paper Book.

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    Indeed, it  appears from the observations of this Court in State  of U.P. v. Hindustan Aluminium Corpn. Ltd., [1979] 3 SCR  709 that  this Court  proceeded  on  the  basis  that Renusagar had its own source of generation.      It is  further  said  that  the  appellants  have  also admitted  in  the  present  proceedings  the  position  that Hindalco had  in Renusagar  its own  source  of  generation. Reliance has been placed on:      (a) Section  9 of the Duty Act as it existed upto 1970.      See Vol. XVIII, page 5 of the Paper Book.      (b) Three  men Committee  Report on  exemption  treated      Renusagar as own generation. See Vol. A page 158 at 163      of the Paper Book. 652      (c)  The   Government  of   U.P.   rejected   exemption      application. Vol. A page 3 of the Paper Book.      (d) Counter-affidavit  in the  first petition.  Vol. X,      pages 26, 27 & 32 of the Paper Book.      (e) Counter-affidavit  in  second  petition.  Vol.  XI,      pages 93 & 130 of the Paper Book.      (f) See  the Judgment of the Allahabad High Court. Vol.      A, pages 7, 10-11, 13 & 19.      (g) Petition  of the U.P. Government under Article 138.      Vol. XI page 134.      (h) It  is also  significant to  note the special leave      petition filed by the U.P. Government. Reference may be      made to Vol. XI, pages 139 to 141.      (i) Reference may be made to Rajagopalan Report, Vol. A      pages 237 & 265 of the Paper Book.      (j) See  the affidavit  of State  of U.P.  in Allahabad      High Court in present proceedings. Vol. A, pages 71-72,      76 & 84.      (k) The  High Court’s  Judgment dated  26.9.84  in  the      present proceedings. Vol. B, pages 391-397.      All  these   factors  have  to  be  borne  in  mind  in considering whether  Renusagar was  Hindalco’s own source of generation. Counsel  for the  respondents drew our attention to the fact that in the manufacture of aluminium, electrical energy is raw-material and between 16,000 to 20,000 units of energy  are   required  for  the  production  of  1  ton  of aluminium. The impact of the imposition of duty on energy @1 paise  per  unit  would  be  an  increase  in  the  cost  of production of  aluminium by  Rs.160 to  Rs.200 per  ton. The impact of  the imposition  of duty  on energy  @ 6 paise per unit will  be an increase in the cost of aluminium by Rs.960 to Rs.1,200 per tan.      Hindalco was  incorporated in  1959 and  its  aluminium plant commenced production in 1962 with a capacity of 20,000 tons of  aluminium ingots  p.a. Hindalco obtained electrical energy required  for the  manufacture of  aluminium  to  the extent of 55 MW from the State/ 653 Board  Hydle   power  under   an  agreement  dated  29.10.59 @1.997717 paise  per unit  inclusive of  all charges, duties and taxes  of whatever  nature  on  electricity.  Hindalco’s plant was located at Renukut because of their assurances for power supply at economical rates.      The first  expansion of  Hindalco from 20,000 to 60,000 tons p.a.  required further  electricity. According  to  the respondent  the   basic  planning  of  the  power  plant  at Renusagar, the  arrangement  for  its  design,  engineering, purchase and  for importing  the plant and for financing the whole project were done by Hindalco.      Renusagar, which  is a  100%  subsidiary  of  Hindalco, wholly owned and controlled by Hindalco, was incorporated in

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March 1964. Hindalco established the power plant through the agency of  Renusagar in  order to avoid complications in the case of a take over of the power plant by the State/Board of which there  could be  a possibility  as power generation is generally not  permitted in  normal  conditions  in  private sector      In this  background what  was highlighted  on behalf of the respondent was that the sanction under section 28 of the 1910 Act  given to  Renusagar and  its amendment established that Renusagar  was not  a normal  type  of  sanction  under section 23  of the 1910 Act as the holder could supply power only to Hindalco.      The first  generating unit  in Renusagar  commenced  on 9.9.67 and  the second  one commenced on 5.10..68. All steps for the  expansion of  the power in Renusagar so as to match the power  requirement of Hindalco’s expansion were taken by Hindalco  even   though  Renusagar  had  been  incorporated. Applications for all the necessary sanctions and permissions were made by Hindalco.      Permissions  and  sanctions  were  first  intimated  to Hindalco even  though Renusagar  was in  existence. See Vol. XVI, pages  129-134 &  149 of the Paper Book. Changes in the sanctions  and/or   permissions  granted  were  obtained  by Hindalco and  not by Renusagar. See Vol. XVI, pages 157, 180 of the  Paper Book.  The expansion  of the  power  plant  in Renusagar was  to exactly match the requirements of Hindalco for the  production of aluminium. The expansion of the power plant in  Renusagar was  part and parcel of the expansion of the aluminium  plant of  Hindalco. See  Vol. XVI, pages 145, 159, 161, 185, 187 & 189 of the Paper Book. 654      The third  generation unit  in Renusagar  commenced  in November 1981  and the fourth generating unit in April 1983. Hindalco consumes  about 255  MW power  out of  which 250 MW comes from  Renusagar and  5 MW by way of main supply and 15 MW by way of emergency supply is made by the Board.      It was  emphasised on behalf of Hindalco that the power plants at  Renusagar were  set up  as part and parcel of the aluminium expansion  scheme of  Hindalco and the only object and purpose  of the  power plants in Renusagar was to supply power to suit the needs of Hindalco.      All steps  to set  up the  power plant in Renusagar and its further  expansion were  taken by  Hindalco.  The  power plant was set up by Hindalco through the agency of Renusagar (100%  subsidiary   and  wholly   owned  and  controlled  by Hindalco) to  avoid complications  in the event of take over by the State/Board.      All the  borrowings  of  Renusagar  were  arranged  and guaranteed  by   Hindalco.  Further,   there  is   only  one transmission line  going out  of Renusagar and the same goes to Hindalco.  Renusagar can  supply power  only to Hindalco. Renusagar generates  power only  to the  extent required  by Hindalco.  Hindalco  has  complete  control  over  Renusagar including its  day-to-day operations.  This will  be evident from the  applications with  regard to  running of Renusagar Power Plant Station undertaken by Hindalco to the Board. See Vol. XV, pages 104, 118, 124 of the Paper Book.      The agreement  between Renusagar and Hindalco indicates this was  not a  normal sale-purchase  agreement between two independent persons at arms length. The price of electricity is determined according to the cash needs of Renusagar. This covenant  also  shows  complete  control  of  Hindalco  over Renusagar.      It was  submitted before us that if looked at properly, Renusagar  was  Hindalco’s  own  source  of  generation  and

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according to  the respondent  an analysis  of the  different provisions of  the Amendment  Act, makes the position clear. Submissions were  made on  the construction  of section 3 of the Act  and also that the difference in language of section 2(g)(c) and  old section  9 is significant. Ambit of section 3(1)(c) is  wider than  the  old  section  in  view  of  the addition of  the words  ’source of generation’ which must be given their  full meaning.  We have set-out hereinbefore the provisions of  sections 3(1)(c)  and 9 of the Act. Rule 2(g) referred to in the order shows that the expression ’any 655 person’ in  section 3(1)(c)  would mean  a person other than licensee or  a Board who consumes energy from his own source of generation.  Hindalco fixes  in the expression ’any other person’ under  section 3(1)(c)  and it  consumes energy from its own  source of  generation.  Generation  being  done  by Renusagar, it  was pointed  out that  Rule 2(g)  of the U.P. Electricity Duty  Rules, 1952  supports  this  plea  of  the respondents. It  should be borne in mind that the expression ’own source of generation’ which has not been defined in the Duty Act or 1910 Act, cannot be regarded as a term of art.      The various  documents and  letters placed  before  the Court and referred to hereinbefore indicate that all persons and authorities  dealing and conversant with this matter had consistently treated  Renusagar as  own source of generation of Hindalco.  In the  power-cuts matter under section 22B of 1910 Act,  100% cut  was imposed  on Hindalco on the footing that  it   has  its   own  source  of  generation.  All  the authorities including the State and the Board have all along treated Renusagar  as own  source of generation of Hindalco. The High  Court as  well as this Court had proceeded on that basis. In a note with the Advisory Counsel dated 31.5.77 the Secretary, Power Deptt. Of the State Govt. treated Renusagar as own source of generation of Hindalco.      In the  proceedings  under  the  Electricity  Duty  Act itself,  it  was  the  case  of  the  State  that  Renusagar generation was  by Hindalco  for  its  own  use  within  the meaning of  section 9  of the Duty Act. It was also the case of the  State that Renusagar was own source of generation of Hindalco and  since by its amendment in 1952 the Legislature had shown  an intention  to  levy  duty  on  own  source  of generation, Hindalco  was not entitled to exemption. It was, therefore, submitted  that Renusagar  must  be  regarded  as alter ego  of Hindalco  i.e., own  source of  generation  of Hindalco within  the meaning  of section 3(1)(c) of the Duty Act.      The word  "own" is  a generic  term,  embracing  within itself  several   gradations  of  title,  dependent  on  the circumstances, and it does not necessarily mean ownership in fee simple;  it means,  "to  possess  to  have  or  hold  as property". See  Black’s Law  Dictionary, 5th Edn. p. 996. It was further  submitted that  by the  1970 Amendment Act, the Legislature intended  to cover  a wide  area  under  section 3(1)(c) than  under the  old section  9. If Renusagar is the own source  of generation  of Hindalco  then the consumption clearly falls  within section  3(1)(c). The three clauses of section 3(1),  it was  submitted, had to be read together by way of harmonious construction. Section 3(1)(a) should 656 not be so construed as to defeat the aim of section 3(1)(c). In the  case of  harmonious construction  what needs  to  be looked at,  is the  dominant or  the primary  element in the provisions. Thus  section 3(1)(c)  should not be interpreted to cover all the cases of own generation notwithstanding the fact that  a sale  may be  involved and  to that  extent the

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transaction should be excluded from the operation of section 3(1)(a). Alternatively,  it was  submitted that if the three clauses were to be treated as independent of each other then the result  of construction  that each provision would yield to special  provisions applied  should be  applied as a part and parcel of harmonious construction of this section.      In this approach clause (c) of section 3(1) ought to be regarded as  dealing with  the special  situation, namely, a person consuming  from its  own source  of generation  while provisions of  clause (a) of section 3(1) should be regarded as general  provisions dealing  with the  cases of  sale and consumption generally.  The aforesaid  construction would be in harmony, it was urged, with the object and purpose of the legislation. Reliance was placed on the observations of this Court in  J.K. Cotton  Spinning &  Weaving Mills Co. Ltd. v. State of  U.P. &  Ors., [1961]  3 SCR 185, where at page 193 this Court  insisted on  harmonious construction  and not on literal construction.  Also see  M/s Girdhari  Lal & Sons v. Balbir Nath  Mathur &  Ors., [1986]  2 SCC 237 at 241 & 246; State of  Tamil Nadu  v. Kodaikanal  Motor Union  (P)  Ltd., [1986] 3  SCC 91  at 100  and  D.  Sanjeevayya  v.  Election Tribunal, A.P. & ors., [1967] 2 SCR 489 at 492.      On behalf  of the  respondents and  in support of their contention, it  was urged  that the  harmonious construction would advance purpose and object of the legislation inasmuch as it  was clearly one of the purposes of the legislation to treat captive  generation or  self-generation as  a separate category and  to confer  benefits  on  the  same  in  public interest. Our  attention was drawn to the notification dated 17th March,  1973 which  appears at  Vol. XVIII, page 34. It was further  contended on  behalf of  the  respondents  that interpretation of  section 3(1)(c)  of  the  Act  would  not depend on  the manner  in which  a person  might  choose  to organise his  affairs. Further  that there  was no  rational distinction having  a nexus with the object of the Duty Act, where a  person generating  electrical  energy  himself  was consuming the  same and  a person who engaged another person to generate  electrical energy exclusively for and on behalf of his  complete control and who consumes all the electrical energy so  generated. Accordingly  it was  urged that such a distinction being arbitrary and irrational, it would be 657 violative of  Article 14  of the Constitution. Hence, it was contended that  a construction  of the Duty Act, which would make such a distinction, must be avoided.      This naturally brings us to the question of lifting the corporate veil  or piercing  the corporate  veil as we often call it.  On behalf  of the appellants, however, it was very strongly urged  that in  this case  there was  no ground for lifting  the   corporate  veil  and  Shri  Trivedi,  learned Additional Advocate-General, State of U.P., who was assisted by Shri  Gopal Subramaniam,  submitted before  us  elaborate arguments  and   made  available  to  us  all  the  relevant documents, urged  that there was no warrant either in law or in fact  to lift the corporate veil and to treat Renusagar’s plant as  Hindalco.s own  source of generation. Shri Trivedi urged that  facts  in  this  case  do  not  justify  such  a construction and  the law does not warrant such an approach. We  may   say  that   Shri  Trivedi  mainly  relied  on  the proposition that  normally the  Court  has  disregarded  the separate legal  entity of  a Company  only where the Company was  formed   or  used   to  facilitate   evasion  of  legal obligations. He  referred us  to the  observations  of  this Court in Western Coalfields Ltd. v. Special Area Development Authority, Korba  & Anr., [1982] 2 SCR 1 at 17. The facts of

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that case  were,  however,  entirely  different  and  it  is useless to  refer to  them but  at page  17 of  the  report, Chandrachud,  C.J.   speaking  for   the  Court  quoted  the observations in  Andhra Pradesh  State Road Transport Corpn. v. The  I.T.O. & Anr., [1964] 7 SCR 17, where this Court had held  that  though  the  Transport  Corporation  was  wholly controlled by  the State Government it had a separate entity and its  income was  not the income of the State Government. While delivering  the Judgment  in that case Gajendragadkar, C.J., referred to the observations of Lord Denning in Tamlin v. Hannaford,  [1950] KB  18 where Lord Denning had observed that the  Crown and  the corporation  were different and the servants of the corporation were not civil servants.      Chandrachud, C.J., relied on the aforesaid observations and referred to Pennington’s Company Law 4th Edn., pages 50- 51, where it was stated that there were only two cases where the Court  had disregarded  the separate  legal entity  of a Company and  that was done because the company was formed or used to facilitate the evasion of legal obligations.      The learned  editor of  Pennington’s Company  Law,  5th Edn., at page 49 has recognised that this principle has been relaxed in subsequent cases. He states that the principle of company’s separate legal 658 entity has  on the  whole been  fully applied  by the Courts since Salomon’s  case. Corporate  veil has been lifted where the principal  question before  the court was one of company law, and  in some situations where the corporate personality of the  company involved  was really of secondary importance and the application of the old principle has worked hardship and injustice.  In England, there have been only a few cases where the  court had  disregarded  the  company’s  corporate entity and  paid attention  to where  the real  control  and beneficial ownership  of the company’s undertaking lay. When it had done this, the court had relied either on a principle of public  policy, or  on the principle that devices used to perpetrate frauds  or evade  obligations will  be treated as nullities, or  on a  presumption of  agency  or  trusteeship which at first sight Salomon’s case seems to prohibit. Again at page  36 of the same Book, the learned author notes a few cases where  the  courts  have  disregarded  separate  legal entity of  a company and investigated the personal qualities of the  shareholders or the persons in control of it because there were  overriding. public  interests to  be  served  by doing so.      Indubitably, in  this case  there was  no  question  of evasion of  taxes but  the manner  of treatment of the power plant of  Renusagar as  the power  plant of Hindalco and the Government taking  full advantage of the same in the case of power cuts  and denial  of supply of 100% power to Hindalco, in our  opinion, underline  the facts  and, as  such,  imply acceptance and  waiver of  the position that Renusagar was a power plant  owned by Hindalco. Shri Trivedi natually relied on several  decisions which  we shall briefly note in aid of the submission  that Renusagar’s  power plant  could not  be treated as  Hindalco’s power  plant. He  referred us  to the well-known case  of Aron  Salomon v.  A. Salomon & Co. Ltd., [1897]  AC  22  at  27,  30-31,  43.  56  to  emphasise  the distinction between  the shareholders  and the company. This point of  view was  emphasised by  this Court  also in which Chandrachud, CJ.,  relied  on  Western  Coalfields  Ltd.  in Rustom Cavasjee  Cooper v.  Union of India, [1970] 3 SCR 530 at 555,  where this  Court held  that a  Company  registered under the  Companies Act  was a  legal person,  separate and distinct  from  its  individual  members.  Property  of  the

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Company was  not the  property of  the  shareholders.  These propositions, in our opinion, do not have any application to the facts  of the  instant case.  Shri Trivedi also drew out attention to  the Bank  Voor Handel  En Scheepvaart N. V. v. Stalford, [1953]  1 QB  248, where  in the  context  of  the international law property belonging to or held on behalf of a Hungarian  national came  up  for  consideration  and  the distinction  between   a  shareholder   and  a  company  was emphasised and highlighted. 659      In Kodak  Ltd. v.  Clark, [1903] 1 KB 505, the Court of Appeal in  England while  dealing with  an  English  company carrying on  business in the U.K. Owned 98% of the shares in a foreign  company, which gave it a preponderating influence in the  control, election  of directors etc., of the foreign company. The  remaining shares  in the foreign company were, however, held  by independent  persons,  and  there  was  no evidence that  the English  company had  ever  attempted  to control or  interfere with  the management  of. the  foreign company, or  had any power to do so otherwise than by voting as shareholders.  It was  held that  the foreign company was not carried  on by the English company, nor was it the agent of the  English company,  and that  the English  company was not, therefore,  assessable to income tax. Renusagar was not the alter  ego of  Hindalco, it  was submitted. On the other hand these  English cases  have often  pierced the  veil  to serve the  real aim  of the parties and for public purposes. See in  this connection  the observations  of the  Court  of Appeal in  DHN Food  Distributors Ltd.  &  Ors.,  v.  London Borough of  Tower Hamlets,  [1976] 3  AER  462.  It  is  not necessary to  take into  account the  facts of that case. We may, however,  note that in that case the corporate veil was lifted to confer benefit upon a group of companies under the provisions of  the Land  Compensation Act,  1961 of England. Lord Denning  at page  467 of  the report  has made  certain interesting observations  which are  worth repeating  in the context of the instant case. The Master of the Rolls said at page 467 as follows:           "Third, lifting the corporate veil. A further very           interesting point  was raised  by counsel  for the           claimants on company law. We all know that in many           respects a  group of companies is treated together           for the purpose of general accounts, balance sheet           and profit  and loss  account. They are treated as           one  concern.  Professor  Gower  in  his  book  on           company law  says: ’there is evidence of a general           tendency to  ignore the separate legal entities of           various companies  within a  group,  and  to  look           instead  at  the  economic  entity  of  the  whole           group’. This  is especially the case when a parent           company owns  all the  shares of the subsidiaries,           so much  so that  it can control every movement of           the subsidiaries.  These  subsidiaries  are  bound           hand and  foot to  the parent  company and must do           just what  the parent  company  says.  A  striking           instance is  the decision of the House of Lords in           Harold Holdworth & Co. (Wakefield) Ltd v. Caddies.           So here.  This group  is virtually  the same  as a           partnership in  which all  the three companies are           partners. They 660           should not  be treated  separately  so  as  to  be           defeated on  a technical point. They should not be           deprived of  the compensation  which should justly           be payable  for disturbance.  The three  companies

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         should, for  present purposes,  be treated as one,           and the  parent company, DHN, should be treated as           that one.  So  that  DHN  are  entitled  to  claim           compensation accordingly. It was not necessary for           them to  go through  a conveyancing  device to get           it.           I  realise   that  the   President  of  the  Lands           Tribunal, in  view  of  previous  cases,  felt  it           necessary to  decide as  he did.  But now that the           matter has  been fully discussed in this court, we           must decide  differently from him. These companies           as a  group are  entitled to compensation not only           for the  value of  the land, but also compensation           for  disturbance.   I  would   allow  the   appeal           accordingly."      Lord Justice  Goff proceeded  with caution and observed as follows at pages 468 & 469 of the report:                Secondly, on  the footing that that is not in           itself sufficient,  still, in my judgment, this is           a case  in which  one is  entitled to  look at the           realities of  the  situation  and  to  pierce  the           corporate veil.  I wish  to  safeguard  myself  by           saying that  so far as this ground is concerned, I           am relying on the facts of this particular case. I           would not  at this  juncture accept  that in every           case where  one has  a group  of companies  one is           entitled to  pierce the veil, but in this case the           two subsidiaries  were both wholly owned; further,           they   had   no   separate   business   operations           whatsoever; thirdly, in my judgment, the nature of           the question  involved is  highly relevant, namely           whether the  owners of  this  business  have  been           disturbed in their possession and enjoyment of it.           I find support for this view in a number of cases,           from which  I would  make a  few brief  citations,           first from  Harold Holdworth & Co (Wakefield) Ltd:           v. Caddies where Lord Reid said:           ’It was  argued that the subsidiary companies were           separate legal entities, each under the control of           its own  board of directors, that in law the board           of the  appellant company  could  not  assign  any           duties to  anyone in relation to the management of           the subsidiary companies, and that, there- 661           fore,  the   agreement  cannot   be  construed  as           entitling them  to assign  any such  duties to the           respondent. My  Lords, in my judgment, this is too           technical an  argument. This is an agreement in re           mercatoria, and  it must be construed in the light           of the  facts and  realities of the situation. The           appellant company owned the whole share capital of           British Textile  Mfg. Co. and, under the agreement           of 1947,  the directors of this company were to be           the nominees  of the  appellant  company.  So,  in           fact, the  appellant  company  could  control  the           internal management of their subsidiary companies,           and, in  the unlikely  event of  there  being  any           difficulty, it  was only  necessary to  go through           formal procedure  in order to make the decision of           the appellant company’s board fully effective.                That  particular   passage   is,   I   think,           especially cogent  having regard  to the fact that           counsel for the local authority was constrained to           admit that in this case, if they had thought of it           soon enough,  DHN could, as it were, by moving the

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         pieces on  their chess  board, have put themselves           in a  position in  which the  question would  have           been wholly unarguable.                l  also   refer  to   Scottish   Co-operative           Wholesale society  Ltd. v.  Meyer. That was a case           under s.  210  of  the  Companies  Act,  1948  and           Viscount Simonds said:                ’I do  not think  that my  own views could be           stated better  than in  the  late  Lord  President           Cooper’s words  on the first hearing of this case.           He said:  "In my  view, the  section warrants  the           court in  looking at  the business  realities of a           situation and  does not  confine them  to a narrow           1egalistic view."                My third  citation is  from the  judgment  of           Danckwerts LJ  in Merchandise  Transport  Ltd.  v.           British Transport  Commission where  he said  that           the cases-                ’Show that  where the character of a company,           or the  nature of the persons who control it, is a           relevant feature the court will go behind the mere           status of  the company as a legal entity, and will           consider who  are the persons as share sholders or           even as agents who direct and control the 662           activities of  a company  which  is  incapable  of           doing anything without human assistance.’                The third  ground, which I place last because           it is longest, but perhaps ought to come first, is           that in  my  judgment,  in  truth,  DHN  were  the           equitable owners  of the  property.  In  order  to           resolve this  matter, it  will be necessary for me           to refer in some detail to the facts." Shaw L.J. also observed at page 473 as follows:                "Even if  this were  not right,  there is the           further  argument   advanced  on   behalf  of  the           claimants that  there was  so complete an identity           of the  different companies  comprised in  the so-           called group  that they  ought to  be regared  for           this purpose  as a single entity. The completeness           of that  identity  manifested  itself  in  various           ways. The  directors of  DHN were  the same as the           directors of  Bronze; the  shareholders of  Bronze           were the  same as  in DHN. the parent company, and           they had  a common  interest in maintaining on the           property concerned  the business  of the group. If           anything were  necessary to reinforce the complete           identity of  commercial interest  and personality,           cl.  6,   to  which   I  have   referred  already,           demonstrates it,  for DHN undertook the obligation           to procure  their subsidiary  company to  make the           payment which the bank required to be made.                If each  member of the group is regarded as a           company in  isolation, nobody  at all  could  have           claimed compensation in a case which plainly calls           for it.  Bronze would  have had  the land  but  no           business  to  disturb;  DHN  would  have  had  the           business but no interest in the land."      In this  connection it  would be  useful  to  refer  to Harold Holdsworth & Co. (Wakefield), Ltd. v. Caddies, [1955] 1 All E.R. 725, where Lord Morton of Henryton in England, at page 734 of the report observed as follows:           "My Lords,  this  clause  refers  to  a  group  of           companies consisting  of the appellant company and           their existing subsidiary companies. I cannot read

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         the clause  as  compelling  the  board  to  assign           duties  to  the  respondent  in  relation  to  the           business of  every company in the group. Nor can I           read it as 663           compelling the  board  to  assign  him  duties  in           relation to the business of the appellant company.           That  business  is  not  treated  as  being  on  a           different footing  from the  business  of  British           Textile or  of another subsidiary of the appellant           company,  Whalley  &  Appleyard,  Ltd.,  which  is           mentioned in the respondent’s condescendence 3. As           I read  the clause,  it leaves  the board  of  the           appellant company free to assign to the respondent           duties in relation to the business of one only, or           two only or all of the companies in the group, and           to vary the assignment and the duties from time to           time. Further, I think the clause leaves the board           free to  appoint another  person to be "a managing           director", and  to divide  the duties  and  powers           referred to  in the  clause between the respondent           and the  other managing director in such manner as           they think  fit. It  is true  that each company in           the group  is, in  law,  a  separate  entity,  the           business whereof  is to  be carried  on by its own           directors and managing director, if any; but there           is no  doubt that the appellant company, by taking           any  necessary   formal  steps,   could  make  any           arrangements  they   pleased  in   regard  to  the           management  of  the  business  of  (for  instance)           British Textile. They owned all the issued capital           and the directors were their nominees." Lord Reid at pages 737-738 observed as follows:           "It was  argued that the subsidiary companies were           separate legal entities, each under the control of           its own  board of directors, that in law the board           of the  appellant company  could  not  assign  any           duties to any one in relation to the management of           the subsidiary companies, and that, therefore, the           agreement cannot be construed as entitling them to           assign any such duties to the respondent.                My  Lords,   in  my  judgment,  this  is  too           technical an  argument. This is an agreement in re           mercatoria, and  it must be construed in the light           of the  facts and  realities of the situation. The           appellant company owned the whole share capital of           British Textile  Manufacturing Co., and, under the           agreement of  1947, the  directors of this company           were to  be the nominees of the appellant company.           So, in  fact, the  appellant company could control           the  internal   management  of   their  subsidiary           companies, and, in the unlikely 664           event of  there being  any difficulty, it was only           necessary to  go through formal procedure in order           to make  the decision  of the  appellant company’s           board fully effective."      our attention  was drawn  by Shri  Sen to  Scottish Co- operative Wholesale Society Ltd. v. Meyer and Anr., [1958] 3 All E.R.  66, where  Viscount  Simonds  of  House  of  Lords observed at pages 71-72 as follows:           "My Lords,  it may be that the acts of the society           of which  complaint is  made could not be regarded           as conduct  of the  affairs of  the company if the           society  and   the  company   were  bodies  wholly

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         independent of  each  other,  competitors  in  the           rayon market,  and using  against each  other such           methods of  trade warfare as custom permitted. But           this is  to pursue  a false  analogy.  It  is  not           possible  to  separate  the  transactions  of  the           society from  those of  the  company.  Every  step           taken by  the latter  was determined by the policy           of the  former. I  will give an example of this. I           observed that,  in  the  course  of  the  argument           before  the  House,  it  was  suggested  that  the           company had  only itself  to blame if, through its           neglect to  get a  contract with  the society,  it           failed in  a crisis  to obtain  from the  Falkland           Mill the supply of cloth that is needed. The short           answer is  that it  was the  policy of the society           that the  affairs of  the  company  should  be  so           conducted, and  the minority shareholders were con           tent  that   it  should  be  so.  They  relied-how           unwisely the event proved-on the good faith of the           society, and  in any  case they  were impotent  to           impose their  own views.  It is  just because  the           society  could  not  only  use  the  ordinary  and           legitimate weapons on commercial warfare but could           also control  from within  the operations  of  the           company that  it is  illegitimate  to  regard  the           conduct of  the company’s  affairs as a matter for           which  it   had  no   responsibility.  After  much           consideration of  this question,  I do  not  think           that my  own views  could be stated better than in           the late  Lord President,  Lord Cooper’s  words on           the first  hearing of this case . He said (1954 SC           at p.391);                "In my  view, the  section warrants the court           in  looking   at  the   business  realities  of  a           situation and  does not  confine them  to a narrow           legalistic view.  The truth  is tnat,  whenever  a           subsidiary is formed as in this case with an 665           independent minority  of shareholders,  the parent           company must,  if it  is engaged in the same class           of business,  accept as  a result of having formed           such a subsidiary an obligation so to conduct what           are in  a sense  its own affairs as to deal fairly           with its subsidiary."           At the  opposite pole  to this standard may be put           the conduct  of a  parent company  which says "our           subsidiary company  has served  its purpose, which           is our  purpose. Therefore let it die" and, having           thus pronounced  sentence, is  able to  enforce it           and does  enforce  it  not  only  by  attack  from           without but  also by  support from within. If this           section is  inept to cover such a case, it will be           a dead  letter indeed.  I  have  expressed  myself           strongly in  this case because it appears to me to           be a  glaring example  of precisely the evil which           Parliament intended to remedy."      Similarly, at  page 84  of  the  report,  Lord  Keith’s observations are also relevant to the facts of this case.           "My Lords,  if the society could be regarded as an           organisation independent  of the  company  and  in           competition with  it, no  legal objection could be           taken to  the actions  and policy  of the society.           Lord Carmont  pointed this  out in  the  Court  of           Session. But that is not the position. In law, the           society and the company were, it is true, separate

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         legal entities.  But they  were in the relation of           parent and subsidiary companies, the company being           formed to run a business for the society which the           society could  not at  the outset  have  done  for           itself  unless   it  could   have  persuaded   the           respondents to  become servants  of  the  society.           This the  respondents were not prepared to do. The           company, through  the knowledge,  the  experience,           the  connexions,  the  business  ability  and  the           energies  of  the  respondents,  had  built  up  a           valuable goodwill  in which the society shared and           which there  is no  reason to think would not have           been maintained,  if not  increased, with  the co-           operation of  the  society.  The  company  was  in           substance,  though   not  in  law,  a  partnership           consisting of  the society  and  the  respondents.           Whatever  may   be  the   other  different   legal           consequences following  on one  or other  of these           forms of  combination one  result, in  my opinion,           followed in  the  present  case  from  the  method           adopted, which is common to partnership, that 666           there should  be the utmost good faith between the           constitutent members.  In partnership the position           is clear.  As stated  in  Lindley  on  Partnership           (11th Edn.) p.401:           "A partner  cannot, without the consent of his co-           partners, lawfully  carry on  for his own benefit,           either  openly   or  secretly,.  any  business  in           rivalry with the firm to which he belongs. "           It may not be possible for the legal remedies that           would follow  in the  case  of  a  partnership  to           follow here,  but  the  principle  has,  I  think,           valuable application  to the circumstances of this           case."      In Charterbridge Corpn. Ltd. v. Lloyds Bank Ltd. & Anr. [1969] 2  All E.R.  1185 at  page  1194  Justice  Pennycuick emphasised that  the reality of the situation must be looked in.      Shri Trivedi  drew out  attention to  the  decision  in Marshall Richards Machine Co. Ltd. v. Jewitt (H.M. Inspector of Taxes)  36 TC  511, where  at page 525 of the report Lord Upjohn, J.  Observed that  where  you  have  a  wholly-owned subsidiary, and  both the  parent company  and  wholly-owned subsidiary enter  into trading  relationships, there  is, of course, a  dual relation, but you cannot for the purposes of tax disregard the fact that there are, in fact, two entities and two  trades, that  is to say, the trade of each company. It is  normally a  question of fact whether the disbursement in question  is laid  out wholly and exclusively and for the purposes of  the trade.  In aid  of this  proposition and in furtherance Shri  Trivedi drew  our attention to the profits of the two companies which were separately computed and also referred to  Vol. C, 641 where the profits of Renusagar were separately indicated  and Vol. at page 642 where the profits of Hindalco were separately indicated.      We are,  however, of  the opinion  that these tests are not concIusive  tests by  themselves. Our attention was also drawn to  the decision  of the  Madras High  Court  in  M/s. Spencer &  Co. Ltd.,  Madras v.  The Commissioner  of Wealth Tax, AIR  1969 Madras  359, where  Veeraswami J.  held  that merely because  a company  purchases almost  the entirety of the shares  in another  company, there  was no extinction of corporate character for each company was a separate juristic entity for  tax purposes.  Almost on  similar facts, are the

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observations of  P.B. Mukharji,  J. in Turner Morrison & Co. Ltd. v. Hungerford Investment 667 Trust Ltd.,  AIR 1969  Cal. 238  where he  held that holding company and  subsidiaries are  incorporated companies and in this context  each has  a separate  legal entity. Each has a separate corporate  veil but that does not mean that holding company and the subsidiary company within it, all constitute one company.      Mr Justice  o. Chinnappa  Reddy speaking for this Court in Life  Insurance Corpn  of India  v. Escorts  Ltd.  &  Ors [1985] Suppl  3 SCR  909 had  emphasized that  the corporate veil should  be lifted  where the  associated companies  are inextricably connected  as to  be, in  reality, part  of one concern. It  is neither necessary nor desirable to enumerate the classes  of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other  provisions, the  object sought to be achieved, the impugned conduct,  the involvement  of the  element  of  the public interest,  the effect on parties who may be affected. After referring  to several  English and  Indian cases, this Court observed  that eversince  A. Salomon  & Co. Ltd’s case (supra),  a   company  has  a  legal  independent  existence distinct from  individual members.  It has  since been  held that  the   corporate  veil  may  be  lifted  and  corporate personality  may   be  looked  in.  Reference  was  made  to Pennington and Palmer’s Company Laws.      It is  hightime to  reiterate that  in the expanding of horizon of  modern jurisprudence,  lifting of corporate veil is  permissible.  Its  frontiers  are  unlimited.  It  must, however, depend primarily on the realities of the situation. The aim  of the  legislation is  to do  justice to  all  the parties. The horizon of the doctrine of lifting of corporate veil is  expanding. Here, indubitably, we are of the opinion that it is correct that Renusagar was brought into existence by Hindalco  in order  to fulfil the condition of industrial licence of  Hindalco through  production of aluminium. It is also manifest  from the  facts that the model of the setting up of  power station  through the  agency of  Renusagar  was adopted by  Hindalco to  avoid complications in case of take over of  the power  station by  the State or the Electricity Board. As  the facts  make it  abundantly clear that all the steps for  establishing and expanding the power station were taken by  Hindalco, Renusagar  is wholly-owned subsidiary of Hindalco and  is completely controlled by Hindalco. Even the day-to-day affairs  of Renusagar are controlled by Hindalco. Renusagar has  at no point of time indicated any independent volition. Whenever  felt necessary,  the State  or the Board have themselves  lifted the  corporate veil and have treated Renusagar and  Hindalco as one concern and the generation in Renusagar as  the own  source of  generation of Hindalco. In the impugned order of the profits of Renusagar 668 have been treated as the profits of Hindalco.      In the  aforesaid view  of the  matter we  are  of  the opinion  that  the  corporate  veil  should  be  lifted  and Hindalco  and  Renusagar  be  treated  as  one  concern  and Renusagar’s power plant must be treated as the own source of generation of  Hindalco and should be liable to duty on that basis. In  the premises  the consumption  of such  energy by Hindalco will  fall under  section 3(1)(c)  of the  Act. The learned Additional  Advocate-General for the State relied on several decisions, some of which have been noted.      The veil  on  corporate  personality  even  though  not lifted sometimes,  is becoming  more and more transparent in

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modern company  jurisprudence. The  ghost of  Salomon’s case still visits  frequently the  hounds of  Company Law but the veil has been pierced in many cases. Some of these have been noted by  Justice P.B.  Mukharji in  the New  Jurisprudence. (Tagore Law Lecture 183).      It appears  to  us,  however,  that  as  mentioned  the concept of  lifting the corporate veil is a changing concept and is  of expanding  horizons. We  think that the appellant was in  error in not treating Renusagar’s power plant as the power plant  of Hindalco  and not  treating it  as  the  own source of  energy. The  respondent is  liable to duty on the same and  on that  footing alone; this is evident in view of the principles  enunciated and  the doctrine now established by way  of decision of this Court in Life Insurance Corpn of India, (supra)  that in  the facts  of  this  case  sections 3(1)(c) and  4(1)(c)  of  the  Act  are  to  be  interpreted accordingly. The person generating and consuming energy were the same  and the  corporate veil  should be  lifted. In the facts of  this case Hindalco and Renusagar were inextricably linked up together. Renusagar had in reality no separate and independent  existence   apart  from   and  independent   of Hindalco.      In the  aforesaid view  of the  matter we  are  of  the opinion that  consumption of  energy by  Hindalco is clearly consumption by  Hindalco from  its own source of generation. Therefore, the  rates of  duty applicable  to own  source of generation have  to be  applied to such consumption, that is to say.  I paisa  per unit for the first two generating sets and nil  rate in  respect of 3rd and 4th generating sets. It is appropriate to refer that having regard to the conduct of the  State  the  power-cuts  matter  and  also  the  present proceedings the  State should  not  be  permitted  to  treat consumption of  Renusagar’s energy  by Hindalco  as anything other than different from consumption of energy 669 by Hindalco  from its  own source  of  generation.  We  are, therefore, of the opinion that in the facts of this case the corporate veil  must be  lifted and  Hindalco and  Renusagar should be  treated as  one concern  and if that is taken the consumption of  energy  by  Hindalco  must  be  regarded  as consumption by Hindalco from its own source of generation.      Inasmuch as  the High  Court upheld  this contention of the respondent  we are  in respectful agreement of its views and the  appeal directed  against this  finding of  the High Court must, therefore, be rejected.      The  electricity   bill   for   arrears,   subject   to consideration of  other aspects  of the  matter, that  is to say, the  validity of  the order  of rejection passed by the State  on  16th  February,  1982  rejecting  the  claim  for exemption would be treated hereinafter.      In order to appreciate the second aspect of the matter, that is  to say,  the challenge  to the order which has been quashed by  the High  Court, it is necessary to recapitulate certain facts.  Hindalco made  an application  to the  State Government under  section 3(4)  of the  Act for exemption on 28th September,  1970. In spite of repeated requests made by Hindalco the  State did  not take  any decision  on the said application of  Hindalco and  also purported  to  raise  and enforce  demands   under  the  Duty  Act  against  Hindalco. Hindalco and Renusagar filed a Writ Petition No. 368 of 1972 in the  High Court of Allahabad on 21st March, 1972. On that very  date   Hindalco  was  informed  that  the  application previously made  by  it  had  been  rejected  by  the  State Government. Hindalco  applied  for  amendment  of  the  writ petition. Reasons for rejection were intimated on 16th June,

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1972.  Thereafter   Writ  Petition   No.  368  of  1972  was withdrawn. On  21st July,  1972 Hindalco and Renusagar filed another Writ  Petition No. 4521 of 1972 in the High Court of Allahabad challenging  the order  of rejection. On 17th May, 1974  the   High  Court   delivered  judgment  quashing  the aforesaid rejection  and  asking  the  State  Government  to consider the  matter afresh  in accordance  with law  and in accordance  with   the  directions  contained  in  the  said judgment. Another Writ Petition being Writ Petition No. 3921 of 1982  out of which the present appeal arises was filed by Renusagar and  Hindalco on  16th April, 1982. The High Court passed an  order on 26th September, 1984 quashing the order. The High Court was of the view that the Government was under a mandatory  duty to  consider certain  factors. These were: (1) How  did the  cost of  power to  the Corporation compare with the cost of power to 670 similar industries  in other States? (2) How the spending of huge sums  A by  the Government of India in foreign exchange decreased and its keenness to attain self-sufficiency in the country by  increasing its  indigenous production  in public interest attained? (3) The commitment made by the Government of Uttar  Pradesh to  the Hindalco  to supply power at cheap rate as  noticed in  the report  of Dr. Nagarajarao. (4) The effect of  imposition  of  duty  on  the  margin  of  profit available to Hindalco.      The provisions  of sub-section  (4) of  section 3  have been noticed.  As we  have  read  the  said  provisions,  it appears to  us that  the dominance  of  public  interest  is significant and we refer to the various factors, namely, (a) prevailing charges for supply of energy in any area, (b) the generating capacity  of any  plant, (c)  the need to promote industrial  production  generally  or  any  specified  class therof and  other relevant factors and then taking all these factors into  consideration,  in  public  interest,  to  fix different rates of electricity duty in relation to different classes of consumption of energy or allow any exemption from payment thereof. Various grounds have been made out.      Shri Sen  for the  respondents is right that in view of the ceilings  prescribed the  power conferred upon the State under section  3(1) of  the Act  by itself is valid and does not  amount  to  excessive  delegation.  See  also  in  this connection the  observations of this Court in Devi Das Gopal Krishnan &  Ors. v.  State of Punjab & Ors., [1967] 3 S.C.R. 557 and  Ram Bachan  Lal v.  The State  of Bihar,  [1967]  3 S.C.R. 1.      Shri  Trivedi,   learned  Additional  Advocate-General, State of  Uttar Pradesh  drew our  attention to  the case of Panama Canal  Company v. Grace Line, 356 U.S. 309 2 Lawyers’ Edn. 788, where at page 793 of the report while dealing with the facts  of that case Justice Douglas observed that, as it was seen  in that  case, the  conflict raged  over questions that at  heart involved  problems of  statutory construction and cost  accounting: whether  an operating  deficit in  the auxiliary or  supporting activities was a legitimate cost in maintaining and  operating the Canal for purpose of the toll formula. These  are matters on which experts might disagree; these involve  nice issues  of judgment  and  choice,  which required the  exercise  of  informed  discretion.  In  those circumstances Justice  Douglas observed  that the  case was, therefore,  quite  unlike  the  situation  where  a  statute created a  duty to  act and  an equity  court was  asked  to compel the  agency to  take the  prescribed action. What was emphasised was  that the  matter should  be far less cloudy, much more  clear for  courts to  intrude. It is also in this

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connec- 671 tion necessary that if technical considerations are involved the Court feels shy to interfere. Reliance was placed on the observations of  this Court  in  Vincent  Panikurlangara  v. Union of  India and  others, [1987]  2 S.C.C. 165. There the writ petition  involved the  claim for  withdrawal  of  7000 fixed  dose  combinations  and  withdrawal  of  licences  of manufacturers engaged in manufacture of about 30 drugs which have been  licensed by  the Drugs  Control Authorities;  the issues that  fell for consideration are not only relating to technical and  specialised matters  relating to  therapeutic value, justification  and harmful  side effects of drugs but also involved examination of the correctness of action taken by respondents  1 and  2 therein on the basis of advice; the matter also  involved  the  interest  of  manufacturers  and traders of  drugs as  also  the  interest  of  patients  who require drugs  for their  treatment. This  Court  reiterated that in  view of  the magnitude,  complexity  and  technical nature of  the enquiry  involved in  the matter  as also the far-reaching  implications  of  the  total  ban  of  certain medicines for  which the  petitioner had  prayed, a judicial proceeding of  the nature  initiated was  not an appropriate one for determination of such matters. The technical aspects which arose for consideration in a matter of that type could not be  effectively handled  by a  court.  This  Court  also reiterated that  similarly the  question of policy which was involved  in   the  matter   was  also  one  for  the  Union Government-keeping the  best interest of citizens in view-to decide. No  final say  in regard  to such aspects came under the purview of the court.      The High  Court in  the  instant  case  reiterated  the necessity of  cheap electricity and if cheap electricity was not made  available, the  cost of indigenous aluminium would go up.  It would  necessitate import  of  aluminium  causing drain on  the foreign  exchange of the country. On the other hand, the  learned Additional Advocate General for the State of U.P.  contended and  in our  opinion rightly that primary purpose of  the Act  as stated  in the preamble was to raise the revenue  for the  development  projects.  Whether  in  a particular situation,  rural electrification and development of agriculture  should be  given priority  or electricity or development of  aluminium industry  should be given priority or which  is in  public interest,  in our opinion, are value judgments and  the legislature  is the  best judge. The High Court in  its impugned judgment referred to the order of the Government. The said order read as follows:           "The Corporation  has  also  emphasized  that  the           Government of  India is  spending a  huge  sum  of           money in foreign exchange to meet the requirements           of aluminium in India, 672           with a view to increasing the aluminium production           by Hindalco  Electricity should  be made available           at cheap  rate and  exemption should be granted to           the Corporation  from payment of electricity duty.           In this  connection it  may again  be pointed  out           that the  imposition of  electricity duty will not           affect  the   productivity  of  aluminium  by  M/s           Hindalco as  electricity  duty  is  negligible  as           clearly  made   out  in  the  earlier  paragraphs.           Accordingly, the electricity duty is not likely to           have any adverse effect on foreign exchange of the           country.      Referring to  the aforesaid  observations of  the State

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Government, the  High Court  was of  the view  that the said observations of the State Government clearly showed that the State Government  did not  address itself  to  the  need  of promoting aluminium  industry for  increasing production  of aluminium which would in the long run save foreign exchange. We  are   unable  to   agree.  What   was  paramount  before introduction of  the development programme and how the funds should be  allocated and  how far the Government considers a negligible increase  and rise  in the  cost of aluminium for the  purpose   of  raising   monies  for  other  development activities are  matters of  policy  to  be  decided  by  the Government. It  is true  as the  High Court  has pointed out that the  question regarding  public interest  and  need  to promote indigenous  industrial production  was related  with the question  of exemption  of duty. But what the High Court missed, in  our opinion  with respect,  was that a matter of policy which  should be  left to the Government. Reading the order  of   the  Government,  it  appears  to  us  that  the Government had  adverted itself  to all  the aspects of sub- section (4) of section 3 of the Act. It is true that certain amount of  encouragement was  given to Hindalco to start the industry in  a backward  area. After  considerable point  of time the  very low  rate of duty was charged. But if we need other sectors  of growth  and development for example, food, shelter,  water,   rural  electrification,   the  need   for encouragement to  aluminium industry  had to be subordinated by little  high cost  because that  is a matter on which the Government as  representing the  will of  the people  is the deciding factor.  Price fixation,  in our  opinion, which is ultimately the  basis of rise in cost because of the rise of the electricity  duty is  not a  matter fol investigation of Court. This  question was examined by this Court in Union of India and another v. Cynamide India Ltd. and another, [1987] 2 S.C.C. 720 where one of our learned brothers who delivered the judgment  of the  High Court  of Allahabad  was a party. There in exercise of the powers under section 3(2)(c) of the Essential Commodities Act. the Drugs (Prices Control) order, 673 1979 was  made. The  Central  Government  thereafter  issued notification  thereunder.   At  page   741  of  the  report, Chinnappa Reddy,  J. speaking  for the  Court referring to a passage of  the Administrative Law by Schwartz with approval expressed the  view that  those powers  were  more  or  less legislative in character. Fixation of electricity tariff can also to  a certain  extent be  regarded  of  this  category. Chinnappa Reddy,  J. Observed at page 735 of the report that price fixation  is more  in  the  nature  of  a  legislative activity than any other. He referred to the fact that due to the proliferation  of  delegated  legislation,  there  is  a tendency for the line between legislation and administration to vanish  into an  illusion. Administrative, quasi-judicial decisions  tend   to  merge  in  legislative  activity  and, conversely, legislative  activity tends  to  fade  into  and present an appearance of an administrative or quasi-judicial activity. Any  attempt  to  draw  a  distinct  line  between legislative and  administrative functions, it has been said, is ’difficult  in theory and impossible in practice’. Reddy, J.  insisted  that  it  is  necessary  that  the  line  must sometimes  be   drawn  as   different   legal   rights   and consequences may  ensue. It  appears to  us that sub-section (4) of  section 3  of the  Act  in  the  set  up  is  quasi- legislative and  quasi-administrative in  so far  as it  has power to  fix  different  rates  having  regard  to  certain factors and  in so far as it has power to grant exemption in some  cases,   in  our   opinion,  is  quasi-legislative  in

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character. Such  a decision  must be  arrived at objectively and in consonance with the principles of natural justice. It is correct that with regard to the nature of the power under section 3(4)  of the  Act when  the power  is exercised with reference to  any  class  it  would  be  in  the  nature  of subordinate legislation but when the power is exercised with reference  to   individual  it   would  be   administrative. Reference was  made in this connection to the cases of Union of India  v. Cynamide  India Ltd.  (supra) and P.J. Irani v. State of Madras, [1962] 2 S.C.R. 169 at 179-180 and 181-182.      If  the   exercise  of   power  is  in  the  nature  of subordinate legislation  the exercise  must conform  to  the provisions of the statute. All the conditions of the statute must be  fulfilled. The  High Court  was right  only to  the limited extent  that all the relevant considerations must be taken into  account and the power should not be exercised on irrelevant considerations  but singular  consideration which the High  Court, in our opinion, seems to have missed in the judgment  under   appeal,  is  these  factors,  namely,  the prevailing charges  for supply  of energy  in any  area, the generating capacity  of  any  plant,  the  need  to  promote industrial  production  generally  or  any  specified  class thereof  and   other  relevant   factors  cannot  be  judged disjointly. These  must be  judged in  adjunct to the public interest and  that public  interest is  as mentioned  in the Preamble to raise revenue. 674      Reference was  also made  to the  observations  of  the Judicial Committee  in Ryots  of Garabandho  and  others  v. Zamindar of  Parlakimedi and  another, A.I.R.  1943 P.C. 164 where the Judicial Committee had to deal with the proviso to section 30 of the Act. It read as follows:           "In  settling   rents  under   this  section   the           Collector shall  presume, unless  the contrary  is           proved, that  the existing rent or rate of rent is           fair and  equitable and  shall have  regard to the           provisions of  this Act  for determining  rates of           rent payable by a ryot."      Viscount Simon L.C. Observed that the view taken by the majority of  the Collective  Board of  Revenue in making the order which is now complained of, is that the requirement to "have regard  to" the  provisions in  question has  no  more definite or  technical meaning  than that of ordinary usage, and only  requires that  these provisions must be taken into consideration. In  their view  the prime duty of the Revenue officer under Chap. II was to fix a fair and equitable rent, and though  he must  be guided  by the principles underlying such provisions  as were  contained in  chap. 3,  he was not strictly bound  by such  provisions. The  Judicial Committee observed at page 180 of the report as follows:           "Having regard  to the  long time that had elapsed           since the  last tentative  settlement of  rent  in           1867-68, to the prodigions rise in prices that had           taken  place   since  then,  and  to  the  general           economic improvement  of this part of the country,           the   Collective    Board   considered   that   an           enhancement of  37-1/2  per  cent,  would  not  be           oppressive and  directed the  Revenue  officer  to           reduce to  that figure  the enhancement of 100 per           cent, which  he had  made. This view of the effect           of  the   direction  to   "have  regard   to"  the           provisions of  the Act  for determining  rates  of           rent  payable  by  a  ryot  is  supported  by  the           decision of  the High Court in 49 Mad. 499 at 506.           It is  also confirmed  by certain  observations of

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         Reilly J.  in 63  M.L.J. 450  at p. 486, where the           learned Judge said:                Where the  settling officer  has to deal only                with such  questions as would arise in a suit                for   commutation,    for   enhancement,   or                reduction of  money rent,  under s. 168(2) he                must be  guided by the appropriate principles                as set  out in the Act, but there is no doubt                that his  settlement may embrace a much wider                field of 675                question and  whenever he  has not  merely to                adjust the  lawful rent  but to  fix what  is                fair and  equitable  in  variation  from  the                lawful rent  which can  be exacted in a suit,                his settlement  is clearly something which no                civil  Court   could  do   unless   specially                empowered.                Their  Lordships   find  themselves  on  this           matter in  agreement with  the view  taken by  the           majority  of  the  Collective  Board.  It  is  not           possible to  peruse the proceedings of the Special           Revenue officer in this case without seeing that a           number of  matters besides  the rise  in prices of           staple food  crops were considered by him, and had           to be  considered by  him, if  he was to carry out           his duty  under chap.  II. He observed in para. 30           of the final proceedings dated 10th December 1935:                I hold  that the present settlement is also a           fresh and  initial settlement  wherein  everything           has to  be re-classified  afresh and  new rates of           rent have  to be fixed. It is not therefore a case           of enhancement but of fixing and introducing a new           rate of rent based on the principles of equity and           fairnes as  laid down  in Chap.  II, Estates  Land           Act."      The High  Court in the impugned judgment commented that it  was  a  mandatory  duty  to  separately  consider  these relevant factors  and has  committed the error against which the Judicial  Committee cautioned. The High Court was of the view at  page 10  of the judgment that there was a mandatory duty to  consider the  factors mentioned  hereinbefore.  All that the  section requires  was that these factors should be borne in mind but these must be subordinate to the executive decision of the need for public interest.      In Saraswati Industrial Syndicate Ltd. etc. v. Union of India, [1975]  1 S.C.R.  956 the Sugar (Control) order, 1966 came  up   for  consideration.  Clause  7(2)  of  the  Sugar (Control) order  had been set out at page 958 of the report. It read as follows:           "Such price or maximum price shall be fixed having           regard to  the estimated  cost  of  production  of           sugar determined  on the  basis  of  the  relevant           schedule of  cost given in the Report of the Sugar           Enquiry Commission  (October 1965), subject to the           adjustment of  such rise in cost subsequent to the           Report aforesaid as, in the opinion of the Central 676           Government, cannot  be absorbed  by the  provision           for contingencies in the relevant schedule to that           Report."      Beg, J. as the learned Chief Justice then was, observed that clause  7(2) set  out above  required the Government to fix the  price "having  regard  to  the  estimated  cost  of production of  sugar on the basis of the relevant schedule".

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The  expression   "having  regard   to"  only   obliges  the Government to consider as relevant data material to which it must have regard to.      In so  far as the High Court held in this judgment that the power  conferred on  the State  Government  was  of  the administrative nature,  the High  Court may not be in error. But the High Court held that it should be in consonance with the principles of natural justice, in our opinion-it must be in accordance  with natural  justice to a limited extent-and such principles  of natural  justice are  enunciated by this Court in several decisions, namely, A.K. Kraipak v. Union of India, A.I.R.  1970 S.C. 150; M/s. Travancore Rayons Ltd. v. Union of  India, A.I.R.  1971 S.C. 862 and Amal Kumar Ghatak v. State of Assam & others, A.I.R. 1971 Assam 32.      Keeping in  view the  aforesaid  principles,  the  High Court examined  the petitioners’  grievance. Dr. Rajagopalan submitted his  report to  the State  Government in  January, 1979. Admittedly,  Dr. Rajagopalan  placed reliance  on  the report  of   Working  Group  on  Aluminium  set  up  by  the Government of  India in  1970 and  various other  reports of Bureau of  Industrial Cost  and Price (hereinafter refer red to as  ’BICP’), submitted  to the  Government from  time  to time. It is based on the balance-sheet of the appellants and had been made available to the respondents. We have examined the correspondence  that passed  between the  parties and we are of  the opinion  that there  was  no  violation  of  the principles of  natural justice  because the  relevant  datas were made  available to  the appellants. It is true that the principles of  natural justice  must be  adhered to. In this connection reference  may be  made to S.D. Hotop "Principles of Australian Administrative Law 6th Edition, Pages 210-212, Cases and  Materials on Review of Administrative Action (2nd Edition) by  S.D. Hotop,  Wade on  Administrative  Law,  5th Edition,   pages    506/507   and   Bennion   on   Statutory Interpretation, 1984 Edition, pages 140-141. The exercise of power whether  legislative or  administrative  will  be  set aside if  there is  manifest error  in the  exercise of such power or  the exercise of the power is manifestly arbitrary. Similarly, if  the  power  has  been  exercised  on  a  non- consideration or non-application of mind to re- 677 levant factors  the exercise  of power  will be  regarded as manifestly erroneous.  If a  power (whether  legislative  or administrative) is  exercised on  the basis of acts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. See Commissioner of Income Tax v. Mahindra &  Mahindra Ltd.  Ors., [1983] 3 S.C.R. 773 at 786- 787. The  present case  relates to  the particular facts and circumstances of  an individual,  namely, Hindalco.  To  the extent,  its   claim  for  exemption  was  entitled  to  the consideration. In  our opinion,  the facts and circumstances of the  case were examined in consonance with the principles of  natural   justice.  All   relevant  factors  were  given consideration but subject to public interest. The High Court considered whether  electricity duty  was  included  in  the prices of aluminium fixed by the Central Government. On this aspect our  attention was drawn on behalf of the respondents at pages  372-387 of  the  judgment  in  Volume  B.  It  was submitted that  the assumption  that  electricity  duty  was included in  the prices  of Hindalco  fixed by  the  Central Government formed a basic and a very important consideration in the making of the impugned order. We are unable to agree. It was  also submitted  that the said assumption was made by the State Government and Dr. Rajagopalan on the basis of the reports of  BICP and  the Working Group. The High Court on a

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perusal of  the reports  of the  BICP and  the Working Group came to the conclusion that the said assumption of the State and Dr.  Rajagopalan is based on non-existent fact and/or is patently erroneous.  Apparently such examination by the High Court was  not  warranted.  It  was  pointed  out  that  Dr. Rajagopalan had  determined the  adequacy of  the profits of Hindalco by  relating the  same to  the original  subscribed capital only  and had  completely ignored  the  reserves  of Hindalco. The aforesaid basis, it was held by the High Court is contrary  to the  well accepted  principles of  return on capital employed/net  worth. It  is true  that Hindalco  has made profits  much more than it had before the imposition of the duty.  The adequacy  of the  profits or  whether it made much more  profits is not a consideration which must prevail over public  interest and  the Government  having taken into consideration this  factor, in  our opinion,  did not commit any error  and the  High Court was in error in setting aside the order  of the  Government. It  is true  that the cost of power to  similar industry  in other  State was  a  relevant factor and  the State was under a mandatory duty to consider the same.  The State has taken note of all those factors and has observed  that M/s.  Hindalco  is  being  supplied  with electrical energy  at a  very nominal  rate and  taking into consideration the prevailing practice of levy of electricity duty in  other States  as well  as the  provisions stated in section 3(4),  the Government  have come  to the  conclusion that there is no justification for allowing 678 exemption  from  electricity  duty  to  M/s.  Hindalco.  The Government  did   not  commit   any  error   which  required interference by  the High  Court in  the manner it did . The assurance of cheap power factor was there. But the assurance of cheap power factor does not foreclose the public interest of raising public revenue.      In July,  1975 the  Central  Government  fixed  uniform prices of  aluminium for all the producers of aluminium. The Central  Government   also  fixed  uniform  sale  prices  of aluminium  applicable   to  all   producers.   The   Central Government also  fixed individual  retention prices  (based, inter alia,  on the  cost of production) for each individual producer. All  producers of aluminium were to sell aluminium at the  uniform sale  prices. Any  producer whose  retention prices were lower than the sale prices had to pay difference into the  Aluminium Regulation  Account. Any  producer whose retention prices  were  higher  than  the  sale  prices  was entitled  to  receive  the  difference  from  the  Aluminium Regulation Account. Price, therefore, was no question of the respondent  being   loser  or  sufferer.  It  is  true  that electricity duty was not included and was also considered in the fixation  of the  price. That  is the  only pre-dominant factor, having  regard to the technical nature of the order. The impugned  order does  not suffer  from the  vice of non- application of  mind or  non-consideration of  the  relevant factors and  the High Court was in error in interfering with the order  of the  Government. We are clearly of the opinion that the  High Court  was in  error in  interfering with the order in  the manner  it did. The High Court should not have interfered for  interference by  the High  Court the  matter should have been far less cloudy and far more clear.      Natural justice in the sense that a party must be heard beforehand need  not be  directly  followed  in  fixing  the price. Reference  in this  connection may  be  made  to  the observations of  this Court  in Prag  Ice &  oil  Mills  and another etc.  v. Union of India, [1978] 3 S.C. R. 293, where at page  325 of  the report, this Court observed that in the

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ultimate analysis,  the  mechanics  of  price  fixation  has necessarily to  be left to the judgment of the executive and unless it  is patent  that there  is hostile  discrimination against a  class of operators, the processual basis of price fixation has  to be  accepted in  the generality of cases as valid. In  this connection  reference may  also be  made  to Shree Meenakshi  Mills Ltd.  v. Union  of  India,  [1974]  2 S.C.R. 398, where this Court dealing with the Cotton Textile (Control) order,  1948 at  page 419  of the  report observed that if  fair price  is to  be fixed  leaving  a  reasonable margin  of   profit,  there   is  never   any  question   of infringement of  fundamental right  to carry  on business by imposing reasonable restrictions. 679 Unreasonableness and  natural justice  have to  be judged in that context.  In that  view of the matter non-supply of the basis of  the report  of the BICP does not by itself, in our opinion, in the facts and circumstances of the case make the order of the State Government vulnerable to challenge.      In Laxmi  Khandsari etc.  etc. v.  State of U. P. & Ors [1981] 3 S.C.R. 92 this Court was dealing with the Essential Commodities Act,  1955 and  the Sugarcane  (Control)  order, 1966 and  observed that in determining the reasonableness of restrictions imposed  by law in the field of industry, trade or commerce,  the mere fact that some of the persons engaged in a  particular trade  may incur loss due to the imposition of restrictions will not render them unreasonable because it is manifest  that trade and industry pass through periods of prosperity and  adversity on  account of economic, social or political factors.  At page  129 of the report rejecting the plea that before fixing a price the rules of natural justice should be  adhered to,  this Court  emphasised, referring to the  observations   in  the  case  of  Saraswati  Industrial Syndicate Ltd.  v. Union  of India, [1975] 1 S.C.R. 956 that price fixation  is more  in  the  nature  of  a  legislative measure even  though it may be based upon objective criteria found in  a report  or other  material. There  is scope  for trial and error in such sphere. Judged by that standard, the impugned order in this case, in our opinion, is not bad.      In support  of the  proposition that  the principles of natural justice  had been  violated in  passing the impugned order, five  decisions were  referred to,  namely, State  of Orissa v.  Mr. (Miss)  Binapani Dei,  [1967] 2  SCR 625; A.K Kraipak v. Union of India, A.I.R 1970 S.C. 150; Mohd. Rashid v. State  of U.P.  A.I.R. 1979  S.C.  592;  S.L.  Kapoor  v. Jagmohan and  others, A.I.R. 1981 S.C. 136 and Maneka Gandhi v. Union  of India,  A.I.R. 1978 S.C. 597. The principles of these cases  will have  no application  to the facts of this case. There  has been  no violation  of  the  principles  of natural justice  to the  extent applicable  to the  order of this nature.      Reference was  made to  the observations in the case of India Sugars  & Refineries  Ltd. v.  Amravathi  Service  Co- operative Society  Ltd., [1976]  2 S.C.R.  740 where at page 746 of  the report,  this Court  observed that  the power to grant exemption  to factories  from  payment  of  additional price is  intimately connected  with the  right of sugarcane growers to  claim additional  price.  In  granting  of  such power, principles  of natural justice should be followed. In such a case a duty to act judicially does arise. 680      This Court  in Commissioner  of Income  Tax, Bombay and others A  v. Mahindra  and Mahindra Limited & Ors., [1983] 3 S.C.R. 773  at page  786  of  the  report,  dealt  with  the parameters of  the  Court’s  power  of  judicial  review  of

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administrative   or    executive   action    or    decision. Indisputably, it is a settled position that if the action or decision is  perverse or  is such that no reasonable body of persons, properly  informed,  could  come  to  or  has  been arrived at  by the authority misdirecting itself by adopting a wrong  approach or  has been  influenced by  irrelevant or extraneous  matters,   the  Court   would  be  justified  in interfering with the same. See also the observations at page 787 of  the report.  In this  case the  parameters had  been adhered to.  All relevant factors had been borne in mind. It is  true   that  each  factor  had  not  been  independently considered, but  these  had  been  borne  in  mind.  In  our opinion, the  Government did  not act in violation either of the principles  of natural  justice  or  arbitrarily  or  in violation of the previous directions of the High Court.      In the premises, the High Court was in error in setting aside the order of the State Government in its entirety. The High Court should have allowed the claim of Hindalco for the reduced rate of bill on the basis that Renusagar Power Plant was its  own source  of generation under section 3(1)(c) and the bills  should have been made by the Board on that basis. But  the   High  Court   was  in   error  in  upholding  the respondents’ contention  that  the  State  Government  acted improperly and  not in  terms of section 3(4) of the Act and in violation  of the  principles  of  natural  justice.  We, therefore, allow  the appeal  to the  extent indicated above and set  aside the  judgment of  the Allahabad High Court to that extent  and restore  the  State  Government’s  impugned order subject  to the modification of the bills on the basis of own  source of generation. We, therefore, direct that the electricity bills  must be  so made  as to give Hindalco the benefit  of  the  rate  applicable  to  its  own  source  of generation from Renusagar Plant.      The  appeal   is  disposed   of  in  those  terms.  The electricity bills must be computed as indicated above. After recomputation and presentation of such bills the respondents will pay the same within two months thereof.      In view of the facts and circumstances of the case, the parties will pay and bear their own costs.      RANGANATHAN, J.  I agree.  On the second issue, I think it is  difficult to  define the  Precise nature of the power conferred on the 681 State Government  under Section 3(4) of the Electricity Duty Act and  l A  have doubts whether the sub-section can at all be interpreted as conferring a right on individual consumers to require  that, in  the light  of the  material adduced by them, the  rates applicable  to them  should have been fixed differently or that they should have been exempted from duty altogether. However, it is unnecessary to pursue this aspect further as I agree with the conclusion of my learned brother that, in  this case,  the respondent’s  representations have been  fully  considered  and  the  requirements  of  natural justice have  been fulfilled and that there is no warrant to interfere with the order of the State Government. S.L.                                Appeal disposed of. 682