Supreme Court of India
INDIAN ALUMINIUM COMPANY LIMITED AND ANR.versusKARNATAKA ELECTRICITY BOARD AND ORS.
- Citation
- 1992 INSC 158
- Decided
- 13 May 1992
- Disposal
- Dismissed
- Bench
- N M KASLIWAL
Holding
The Karnataka amendment of Section 49 is constitutionally valid, does not breach Articles 14 or 19(1)(g), and overrides the earlier tripartite agreements; promissory estoppel is inapplicable.
Summary
The Indian Aluminium Company set up an aluminium smelter in Karnataka and entered into two tripartite agreements (1966 and 1976) with the Karnataka Electricity Board and the State for uninterrupted power at concessional rates. The Board later raised tariffs, and Karnataka amended Section 49 of the Electricity (Supply) Act, 1948 (Act 33 of 1981) to allow tariff increases irrespective of existing agreements. The company challenged the amendment on grounds of legislative competence, violation of Articles 14 and 19(1)(g) of the Constitution, and claimed promissory estoppel based on the earlier agreements. The Supreme Court held that the amendment was intra‑vires, did not offend Articles 14 or 19(1)(g), and that the agreements were not enforceable against the statutory power to revise tariffs; the doctrine of promissory estoppel could not be invoked against a legislative provision. Consequently, the appeal was dismissed.
Issues considered
- The Karnataka Electricity (Supply) (Amendment) Act, 1981's amendment of Section 49 is within the legislative competence of the State Legislature.
- Whether the amendment violates Article 14 of the Constitution by arbitrarily classifying the aluminium smelter plant as a high‑power‑intensive industry.
- Whether the amendment infringes Article 19(1)(g) – the right to practice any profession, trade or business.
- Whether the 1966 and 1976 tripartite agreements are binding and can be overridden by the amended Section 49.
- Whether the doctrine of promissory estoppel applies to compel the Board to honour the earlier agreements.
- Whether there is any repugnancy between the State amendment and Central legislation such as the Aluminium Control Order and the Industries Development and Regulation Act.
Legislation cited
Subjects
Electricity tariffSection 49Legislative competenceArticle 14Article 19(1)(g)Promissory estoppelTripartite agreementUniform tariffPower‑intensive industryConstitutional validity
Judgment
INDIAN ALUMINIUM COMPANY LIMITED AND ANR. A
v.
KARNATAKA ELECTRICITY BOARD AND ORS.
MAY 13, 1992
[N.M. KASLIWAL AND G.N. RAY, JJ.] B
-~ Electricity (Supply) Act, 1948: Section 49: (As amended by Kamataka
Act 33 of 1981)-Constitutional validity of.
Company-Establishment of Aluminium Smelter Plant-Tripartite C
agreement between Company, Electricity Board and State-Provision for
supply of electricity at concessional rates-Amendment of Electricity (Supply)
1ct-Effect of-Imposition of enhanced revised tariff in supersession of the
terms of ihe Agreement-Inclusion of Aluminium Smelter Plant in .power
intensive industries i.e..category HT-JA and imposition of uni/orm tariff rate
on all industries catesarised as HT-JA-Validity of. D
Constitution of India, 1950 : Article 14:
Equality-Classification-Principles for exclusion or inclusion-Ques- G
tion of hostile discrimination-Examination of-Not mere phraseology but the
real effect of the provisions should be looked into.
Constitution-Interpretation of-Ascertainment of legislative com-
petence-Provisions should not be constJUed with na"ow or pedantic ap
proach-Should be interpreted broadly and liberally. H
213
214 SUPREME COURT REPORTS (1992) 3 S.C.R.
A The appellant-Company established its Aluminium Smelter Plant at
Belgaum in the State of karnataka. On March 26, 1966 a tripartite agree-
ment was entered into between the Company, the Electricity Board and the
State of Karnataka. A second tripartite agreement,, in supersession or the
earlier one, was entered on August 7, 1976 between the parties providing
for uninterrupted supply of power to the company at concessional rates.
B According to the appellant-company the agreement of 1976 was made in
view of the industrial policy of the Government of llidia and the guidelines
stated by the Government in the matter of electricity tariff to be applied
to aluminium plants. In July 1980, the Electricity Board inc~ the
power rate far beyond the prescribed rate in the agreement. Subsequently,
C the State of Kamataka enacted the Electricity (Supply) (Karnataka
Amendment) Act, 1981 amending Section 49 of the Electricity (Supply) Act
1948. The amended Section 49 empowered the Electricity Board to increase
-
its tariff rates notwithstanding any agreement with the consumers. On
February 2, 1981 the Board further increased the tariff rate. Aggrieved by·
D increase of tariff rates and the consequential demands for payment of bills
on the basis of increased tariff the company filed a writ petition challeng-
ing the vires of the Amending Act on the score of legislative competence
and also on the ground of arbitrary action of revising the tariff without
justification and the unjust classification of the aluminium Smelter Plant
in the category of other power tariff industries included in the category of
E HT IA Industries ignoring the special features of aluminium smelter plant.
It was also contended that since the State Government invited the company
to establish the plant by assuring uninterrupted supply of power at con-
cessional rates, the principle of promissory estoppel was applicable and
consequently the demand of tariff contrary to agreement was. illegal and
arbitrary.
F
The High Court upheld the validity of the impugned legislation by
holding that : (1) under the amended provisions of Section 49 of the
Electricity (Supply) Act uniformity was the basis of tariff and since all the
powe~ tariff industries were treated alike the treatment meted out to the
G company was not discriminatory under Article 14; (2) the enhancement of
tariff was not violative of Article 19(1) (g); (3) no special promise was held
out by the State or Electricity Board to the C~m~ny that a particular
formula will be applied in the case of coiisumption of electricity by the
company; that the doctrine of promissory estoppel was not attracted in the
H sphere of statutory power and since the impugned action was a conse-
INDIAN ALUMINIUM CO. v. ELEClRICITY BOARD 215
quence of the amended provision of Section 49 the question of promissory A
estoppel did not arise; (4) the State Legislature was not denuded of its
~ legislative competence merely because the Parliament declared aluminium
industry as a controlled industry under the Industries (Development and
Regulation) Act, 1951; and (5) the notification issued by the Central
Government fixing the aluminium policy and also indicating the tariff
B
affecting the aluminium industry was not repugnant to the impugned
provisions under the Amending Act of State Legislature.
Against the decision of the High Court the company filed an appeal
-~
in this Court challenging the vires of the Amending Act as well as the levy
of enhanced electricity tariff contending that : (1) since the agreement was c
tripartite it could not have been anulled by taking recourse to the amended
- provisions of Section 49 and that the Electricity Board unjustly repudiated
the agreement by revi.sing the tariff exhorbitantly and making it applicable
uniformly to all the power intensive industries; (2) even if the Amending
Act was intra-vires empowering the Board to charge uniform tariff from
consumers categorised in a particular industry there was no justification D
to include the company's plant in other power intensive industries; (3) the
smelter aluminium plant has some special and peculiar features and its
inclusion in the category of other power intensive industries included in
the HT IA category was an unjust classification violating Article 14 of the
Constitution; (4) the High Court failed to note that a clear case of E
promissory estoppel was made out by the appellant-company and that it
was still applicable without violating Section 49 of the Electricity (Supply)
Act.
Dismissing the appeal, this Court,
F
HELD : 1. The amending Act does not suffer from any infirmity
affecting its vires either on the score of legislative competence or for
offending Articles 19(1)(g) or Article 14 of the Constitution. (236 - DJ
2. In deciding the question of legislative competence one must bear
in mind that the Constitution is not to be construed with a narrow or G
pedantic approach and it is not to be construed as a mere law but as a
machinery by which _laws are made. Such interpretation should be made
. -""( broadly and liberally. The entries in the Constitution only demarcate the
legislative fields of the respective legislature and do not confer legislative
power as such. (236 D-F] H
216 SUPREME COURT REPORTS (1992) 3 S.C.R.
A 3. In examining the allegations of hostile discriminatory treatment,
what is looked into is not its phraseology but the real effect of its provisions.
The legislature has been permitted to exercise an extremely wide discretion
in classifying items for collection of revenue so long as it refrains from clear
and hostile discrimination against particular persons or classes. It however
should be borne in mind that with all these latitudes certain irreducible
B consideration of equality shall govern the differential treatment even in..
fiscal legislation. The test could only be ~f palpable arbitrariness in the
context of felt needs of the time and social exigencies informed by experience.
There cannot be any precise or set formulae or doctrinaire tests or precise
scientific principles of exclusion or inclusion. (236 G H, 237 -A]
c -
4. It is true that the smelter plant has distinctive features in its
manufacturing mechanism and in the process of electrolytic operation.
Also the smelter plant is not only power intensive industry but the power
-
assumes a very significant role and constitutes one of the important raw
D materials in the productive process. But the categorisation of the smelter --(
plant as a high power intensive industry is not by itself illegal or perverse,
or without any basis and wholly unjustified. In the broader classification,
the smelter plant is certainly a high power intensive industry and suc1-
categorisation was made by the Board not for the purpose of enforcing the
amended Section 49 with an object to annul the agreement but such
E categorisation was made even earlier. In the circumMtances, it cannot be
said that the broader categorisation of the smelter plant is arbitrary,
capricious and unreasonable resulting in treating the unequal as equal
thereby offending Article 14 of the Constitution. (245 B - E]
5. The agreement of 1966 and 1976 were not the outcome of any
F unilateral promise or assurance held out by the State or the Board to the
appellant-Company. (244 HJ
Such agreement was the result of negotiations between the parties
and on such negotiations, the terms and conditions were agreed upon
G bem·een the parties. Accordingly, the foundation of promissory estoppel is
absent and the case of promissory estoppel as sought to be made out by
the Company cannot be accepted. (244 H, 245 - A]
Excise Commissio11er, U.P. Etc. Etc. v. Ram Kumar Etc. Etc., A.l.R.
1976 S.C. 2237; U11io11 of India and Ors. v. Godfrey Philips /11dia Ltd., A.l.R.
H 1986 S.C. 806; Council of Civil Service U11ion a11d Ors. v. Mi11ister for the
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD 217
Civil Service, 1985 (3) All.E.R. 935; R v. Secretary of State for Home Depart- A
ment, 1985 (1) All.E.R. 40; R v. Secretary of State for Home Department a
parte Ruddock & Ors., 1987 (2) All.E.R. 518; Mis Motilal Padampat Sugar
Mills Company (Pvt.) Ltd., v. State of Uttar Pradesh, (1979) 2 S.C.R. 641;
Delhi Cloth and General Mills Ltd. v. Union of India, (1988) 1 S.C.R. 383;
Indian Aluminium Company v. The Orissa Electricity Board and Anr., A.1.R. B
1975 Orissa 100, referred to.
Ha/sbury's Laws of England, Fourth Edition (Reissue) Vol. 1 (1) Page
151, referred to.
6. Since the agreements stood annulled in view of the amended C
provisions of Section 49 of the Act, the Board was empowered to ask for
uniform tariff rate from the industries classified under one category.
However, the question of tariff for the supply of electricity to the smelter
plant should be considered sympathetically. (245 B, F]
Tika Ramji v. State of U;P., A.I.R. 1956 S.C. 676; Uttar Pradesh & Ors. D
v. Synthetics and Chemical Ltd. and Ors., A.l.R. 1980 S.C. 614; Hoechest
Phannaceuticals Ltd. and Anr. Etc. v. State of Bihar & Ors., A.l.R. 1983 S.C.
1019; lshwari Khetan Sugar Mills Pvt. Ltd. Etc. Etc. v. The State of U.P. and
Ors., A.l.R. 1980 S.C. 1955, relied on.
E
Indian Aluminium Co. v. Kera/a State Electricity Board, A.l.R. 1975
S.C. 1967; Delhi Cloth and General Mills Co. Ltd. v. The Rajasthan State
Electricity Board, A.l.R. 1986 S.C. 1126, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1841 of
1988. F
From the Judgment and Order dated 19.4.1988 of the Karnataka
· High Court in W.P. No. 6257 of 1981.
K. Parasaran, A.K. Ganguli, K.R.D. Karanath and S. Sukumaran for G
the Appellants.
---(, P.P. Rao, R.N. Naransihma Murthy, S.K. Kulkarni, R.P. Wadhwani,
M. Veerappa and Kh. Nobin Singh for the Respondents.
The Judgment of the Court was delivered by H
218 SUPREME COURT REPORTS (1992) 3 S.C.R.
A G.N. RAY, J. This Civil Appeal arising out of Special Leave Petition
(Civil) No. 5890 of 1988, is directed against the judgment passed by the
Division Bench of Karnataka High Court on April 19, 1988 in Writ Petition
No. 6257 of 1981. The- appellants prayed for a Writ Di the nature of
certiorari for directing the respondents to withdraw the letter dated July
3, 1980 (Annexure G to the Writ Petition) and Notification dated June 30,
B 1980 and for appropriate writs and directions commanding the respondents
to refund a sum of Rs. 60,28,175.08 collected by the respondents illegally.
There was also a prayer for appropriate writs and directions on the
respondents to withdraw the supplementary electricity bills for the months
of November and December, 1980 and also the bills of January, 1981 and
C February, 1981 respectively (being Annexures CC, Y, X and GG) and for
a direction to refund a sum of Rs. 18,40,800.58 collected by the respondents
on account of the electricity bills. There was also a prayer for appropriate
directions restraining the respondents from collecting energy charges in
any manner other than on the basis of supply agreement and also restrain-
D ing them for disconnecting the supply of electricity to the factory of the
appellant No.1, Indian Aluminium Company Limited at_ Belgaum. The
appellants also prayed f~r directing the respondent No. 1, the Karnataka
Electricity Board to exercise its powers under Section 49 (3) of the
Electricity (Supply) Act by either framing regulations in the tariff or by
entering into an agreement providing for appropriate protective claims.
E
The essential facts concerning the writ petition involved in the instant
Civil Appeal may be stated as follows :
F
The Indian Aluminium Company Limited registered under the Com-
panies Act and one shareholder, namely, Shri K. Ghosh, were the Writ
Petitioners and the respondent No. 1 is the Karnataka Electricity Board, a
-
Body Corporate constituted under the Electricity (Supply) Act, 1948 and
· respondents Nos. 2, 3 and 4 are respectively the Executive Engineer
(Electrical), 0 and M Division, Karnataka, the Chief Engineer (General)
G and the Accounts Officers, 0 and M Division, all the Karnataka Electricity
Board. Respondent No. 5 is the State of Karnataka through the Secretary,
Department of Public Works Department and the respondent No. 6 is
Union of India through the Secr~tary, Ministry of Energy, Government of
India. The case of the appellants was inter alia that in 1966 the Government
of Karnataka had undertaken the Sharvathy Valley Hydro Electric Project
H in the State of Karnataka. It had planned for constructing a hydro electric-
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.] 219
genrating system to genrate a large quantity of electric power. The State A
was anticipating the generation of large surplus power. The aluminium
industry particularly the smelter plant requires a large quantity of power
for manufacturing operation. The Karnataka State Electricity Board,
{hereimilter referred to as Board) and the State of Karnataka (hereinafter
referred to as State) had invited the Indian Aluminium Company Limited
(hereinafter referred to as the Company) to establish its aluminium smelter
B
plant within the State of Karnataka by assuring that uninterrupted supply
.1,-- of electricity would be given to the smelter plant. Accordingly the Company
established a factory with its smelter plant at Belgaum.
There was a tripartite agreement entered into between the Company, C
the Board and the State on March 26, 1966. Later on,· a fresh tripartite
agreement was entered into between the parties in modification of the
aforesaid tripartite agreement and the latter agreement was entered into
on August 7, 1976. In the said tripartite agreement several clauses were
incorporated to ensure uninterrupted supply of power and there were also D
provisions for supply of power at concessional rates.
The State promulgated the Electricity Supply Karnataka (Amend-
ment) Ordinance, 1980 plirporting to amend Section 49 of the Electricity
(Supply) Act, 1948. Such Ordinance was replaced by the Karnataka Act 33
of 1981. Before the promulgation of the Ordinance which was replaced by E
the said Act, the Board increased the power rate in July 1980 far beyond
the rate prescribed in the agreement. After promulgation of the Ordinance
since replaced by the Act on February 1, 1981, the Board futher increased
the tariff rates.
The Aluminium Control Order was issued by the Central Govern- F
ment in 1970 to control the price of aluminium ingots, wire bars, billets etc.
On July 15, 1975, the Central Gover.nment notified the aluminium polfoy.
It was indicated in the said policy that the proposed new rate for aluminium
should remain in force foi: five years and such rates should be periodically
revised and revision, if any, should ·be made only after consultation with G
the Central Government which was controlling the price of aluminium. In
July, 1975 the rate of tariff was 7 paise per unit. The second tripartite
~reement in supersession of the earlier one was entered on A~st 7, 1976
between the Writ Petitioners and the respondent No. 4 and such agreement
inter alia provided that whenever the Board wants to increase its power H
J
220 SUPREME COURT REPORTS (1992} 3 S.C.R.
A rates, it must give at least six months' notice to the Company to approach
the Central Go:vernment so that corresponding increase in retention price
of aluminium was effected to absorb the increased power rate. It was
however provided that if the Central Government would not increase the
price within the period of six months, the increased tariff rates would
B become effective. On January 22, 1980, the Board issued a letter to the
Company calling upon the Company to contact the Executive Engineer for
executing a supplementary agreement relating to certain changes in the
tariff rate proposed in the letter. The Company by its letter dated February
25, 1980 requested the Government of Karnataka for arranging a meeting
for discussion of the situation arising out of the proposed change in the
C tariff rate. It is contended that no positive result came out of the discussion
held between the parties. On July 15, 1980 the Government Of India issued
a notification inter alia refixing the retention price. On July 8, 1980, the
Company received letter dated July 3, 1980 from the Board indicating that
additional surcharge of 2 paise per unit had been enforced. On August 5,
D 1980 the Company, by way of abundant caution, had applied to the Central
Government for increasing the retention price. The request made by the
Company not to increase the tariff rate for the supply of power to its
smelter plant however, was not acceded to by the Board. The power rate
was increased to 19.59 paise per unit in 1980. The Board had also imposed
E surcharge of 10 paise per unit on June 30, 1980, and such surcharge was
made effective from June 1, 1980. The Company contended that ths Board
had not given six months' notice for the surcharge and in the Writ Petition
such change of surcharge effective from June 1, 1980 had also been
challenged and the legality and validity of imposition of surcharge for the
F period between July 1, 1980 to November 1, 1980 before the promulgation
of the said ordinance, were challenged in the Writ Petition. On November
21, 1980, the State of Karnataka promulgated Electricity Supply (Karnataka
Amendment) Ordinance for amending Section 49 of the Electricity (Supp-
ly) Act which as afsoresaid was replaced by Act 33 of 1981. The effect of
G such amendment of Section 49 of the Electricity (Supply) Act is that it has
empowered the Board to increase tariff rates notwithstanding any agree-
ment with the consumers. On February 2, 1981, the Board increased the
tariff rate to 25.93 per unit. Being aggrieved by increase of tariff rates and
consequential demands for payment of bills on the basis of increased tariff
in complete disregard of the said agreement of 1976, the Company and one
H
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.] 221
-0f its share holders moved the said Writ Petition No. 6257 to 1981 for the A
'i"' reliefs indicated hereinbefore.
It may be indicated here that existing rate of electricity was Rs. 22.5
per unit and Rs. 22 per KVA on 27.5.1981. The Board had thereafter
increased the rate periodically from time t.o time as follows :
B
20.08.81 Rs. 30.18
01.11.83 Rs. 38.30
10.11.83 Rs. 41.30
01.01.84 Rs. 41.38
27.09.85 Rs. 58.01 c
- 01.09.86 Rs. 68.01
The Company contended that the increased tariff was not enforceable
against the Company in view of the agreement between the parties. How-
ever, without prejudice to the rights and contentions, cheques were sent to D.
cover the bill. The Writ Petitioners contended inter alia that the agreement
dated August 7, 1976 between the Company and the Board and the Staty
Government was binding on the parties and the tariff for supply of
electricity has to be fixed only on the basis of the terms of the said
agreement. Consequently, excess amount paid by the Company under
protest should be refunded. The Writ Petitioners further contended that E
in the first agreement dated March 26, 1966, the then Mysore State
Electricity Board had agreed to supply electric power to the smelter plant
of the Company located at Belgaum. Elaborate provisions were made to
cover several situations which were likely to arise in the course of supply
of power and utilisation of the same by the Company. The supply of power F
under .the said agreement commenced from October 22, 1969. The said
)-. agreement was replaced by the agreement dated August 7, 1976 (Annexure
B to the Writ Petition). Such agreement of 1976 was made in view of the
industrial policy of the Government of India and the guidelines stated by
the Government of India in the matter of electricity tariff to be applied to
the aluminium plants. G
The Writ Petitioners contended that the smelter plant of the Com-
pany is fully dependent on power and for every tonnt of aluminium
produced, about 19000 units of electric energy are consumed by the said
smelter plant. It is the specific case of the Writ Petitioners-appellants that H
222 SUPREME COURT REPORTS (1992] 3 S.C.R.
A production in the smelter plant depends mainly on the supply of uninter-
rupted electrical power and unlike in other industries where electricity is
used as a motive power, in the smelter plant of the Company the electricity
is not only a motive power but also an important raw material. Uninter-
rupted supply of power at a very high. degree is essentially necessary for
B breaking the chemical bond for aluminium oxygen in the compound of
aluminium oxide. The process of manufacture of primary alumina is done
at two stages - first, alumina i.e. pure oxide of aluminium is extracted from
its ore, bauxite by a chemical process. Such alumina is further processed
in the smelter plant. In this smelter plant, the alumina is treated with the
C help of electrolytic cells. In the smelter plant at Belgaum, there are three
lines with 492 installed electrolytic cells. Alumina is charged into the
molten cryolite in which it gets dissolved and direct electric current is
passed through it continuously. By the passage of electric current the
alumina gets split into aluminium and oxygen. The cryolite is kept at a
-
temperature of about 970 degree C. The melting point of aluminium is less
D than this temperature. The aluminium formed by the splitting up of the
alumina is molten at this temperature and then it settles down at the
bottom of the cells from which it is periodically siphoned out in the molten
form for casting int<:> different forms like ingots, slabs, etc. It is contended
that if the electric supply is curtailed or interrupted, the temperature of
E the cryolite bath will come down and if the interruption period is more
than 2 hours the bath will cool down and solidify. Once the cryolite bath
gets solidified, it will not be able to pass electric current through the cell
and even if the power supp!y is restored, after solidification of cryolite bath,
the cells cannot be restarted. Once the solidification of cryolite bath takes
F place, the cells can be restarted only by a complicated procedure. The
entire cryolite bath will have to be dug out, powdered and charged back.
The same has then to be melted again using abnormally high amount of
electric power, and such process entails a very high cost. The cathode
carbon which. will cost more than Rs. 1 lakh per cell will also get severely
G damaged with the thermal shock of cooling and heating. It is contended
that apart from the time factor and the large amount of energy required
to-be consumed, -in the process of restarting the cost of restarting each cell
is over Rs. 60,000. Besides, the financial loss, there will be production loss
and it may take about two months before normalcy of operations can be
_resumed after the restart operations. It is also contended that any change
H
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD (RAY, J.] 223 ·
or fluctuations such as power cuts or interruptions in supply of power has A
severe adverse costs implication for the production ~f aluminium quite
apart from production loss of aluminium metal itself.
It is also a specific case of the Writ Petitioners appellants that
manufacturing process in the smelter plant has special characteristics and B
such manufacturing process is distinctively different in metallurgical-cum-
electrolytic process and the same cannot be compared with most of the
other industries including power intensive industries where curtailments or
inte~ruptions of supply of power only affect the production during the
interrupted period and not after the full power is resumed. Moreover,
unlike in other industries, the power is itself a very important raw material C
for production of aluminium in the smelter plant. Accordingly, the smelter
plant is not only a high power sensitive plant but it is absolutely dependent
on power being its essential and primary raw material. It is contended that
all over the world, aluminium has been given a special status with regard
to the power and 'firm power' concept is the key note in this industry. Since D
aluminium industry requires a large amount of power not comparable with
any other industry, cost of power is the most important element in the cost
of production of aluminium. At the relevant time when the Writ Petition
was presented the cost of power formed about 38% of the total cost of
production and it is very strongly contended that in no other industry such
large amount of power is required· and consequently power cost element E
in the cost of production in other industries is substantially lower. In the
aluminium policy notified by the Government of India in 1975, it was
indicated that the production of aluminium metal had declined consider-
ably since 1971-72 in spite of the fact that installed capacity had been going
up. It was also indicated that such decline was primarily due to the F
restrictions on power supply to the aluminium producers. It was further
indicated that the rates at which electricity Board had contracted in the
past for supply of power to the aluminium industry, proving to be un-
remunerative for the Boards has also been responsible for this situation,
and the electricity Boards were the largest users of aluminium. Government
of India, therefore, considered it imperative that power tariffs need to be G
revised in a way which would be fair to the Electricity Boards but which
would not result in rising of the price of aluminium.
The Writ Petitioners have contended that under clause 5 of the
agreement of 1976, the' payment for supply is to be made at the rate at H;
·224 SUPREME COURT REPORTS (1992) 3 S.C.R.
A which power is being drawn and no payment is to be made with reference
to the units of electrical energy consumed in any particular period and the
method will operate reasonably. Provisions were made for a formula to
find out average from the demands for all the half hours during the month
in which the cut or interruption took place. By such provision the con-
sumer, namely, the company was given the benefit of a reduced consump-
B tion of the demand during the period where there may have been a power
cut or interruption in supply.
Clause 10 of the agreement provides for relieving the Company from
the obligation of taking and paying for supply of power if the Company was
C prevented from taking electric power. It has been contended that if refer-
ence is made to various provisions in the agreement of 1976 it will be
evident that the State Government and the Board having fully appreciated
the absolute necessity of uninterrupted supply of power and the impact of
the tariff rate for the supply of power to the smelter plant agreed to various
D clauses ensuring smooth and uninterrupted supply of electricity at the rates
agreed upon by the parties. In view of such facts the Board could not revise
the tariff according to its fancies and the Board being squarely bound by
the agreement could not repudiate the same under the cover of the
amendment of Section 49 of the Electricity (Supply) Act. It was contended
by the Writ Petitioners before the High Court that since this smelter plant
E was installed at Belgaum on the invitation by the State of Karnataka and
Electricity Board by clearly assuring the Company that uninterrupted
supply of electricity would be made at a reasonable rate and on the basis
of the understanding between the parties as embodied in the first and the
second agreement, the principle of promissory estoppel was squarely at-
F tracted in the facts of the case and any demand of tariff for electric supply
to the smelter plant of the Company at Belgaum contrary to the existing
,J.._ .
agreement of 1976 is wholly illegal and inoperative. It was also contended
that in the aforesaid circumstances amendment of Section 49 of the
Electricity (Supply) Act, applicable to the Board and its consumers, was
not applicable to the Company and the Company despite such amendment
G was entitled to enjoy the privileges emanating from the agreement of 1976.
The validity of the amending Act was challenged by the Writ Petitioners
before the High Court.
It was contended by the Writ Petitioners before the High Court that
H the amending act does not affect the existing agreement.of 1976 inter alia
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RA\', J.] 225
on the following grounds : A
(a) The agreement is a tripartite agreement no< contemplated
by the amending Act but ·the agreement envisaged under the
amending Act is a bipartite agreement between the consumer
and the Board.
B
(b) The tripartite agreement was the result of aluminium policy
of the Government of India and such Governmental policy
cannot be negatived by the amending Act.
(c) The Board is estoppel from claiming any higher tariff not C
contemplated by the agreement.
(d) The amending Act is ultra vires inasmuch as :
(i) It treats, all consumers at par irrespective of the special
features of each class of consumers and therefore arbitrary D
offending Article 14 of the Constitution.
(ii) The increase of tariff by virtue of the amending Act directly
hits at the price of aluminium fixed under the Aluminium
Control Order issued by the Central Government and
hence illegal and ultra vires. E
(iii) Aluminium industry is a scheduled industry under the
control of the Government of India as declared by In-
dustries Development and Regulation Act and hence falls
under Entry 52 of List I of Vllth Schedule of the Constitu- F
tion. Therefore policy of.Government of India amounts to
direction issued to the State Governments which they are
t>ound to obey. Consequently the agreement of 1976 is an
agreement protected by a law coming under Entry 52 of
List I, terms of which cannot be varied by a law enacted by
a State by virtue of the power conferred by the concurrent G
list (List Ill of Vllth schedule). The amending Act should
be construed in such a way as not to impinge on or detract
from the law, statutory order or constitutional direclion of
the Centi:al Government, otherwise the said amending Act
• will lack legislative competence. H
'
226 SUPREME COURT REPORTS [1992f 3 S.C.R.
A The Respondents opposed the contentions of the Writ Petitioners and the
contentions of the Re!spondents as advanced before the High Court may Y ·
broadly be indicated as follows :
(i) The remedy of writ petition to enforce the contractual rights
under the agreement was not available.
B
(ii) State did not invite the petitioner to establish the factory
at Belgaum; it only agreed to make available the necessary
facilities..
(iii) Aluminium factory does not occupy any unique position
c and does not constitute a class of its own from the point of
view of power requirement and/or supply. Even if it is a class
by itself, that would not confer any legal right on the petitioner
-
to be accorded any preferential treatment among industries or
consumers of electricity.
D
(iv) It is not correct to contend that the agreement entered into
was by exercise of the statutory powers under Section 49(3) of
the Act alone.
(v) The clauses in the agreement were included after mutual
E discussion and consensus of the concerned parties.
(vi) The clause relating to the giving of prior notice before
revision of tariff is neither a condition precedent, nor con-
stituted a fundamental term of the agreement. Similarly such a
clause does not amount to a solemn assurance or repre-
F sentation on the part of the State Government. However, such
a term in the agreement will not bind the Board to revise the
tariff in exercise of its statutory powers.
(vii) Surcharge of 2 paise per unit was levied and collected by
the Board, as applied to others.
G
(viii) In view of the ordinance with effect from 22.11.1980 the
tariff schedule H.T.lA (Electrical Power Tariff of 1978, with
all other charges like surcharges and additional surcharge etc.)
is applicable and the petitioner is governed by that H.T.lA
H Tariff Schedule, in supersession of the terms set out in t.he
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.) 227
agreement. The Ordinance nullifies all the rates and the mode A
of billing envisaged in the supply agreement.
(ix) The plea of promissory estoppel put forward by the
petitioner is untenable, since the amending Act is a legislative
measure.
B
(x) The State legislature has plenary powers to legislate on all
matters pertaining to electricity and the powers of the State
legislature in this behalf, cannot be curtailed by an agreement
entered into by the State with the petitioners or any other
person. c
To appreciate the respective contentions of the parties on the ques·
tion of legislative competence for the amending Act, the High Court
referred the Entires 52 and 54 of List I of Vllth Schedule of the Constitu·
tion, Entries No. 26 and 27 of List II Entries 33,34 and 38 of List III of the
Vllth Schedule. The High Court also referred to and relied on the discus- D
sion of this Court in the case of Tika Ramji v._State of U.P. (AIR 1956 S.C.
676} where the concept of 'industry' as a topic of legislation was explained.
The legislative competence of the State of U.P. to regulate the supply and
purchase of sugar cane by the impugned State Act of 1953 was raised by
contending that 'sugar' beirig controlled industry under ~he Industries E
Development and Regulation Act, the topic of impugned legislation per·
taining to sugarcane fall within the purview of Central Control under Entry
52 of List I and hence the subject is taken away from the field of legislation
by the State. It was also contended that Sugar Control Order 1955 promul-
gated by Central Government under the Essential Commodities Act 1955
empowered the Central Government to regulate the movement of sugar- F
cane and to fix its price. The observation of this Court at rage 695 of the
-~
report was copiously quoted by the High Court for holding that there was
no question of lack of legislative competence for enacting the amending
act by the Karnataka Legislature.
The High Court referred to the observation of this Court to the G
following effect : -
"It is clear therefore, that all the Acts _and the notifications
issued thereunder by the centre in regard to sugar and sugar
cane were enacted in exercise of the concurrent jurisdiction. H
228 SUPREME COURT REPORTS (1992) 3 S.C.R.
A The exercise of such concurrent jurisdiction would not deprive
the provincial legislatures of similar powers which they had
under the Provincial Legislature List and there would, there-
fore, be no question of legislative incompetence qua the Provin- ·
cial Legislatures in regard to similar pieces of legislation
enacted by the latter.
B
The provincial Legislatures as well as the Central Legislature
would be competent to enact such pieces of legislation and no
question of legislative competence would. arise. It also follows as
a necessary ~rrolary that, even though sugar industry was a -
c controlled industry, none of these Acts enacted by the Centre was
in exercise of its jurisdiction under Entry 52 of List I.
Industry in the wide sense of the term would be capable of
comprising three different aspects (1) raw materials which are
an integral part of the industrial process (2) the process of
D manufacture or production, and (3) the distribution of the
products of the industry. The raw materials would be goods
which would be comprised in Entry 27 of List II. The process
of manufacture or production would be comprised in Entry 24
of List II except where the industry was a controlled industry
when it would fall within Entry 52 of List I and the products
E
of the industry would also be comprised in E'l.try 27 of List II
except where they were the products of the controlled in-
dustries when .they would fall within Entry 33 of List III.
This being the position it cannot be said that the legislation
F which was enacted by the Centre in regard to sugar and sugar-
cane could fall within entry 52 of List I. Before sugar industry
became a controlled industry, both sugar and sugarcane fell
within Entry 27 of List II but, after a declaration was made by
Parliament in 1951 by Act 65 of 1951 sugar industry became a
controlled industry and the product of that industry viz. sugar
G
was comprised in Entry 27 of List II. Even so; the Centre as
well as the Provincial Legislatures had concurrent jurisdiction
in regard to the same.
In no event could the legislation in regard to sugar and
H sugarcane be thus included within entry 52 of List I. The pith
INDIAN ALUMINIUM CO. v. ELECI'RICITY BOARD [RAY, J.] 229
and· substance argument also cannot be imported here for the A
simple reason that, when both the centre as well as the State
Legislatures were operating. in the concurrent field, there was
no question of any trespass upon the exclusive jurisdiction
vested in the Centre under Entry 52 of List I, the only question
which survived being whether, putting both the pieces of legis-
lation enacted by the Centre and the State Legislature together,
B
there was any repugnancy, a contention which will be dealt with
hereafter."
The High Court also noted that amending Act was placed before the
President and consent was obtained. Hence by virtue of Article 254(2) of C
the Constitution the State Legislation will prevail even if there is any
repugnancy. The High Court also held that the Writ Petitioners specifically
pleaded that in the smelter plant electricity was a raw material for
aluminium or 'relatable article' to the industry. Hence in the absence of
'>--
any notification under Section 18G of the Industries Development and D
Regulation Act there was no question of any repugnancy on the score of
tariff of electricity fixed by the amending Act. The High Court also relied
on the observation of this Court in Tika Ramji's case at page 701 and 703
of the report to the following effect : -
" Sugar industry being one of the scheduled industries, it was E
contended for the petitioners that sugarcane was an article
relatable to the sugar industry and was, therefore, within the
scope of S. 18G and the Central Government was thus
authorised by notified order to .provide for regulating the supply
and distribution thereof and trade and commerce therein. " F
Even assuming that sugarcane was an article or class of
articles relatable to the sugar industry within the meaning of S.
18-G of Act of 1951, it is to be noted that no order was issued
by the Central Government in exercise of the powers vested in
it under that section and no question of repugnancy could ever G
arise because, as has been noted above, repugnancy must exist
in fact and not depend merely on a possibility. The possibility
of an order under S. 18-G being issued by the Central Govern-
ment would not be enough. The existence of such an order
would be the essential prerequisite before any repugnancy H
230 SUPREME COURT REPORTS (1992] 3 S.C.R.
A couid ever arise. "
It may be noted here that for the purpose of fmding that electricity was a
raw material for the smelter plant, the High Court referred to relevant
pleadings of the Writ Petitioners and also referred to the decision of this
Court concerning the petitioner company itself in Indian Aluminium Co. v.
B Kera/a State Electricy Board, AIR 1975 SC 1967 wherein this Court refer-
ring to the process of manufacture of aluminium from alumina has held
that electricity is a raw material for such manufacturing process. Similar
view was also expresseJ by this Court in the decision of Delhi Cloth and ~
General Mills Co. Ltd. v. The' Rajasthan State Electricity Board, AIR 1986
C SC 1126 while considering electro chemical and PVC and other allied
industrial products in a power oriented industry.
The High Court also negatived the contention of the Writ Petitioners
that when Parliament has evinced interest in Aluminium Industry, the
entire field of legislation touching all aspects of the said industries vests in ~
D the Parlianient and State Legislature has lost its competence as the field
-of legislation will be only under Entry 52 of List I.
The High Court has held that mere declaration by Parlian1ent that a
particular industry is a controlled industry under the Industries Develop-
E ment and Regulation Act is by itself not sufficient to exclude the com-
petence of State legislature to enact a law over a subject which otherwise >-.
falls within its field of legislation. The High Court referred to the decision
of this Court in the case of State of Uttar Pradesh & others v. Synthetics and
Chemical Limited and others, AIR 1980 SC 614. It was contended that the
denatured spirit or industrial alcohol comes within the purview of the
F control of the Central Government and hence Central Government alone
was empowered to provide for regulating the distribution, transport, dis-
posal, acquisition etc. Referring to the order of the Central Government A
issued as Ethyl Alcohol (Price Control) Order, 1971, this Court held to the
following effect : -
G "...We are unable to read the Ethyl Alcohol (Price Control)
Orders as explicitly or impliedly taking away the power of the
State to regulate the distribution of intoxicating liquor by col-
lecting a levy for parting away with its exclusive rights. If the
powers of Parliament and the State Legislature were confined
H to Entry 52 in List I and the Entry 24 in List II, Parliament
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.] 231
would have had exclusive power to legislate in respect of A
industries notified by Parliament. The power of the State under
Entry 24, List II is subject to the provisions of Entry 52 in List
I. But we have to take into account Entry 26 in List II and Entry
33 in List III for determining the scope of legislative power of
the Parliament and the State. Entry 26 in List II is as follows :
B
'Trade and commerce within the State subject to the
provisions of Entry 33 of List III'. "
In the said case, this Court relied on the decision in Tika Ramji's
case. The High Court also referred to the decision of this Court in the case C
of Hoechst Phannaceuticals Ltd. and another etc. v. State of Bihar & Ors.,
AIR 1983 SC 1019. It was contended in the said case that levy of surcharge
of sale tax imposed by the State Legislature was without legislative com-
~- petence as it impinged or affected the price of drugs fixed under Drugs
(Price Control) Order, 1979 issued by the Central Government under the D
Essential Commodities Act. This Court has held in the said decision :
"In the case of a seeming conflict between the Entries in the ·
two lists, the Entries should be read together without giving a
narrow and restricted sense to either of them. Secondly, an
attempt should be made to see whether the two Entries cannot E
be reconciled so as to avoid a conflict of jurisdiction. It should
be considered whether a fair reconciliation can be achieved by
giving to the language of the Union Legislative List a meaning
which, if less wide than it might in another context bear, is yet
one that can properly be given to it and equally giving to the F
language of the State Legislative List a meaning which it can
properly bear. The non obstante clause in Article 246 (1) must
operate only if such reconciliation should prove impossible.
Thirdly, no question of conflict between the two lists will arise
if the impugned legislation, by the application of the doctrine
of 'pith and substance' appears to fall exclusively under one G
list, and the encroachment upon another list is only incidental.
-{ Union and State Legislatures have concurrent -power with
respect to subjects enumerated in List III, subject only to the
provision contained in Cl. (2) of Article 254 i.e., provided the
provisions of the State Act do not conflict with those of any H
232 SUPREME COURT REPORTS [1992] 3 S.C.R.
A Central Act on the subject. However, in case of repugnancy
between a State Act and a Union Law on a subject enumerated
in List III, the State law must yield to the Central law unless it
has been ;eserved for the assent of the President and bas
received his assent under Article 254 (2). The question of
repugnancy arises only when both the Legislatures are com-
B petent to legislate in the same field i.e., when both the Union
and the State laws relate to a subject specified in List III and
occupy the same field."
The High Court also referred to the decision of a Constitution Bench
C of this Court in lshwari Khetan Sugar Mills Pvt. Ltd. etc. etc. v. The State of
U.P. and others, AIR 1980 SC 1955. It has been held by this Court in the
said decision that the question arose for decision in the said case about the
validity of law· acquiring undertakings involved in manufacturing sugar by
the State Legislature. The contention was sugar as a topic of legislation was ---(
D under Entry 52 of List I by virtue of it being declared as an industry control
of which ves~ed in the Union as declared by Industries Development and
Regulation Act. The majority view of this Court in the said case at page
1961 of the report was quoted by the High Court to the following effect :
"The legislation enacted pursuant to the power to legislate
E acquired by declaration must be for assuming control over the A.
industry and the declaration has to be made by law enacted, of
which declaration would an integral part, Legislation for as-
suming control containing the declaration will spell out the limit
of control so assumed by the declaration. Therefore, the degree
F and extent of control that ~ould be acquired by Parliament
pursuant to the declaration would necessarily depend upon the
legislation enacted spelling out the degree of control a~sumed. ~
A mere declaration unaccompanied by law is incompatible with
entry 52 List I. A declaration for assuming control of specified
industries coupled with law assuming control is a pre-requisite
G for taking legislative action under Entry 52, List I. The decla-
ration .and the legislation pursuant to declaration to that extent
denude the power of State Legislature to legislate under Entry ).--
24, List II. Therefore, the erosion of the power of the State
legislature to legislate in respect of declared industry would not
H occur merely by declaration but by. the .enactment consequent
INDIAN ALUMINIUM CO. ·v. ELECTRICITY BOARD [RAY, J.] 233
on the declaration prescribing the extent and scope of control." A
The High Court also referred to few more decisions of this Court for
the purpose of appreciating the contention whether the supply of electricity
and tariff rates were controlled by Entry 52 of List I, thereby taking away
legislative competence of the State Legislature and whether or not the B
Notification issued by the Central Government fixing the aluminium policy
and also irtdicating the tariff affecting the aluminium industry becaQie
repugnant to the impugned provisions under the amending Act of State
Legislature. The High Court by giving a long reasoning has come to the
finding that the impugned legislation was quite valid and did not suffer
either from the want of legislative competence or on the score of repug- C
nancy between the Central and the State legislation.
The High Court also negatived the contention of the Writ Petitioners
that aluminium industry is special class of its own and thus cannot be
categorised with· other industries. It was indicated by the High Court that D
if a microscopic analysis is to be done almost every industry will have its
own special features. Such as analysis is outside the scope of Article 14.
Classification is based on broad principles, to be connected reasonably with
the object to be achieved. It has been held by the High Court that the
Scheme of Section 49 of the Electricity Supply Act indicates that uniformity E
will be the basis of tariff and since all power intensive industries have been
treated alike in view of the amended provision of Section 49 in supersession
of agreements between the consumers and the Board, the High Court held
that no discriniinatory treatment was meted out to the Writ Petitioners.
The High Court has also held that the contention that Kudremukh Iron
and Steel Industries have been treated favourably resulting in a ·dis-
F
criminatory treatment to the petitioner-Company should not be accepted
by indicating the special consideration relating to Kudremukh industry and
also noting the submission made by the learned Advocate General that
enforceability of the .agreement with Kudremukh Iron and Steel Industry
was also under active consideration in the light of the impugned amend- G
ments. It has been held by the High Court that since the Company was not
comparable with the Kudremukh Iron and Steel Industry the contention of
discrimination was not to be accepted. The High Court also rejected the
contention that price hike for the power supply imposes an unreasonable
restriction on the right of the petitioner-Company to carry on its industry, H
234 SUPREME COURT REPORTS [1992) 3 S.C.R.
A thereby infringing Article 19(1) (g) of the Constitution. It has been indi-
cated by the High Court that the price hike will have its impact on the cost
of production but such increase in the cost of production cannot be
avoided. It has been held that the price of aluminium control order itself
provides for restructure of aluminium for which the petitioner-Company
B has to approach the Central Government.
Coming to the question of promissory estoppel raised by the petitioners,
the High Court referred to paragraphs 91 and 92 of the Writ Petition where
the pleading of promissory estoppel was made by the Writ Petitioners. The
High Court has accepted ·the contention of the respondents as advanced by
C the learned Advocate-General appearing for the respondents that the doctrine
of promissory estoppel is not attracted in the sphere of statutory power and
since the impugned action was a consequence of the amended provision of
Section 49, the question of promissory estoppel did not arise. The reference
was made to the decision of this Court in Excise Commissioner, U.P. etc. etc.
D v. Ram Kumar etc. etc., AIR 1976 SC 2237 wherein it was observed by this
Court to the following effect: -
"It is now well settled by a catena of decisions that there can
be no question of estoppel against the Government in the
exercise of its legislative, sovereign or executive powers."
E
Reference wa.> also made to another decision of this Court in Union
of India and others v. Godfrey Phillips India Ltd., AIR 1986 SC 806. The
observation of this Court appearing at para 14 was referred to by the High
Court to the following effect :
F
".. .It is equally true that promissory estoppel cannot be used to
compel the Government or a public authority to carry out a
representation or promise which is contrary to law or which
was outside the authority or power of the officer of the Govern-
ment or of the public authority to make. We may also point out
G that the doctrine of promissory estoppel being an equitable
doctrine, it must yield when the equity so requires, if it can be
shown by the Government or public authority that having
regard to the facts as they have transpired, it would be inequi-
table to hold the government or public authority to the promise
H or representation made by it, the Court would not raise an
INDIAN ALUMINIUM CO. v. E~ECTRICITY BOARD [RAY, J.] 235
y equity in favour of the person to whom the promise or repre- A
sentation is made and enforce the promise or representation
against the Government or public authority. The doctrine of
promissory estoppel would be displaced in such a case, because
on the facts, equity would not require that the Government or
public authority should be held bound by the promise or
B
representation made by it."
The High Court has held that Section 49(5) of the Act as introduced
~
by the impugned amendment by the very language of it overrides any other
agreement or law. It has been held that question of categorisation under
Section 49(5) is to compel the consumer to pay for the electricity consumed c
-- according to the uniform tariff applicable to the category to which it
belongs. The High Court has held the petitioner's contention should not
be accepted that the Board is bound to treat the petitioner as a special
,... category for which the tariff applicable was to be regulated by the agreed
formula. The High Court has also held that factually also it is not possible
D
to conclude on the existing material that a special promise was held out to
the petitioner-Company that a particular formula will be applied in the case
of the consumption of electricity by the Writ Petitioners. The High Court
has come to the finding that it will not be possible to hold that there was
,.. a promise which was held out for the benefit of the petitioners but th~
invitation to start the industries in the State, if al all, was the motive force E
for the petitioner and other industries to establish various factories in the
State to avail the advantages of the prevailing conditions in the State. The
contentions of the Writ Petitioners that the hills containing the revised
--- tariff even before the promulgation of ordinance amending Section 49 was
illegal and unjustified, had not been gone into by the High Court in view
of the specific statement by the learned counsel for the Board before the
F
),.. High Court that the Writ Petitioners should approach the Board with
/ particulars in sup~orl of their contentions and the Board was prepared to
revise the bills if there had been any error or omission on the part of the
Board. Save as aforesaid, all other reliefs claimed by the petitioners in the
Writ Petition were disallowed by the High Court and the Writ Petition was G
accordingly dismissed.
-{
Mr. Parasaran, the learned Senior Counsel appearing for the appel-
lants in his usual fairnc-ss had indicated that detailed arguments had been
advanced before the High Court of Karnataka al the hearing of the Writ H
'
236 SUPREME COURT REPORTS (1992] 3 S.C.R.
A proceeding on the question of vires of the amending Act, on the score of
legislative competence and also on the ground of arbitrary action in revis- ~
ing the tariffs without justification and unjust classification of the smelter
plant in the category of other power intensive industries includ~d in the
category of HT-IA without appreciating the peculiar features of the
productive mechanism in a smelter plant thereby offending Article 14 of
B the Constitution. He has submitted that as he intends to advance the same
contentions raised before the High Court on the question of vires for
appropriate consideration by this Court he does not intend to elaborate
the same once more. It is precisely for the aforesaid reason, we have ~
indicated in detail the reasonings of the High Court in dispelling the
c contentions of the Writ Petitioners that the amending Act is ultra vires.
We have given our anxious consideration to the contentions raised
for challenging the vires of the amending Act but we are unable to accept
-
the contentions that the Act suffers from any infirmity affecting its vires
D
either on the score of legislative competence or for offending Articles 19(1) ~
(g) ·or Article 14 of the Constitution. It appears that the High Court has
given cogent reasons for upholding the vires of the amending Act and for
dispelling the contentions raised by the Writ Petitioners and we endorse
the view taken by the High Court. We may only indicate her that in
deciding the question of legislative competence one must bear in mind that
E the Constitution is not to be construed with a narrow or pedantic approach
and it is not to be construed as a mere law but as a machinery by which ~
laws are made. Such interpretation should be made broadly and liberally.
The entries in the Constitution only demarcate the legislative fields of the
respective legislature and do not confer legislative power as such.
F
In examining the allegations of hostile discriminatory treatment, what
is looked into is not its phraseology but the real effect of its provisions.
~
Decisions of this Court have permitted the legislature to exercise an
....
extremely wide discretion in classifying items for collection of revenue so
long as it refrains from clear and hostile discrimination against particular
G persons or classes. It however should be borne in mind that with all these
latitudes certain irreducible consideration of equality shall govern the
differential treatment even in fiscal legislation.
)-
The test could only be of palpable arbitrariness in the context of felt
H needs of the time and social exigencies informed by experience. There
••
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.] 237
cannot be any precise or set formulae or doctrinaire tests or precise A
scientific principles of exclusion or inclusion.
Mr. Parasaran in his fairness has submitted that.under the Electricity
(Supply) Act the Board is empowered to revise tariffs but he has contended
that such revision cannot be made arbitrarily and capriciously. He has B
submitted that since the Board is the licencee for supply of electrical
energy to various consumers in a particular area, the :Board, as a matter of
fact enjoys the privilege of monopoly to some extent. It is therefore
necessary to consider whether in the exercise of revision of tariffs, the
Board has acted reasonably andJairly and the action is well informed by
reasons. He has also contended that the smelter plant has some special and C
- peculiar features in its manufacturing mechanism of aluminiurp from
alumina. He has drawn our attention to. the pleadings in the Writ Petition
where such mechanism and the key role of electricity have been elaborately
high-lighted. Mr. Parasaran has also drawn our attention to the accepted
position all over the world about the very important and key role of D
electricity in the electrolytic process in manufacture of aluminium in a
smelter plant and its impact as a basic raw material with a very high
implication in the cost of manufacture. In the aforesaid context, Mr.
Parasaran has contended that it is only unjust and improper to classify the
smelter plant in the general group of power intensive industries. To classify
the smelter plant only as a power intensive industry like various other E
power intensive industries, will not be proper classification. The very
distinctive and unique features of smelter plant are well known to the State
and the Board. He has drawn the attention of the Court to various clauses
of the agreement of 1976 for the purpose of showing that the State and the
Board were fully aware of the role of electricity in the manufacturing F
mechanism in a smelter plant and the extreme need of uninterrupted
supply of energy to the plant of the petitioner-Company at Belgaum. Mr.
Parasaran has submitted that as the State and the Board were fully aware
of the implication of tariff of electricity in the smelter plant, special
provisions were made in the agreement for billing and rates to be charged
in the event of interruption of supply. Mr. Parasaran has contended that G
as the agreement was tripartite it could not have been annulled by taking
recourse to the amended provision of Section 49 of the Electricity (Supply)
Act, the Boards has unjustly repudiated the agreement by treating the
smelter plant as only a power intensive industry and revising the tariff
exorbitantly and making it applicable to the petitioner-Company on the HI
238 SUPREME COURT REPORTS (1992) 3 S.C.R.
A plea that all the power intensive industries including the plant of the
petitioner-Company have been placed at par and have been subjected to
same tariff for the supply of electricity.
Mr. Parasaran has contended.that even if the amending Act is intra
vires thereby empowering the Board to annual all existing agreements with
B the consumers and requiring the Board to charge uniform tariff to the
consumers categorised in a particular group or class, there was no justifica-
tion to treat the smelter plant in the same category as in the case of other
power intensive industries.
c Mr. Parasaran has referred to specific pleadings in the Writ Petition
wherein a case of promissory estoppel binding the State and Board in the
matter of adhering to the terms of agreement of 1976 have been made out
by the petitioner-Company. He has submitted that the foundation of
promissory estoppel lies in the legitimate expectation a person may have
D of ·being treated in a certain way by administrative authority. In this
connection, Mr. Parasaran has referred to paragraph 81 at page 151 of
Volume 1(1) of Halsbury's Laws of England, Fourth Edition (Reissue)
dealing with "Legitimate Expectation". It has been indicated in the treatise
that a person may ha11e a legitimate expectation of being treated in a certain
way by an administrative authority even though he has not legal right in
E private law to receive such treatment. The expectation may atise either
from a representation or promise made by the authority including an
implied representation or from consistent past practice. The existence of a
legitimate expectation may have a number of different consequences and
one of such consequences is that the authority ought not to act so as to
F defeat the expectation without some overriding reason of public policy to
justify its doing so. It may also mean that if the authority proposes to defeat
a person's legitimate expectation it must afford him an opportunity to make
representations in the matter. In this connection, Mr. Parasaran has
referred to the decision of House of Lords in Council of Civil Service Union
and others v. Minister for the Civil Service, (1985) 3 All England Reporter
page 935. It has been held in the said decision that an aggrieved person
was entitled to invoke judicial review if he could show that a decision of
public authority affected him of some benefit or advantage which in the
past he had been permitted to enjoy and which he legitimately expected to
be permitted to continue to enjoy either until he was given reasons for
IH withdrawal and the opportunity to comment on these reasons. ·Mr.
INDIAN ALUMINIUM CO. v. ELEcrRICITY BOARD [RAY, J.] 239
Parasaran has also referred to a decision of Court of Appeal in R v. A
y Secretary of State for Home Department, (1985) 1 All England Reporter
page 40 wherein the right of being heard by a person having a reasonable
expectation if likely to be. affected by a decision to be taken by an authority
has been indicated. Mr. Parasaran also relied on a decision of Qµeen's
Bench Division in R v. Secretary of State for Home Department et parte B
Ruddock & others (1987) 2 All England Law Reports page 518. It has been
indicated in the said decision that the doctrine of legitimate expectation
imposed in essence a duty to act fairly and was not restricted to cases that
party having expectation was to be consulted or to be given the opportunity
to make representations before a decision was made. Where ex hypothesi
there was no right to be heard, it could be more important to fair dealing C
-- that a promise or undertaking given by a Minister as to how he would
proceed should be kept. Mr. Parasaran has also submitted that the Courts
in India including this Court have also taken note of the case of promissory
estoppel and obligation on the part of the promisor to honour the commit-
ment or the representation on the basis of which the other party has altered D
its position financially, Mr. Parasaran has referred to some of the decision
of this Court including the decision in Mis Motilal Padampat Sugar Mills
Company (Private) Limited v. State of Uttar Pradesh, [1979] 2 SCR 641 and
the decision in Delhi Cloth and General Mills Ltd; v. Union of India, [1988]
1 SCR 383. In the latter decision, it has been indicated by the Supreme
Court that if one of the representations induced a party to alte.r his E
position, a case of promissory estoppel is attracted. He has contended that
before annuling the agreement and making unjust demand of high tariff,
the Board ought to have given reasonable opportunity to the petitioner-
Company to establish that there was no occasion to resile from the obliga-
tion under the agreement. Mr. Parasaran has further submitted that if the F
Court comes to the finding that the action of the Board and the State are
unjust and the Board has an obligation to abide by the agreement of 1976
in view of the promissory estoppel, there will be no difficulty in issuing
appropriate writs for giving the reliefs claimed in the Writ Petition.
Mr. Parasaran has submitted that even if it is accepted that in view G
of amendment of Section 49 of the Electricity ~Supply) Act, the Boa~d was
required to charge tariff at uniform rate to all the consumers placed in a
particular category, such amendment does nol stand in the way of giving
special privilege to the petitioner-Company in the matter of tarifffo; the
supply of electricity in view of the fact that the smelter plant cannot be H
240 SUPREME COURT REPORTS (1992) 3 S.C.R.
A equated with other power intensive industries placed in the category HT y
IA and Section 49(3) of the Electricity (Supply) Act still empowers the
Board to fulfil its obligation in terms of the agreement of 1976. Mr.
Parasaran, in his fairness, has stated that promissory estoppel cannot
operate in violation of the statutory provisions but Section 49(3) of the Act
empowers the Board to fix tariff in conformity with the promise held out
B to the petitioner-Company because the petitioner-Company was entitled to
be treated altogether differently for the reasons indicated hereinbefore. In
view of such enabling provision under Section 49(3), Mr. Parasaran has
submitted, that the obligatioa to abide by the agreement consistent with
the case of promissory estoppel still survives. He has also submitted that
C there has been clear non-application of mind by the Board in not consider-
ing the manufacturing process in the smelter plant in its proper perspective
and because of such non-application of mind ·an attempt has been made to
-
treat an unequal with equals, Mr. Parasaran has also contended that before
purporting to annul the agreement by taking recourse to the amended
D provisions of Section 49, the Board should have given proper opportunity
to the petitioner-Company to substantiate that there had been a clear case
of promissory estoppel and such promissory estoppel survived even on the
face of the amended provisions. He has, therefore, submitted that the
Board should be directed to give a fresh look to the question of abiding by
the agreement of 1976 by taking into consideration of the relevant aspects
E of the manufacturing mechanism in the smelter plant of the petitioner-com-
pany in a proper perspective. Mr. Parasaran has submitted that unfor-
tunately, the High Court concentrated more on the question of vires and
attack of the amending Act or the score of legitimate competence. The
High Court has failed to note that a clear case of promissory estoppel was
F made out by the petitioner-Company and such promissory estoppel was
still applicabl~ without offending the statutory provisions, namely, the
amended provisions of Section 49 of the Electricity (Supply) Act.
Mr. Narasimhamurthy, learned counsel appearing for the respon-
dent-Board has submitted that the amending Act does not suffer from any
G vice either on the score of legislative competence or on the score of
arbitrary or capricious action and/or on account of offending Article 14
and 19(1)(g) of the Constitution. He. has also submitted that the High
Court has discussed the contentions raised by the parties at the hearing of
the Writ Petition at length and has not accepted the contentions that the
H amending Act was ultra vires on any account. He has submitted that the
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.) 241
reasonings of the High Court should be accepted and the contentions on A
the question of the vires of the Act sought to be reiterated in this Appeal
should be discarded by this Court.
We have already indicated that decision of the High Court in uphold-
ing the vires of the amending Act should be accepted and we have B
endorsed the reasonings given by the High Court in that regard which we
have referred to in some details.
Mr. Narasimhamurthy has submitted that there is no conflict with the
proposition that if a strong case of promissory estoppel is made out by a
party and such promissory estoppel does not come in conflict with any C
statutory provision, the party having reasonable expectation flowing from
a promise or representation may ask for enforcement of such legitimate
expectation founded on representations or assurances on the part of the
administrative body in appropriate cases. But in the instant case, the very
foundation of promissory estoppel is absent and as such consideration of D
the question of promissory estoppel does not arise. In this connection, he
has drawn the attention of this Court to the preamble of the first agreement
of 1966. He has submitted that if a reference is made to the preamble of
the agreement and other clauses it is quite apparent and evident that the
same do not indicate that on the invitation by the electricity Board or the
State Government, the smelter plant of the petitioner-Company had been E
established at Belgaum. It is quite evident that on coming to know that the
State and the Board were in a position to supply electric energy without
- any interruption according to the need of the smelter plant the petitioner-
Company became interested in establishing its smelter plant at Belgaum
and. thereafter negotiations were made between the parties and an agree- F
ment under Section 49{3) of the Electricity {Supply) Act was entered into.
He has contended that later on in view of changed circumstances a new
agreement was entered into between the parties in 1976 for the purpose of
getting uninterrupted supply of electricity on agreed rate and in a par-
ticular manner. Both the said agreement of 1966 and 1976 were the ·
outcome of usual bargaining between the parties on terms and counter G
terms and it is not a case that the terms were offered unilaterally by the
State or the Board to induce the Company to set up its smelter plant in
the State of Karnataka and the Company being induced by a representation
by the State or the Board that if the Company would set up a smelter plant
in the State of Karnataka then in the smelter plant of the Company, H
242 SUPREME COURT REPORTS [1992) 3 S.C.R.
A concessional rates would be offered for supply of electricity for all times
to come and the smelter plant would be treated altogether in a different
manner. He has also submitted that in the first agreement of 1966 there
was no provision relating to the revision of rates but in the agreement of
1n6, there is a specific provision for revision of the rates of tariff of
B electricity to be supplied to tlie smelter plant. Mr. Narasimhamurthy has
drawn the attention of the Court to the correspondence between the
parties starting from. 1964 for the purpose of showing that such correspon-
dence unmistakably point out a normal case of bargaining between the
parties for getting uninterrupted supply of electricity in the proposed
factory of the Company. In this connection, Mr. Narasimhamurthy has also
C referred to a decision of the High Court of Orissa in the case of Indian
Aluminium Company v. The Orissa Electricity Board and Anr., AIR 1975
Orissa page 100 where the Division Bench of ~he Orissa High Court has
considered when the principle of promissory estoppel can be invoked. It
has been held in the said decision that the State Electricity Board may
D revise the tariff fixed under the binding contract by relying on Section 49
and 59 of the Electricity {Supply) Act. It has been held by the Division
Bench that simply because the State Government had held out the assuran-
ces to the Company to supply hydro power fixed at low rate, a case of
promissory estoppel is not made out. It has been held that if the agreement
was the result of negotiations between the parties indicating that the
E Company was as much desirous of being supplied with electric power as
the supplier was anxious and willing to supply the same, there is no case
of promissory estoppel. Mr. Narasimhamurthy has submitted that facts and
circumstances in the instant case clearly reveal that the State government
was eager to have industries established in the State and for that purpose
F took steps to supply sufficient electric energy to various industries including
-
the petitioner-Company. The petitioner-Company was also equally anxious
to establish its smelter plant in the State of Karnataka in view of the
facilities made available . in the State, and both the parties thereafter
entered into negotiations and on such neg<;>tiations . terms and conditions
were arrived at. The agreement was made in accordance with the Section
G 49(3) of the Electricity (Supply) Act. It .is not the case that there was no
occasion to enter into any negotiation for settling the terms but clearly
unilateral assurances were given by.th~ State and the Board to give uninter-
rupted supply of electricity on specific conditions and on agreed rate
promised to the Company and only on the basis of such promises held out
H
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.j 243
to the petitioner-Company, the said smelter plant was established and the A
"T' agreement is only embodiment of the terms and conditions unilaterally held
out by the State and the Board. Mr. Narasimhamurthy has, therefore,
contended that the very foundation of promissory estoppel is absent in the
case and the High Court was justified in not accepting the case of promis-
sory estoppel.
B
Mr. Narasimhamurthy has submitted that sub-section 1 and 2 Section
49 of the Electricity (Supply) Act envisage supply of electric energy to
different consumers at uniform tariffs. It, however, empowers the Board to
charge a different tariff in appropriate case under Section 49(3) of the Act.
By the amending Act, Section 49 of the Electricity (Supply) Act has been c
amended in its application in the State of Karnataka. Sub-Section 5, sub-
section 6 and sub-section 7 to section 49 have been inserted after sub-sec-
tion 4 of Section 49 of the Electricity (Supply) Act. Sub-section 5 and 6 of
Section 49 of the Electricity (Supply) Act as applicable to Karnataka in
}-
view of the aforesaid amendment are to the following effect: - D
"(5) The party to an agreement or any other arrangement
entered into prior to the commencement of the Electricity"
(Supply) (Karnataka Amendment) Act, 1981 and providing for
supply of electricity by the Board shall, notwithstanding any-
thing contained in the instrument of agreement or other arran- E
gement or in any law including this Act, in force at such
commencement, pay, in respect of electricity so supplied after
such commencement, price (by whatever name called) calcu-
lated in accordance with the uniform tariff framed or modified
from 4~e! to time, under sub-section (1) and applicable to the F
category to which such party belongs .
.+.
(6) The party to any such agreement or arrangement entered
into after the commencement of the Electricity (Supply) (Kar-
nataka Amendment) Act, 1981, shall, notwithstanding anything
contained in this Act, or in such agreement or other arrange- G
ment, pay, in respect of electricity supplied by the Board, price
(by whatever name called) calculated in accordance with the
--( uniform tariff framed or modified "from time to time under
sub-section (1) ud applicable to the category to which such
party belongs." H
244 SUPREME COURT REPORTS (1992) 3 S.C.R.
\
A Mr. Narasi,mhamurthy has contended that the smelter plant of the
petitioner-Company had always been categorised by the Board as in-
dustries included in HT-IA. He has drawn attention of the Court to tariff
rates of 1974 and 1978. It appears that for 1978 tariff rates, the plant of the
petitioner-Company was includi:!d in HT IA category. Mr. Narasimhamur-
B thy has contended that such categorisation by the electricity Board made
as far back as in.1978 is not under challenge, and no protest had been made
by the petitioner-Company for categorising .the plant of the petitioner-
Company in HT-IA. Mr. Narasimhamurthy has also contended that in- _.(
dustries may have some distinctive features but still then a broader clas-
sificat;on is possible taking into consideration, the power intensive nature
c of various ~ndustries. The Board has taken into consideration such power
intensivity in the manufacturing process and has made a broad based
categorisation. The smelter plant has been included in HT-IA not only for
-
the first time for the purpose of applying the amended provisions of Section
49 of the Act but ~uch categorisation was made long back. Even in· 1978
D such categorisation was made without any protest from the petitioner-Com-
pany. If such categorisation ·has a rational basis and not arbitrary, capri-
cious or illusory, no exception need be made to such categorisation.
Accordingly, sub-sections 5 and 6 of Section 49 are squarely applicable to
the petitioner-Company and the Board is justified in treating the agreement
E as annulled and subjecting the petitioner-Company to the uniform traiff
rate applicable to all the industries categorised as ST-lA. He has submitted
that if in terms of the statutroy provision, an iUniform· rate of tariff is
applicable to the petitioner-Company on the basis of category of the ·
industry to which it belongs, and the agreement of 1976 stands annulled in
F view of the amended provision, there cannot be any question of promissory
estoppel against statute even if it is assumed that in the facts of the case,
a case of promissory esfoppel has otherwise been made out. He has,
therefore, submitted that there is no occasion to interfere with the judg-
ment under appeal and the appeal should be dismissed with costs.
G
After giving our anxious consideration to the respective contentions
of the learned counsel for the parties, it appears lo us that the agreement )-
of 1966 and 1976 were not the outcome of any unilateral promise or
assurance held out by the State or the Board to the petitioner-Company.
H Such agreement was the result of negotiati<;ms between the parties and on
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RAY, J.] 245
-y·· such negotiations, the terms and conditions were agreed upon between the A
parties. Accordingly the foundation of promissory estoppel is absent and
the case of promissory estoppel as sought to be. made out by the petitioner-
Company cannot be accepted. In our view Mr. Narasimhamurthy is jus-
tified in his contention that since the agreements stood annulled in view of
the amended provisions of Section 49 of the Act, the Board was em- B
powered to ask for uniform tariff rate from the industries classified under
one category. It is true that the smelter plant has distinctive features in its
manufacturing mechanism and in the process of electrolytic operation. It
also appears to us that the smelter plant is not only power intensive
industry but the power assumes a very sign~ficant role and constitutes one
c
- of the important raw materials in the productive process. But it does not
appear to us that categorisation of the smelter plant a high power intensive
industry by itself is illegal or perverse, or without any basis and wholly
unjustified. In the broader classification, smelter plant is certainly a high
power intensive industry and such categorisation was made by the Board
not for the purpose of enforcing the amended Section 49 with an object to D
annul the agreement but such categorisation was made evf'.n in 1978. In the
circumstances, we are unable to accept the contention that the broader
categorisation of the smelter plant is arbitrary, capricious and unreasonable
resulting in treating the unequal as equal thereby offending Article 14 of
the Constitution. We, therefore, find no justification to interfere .with the E
impugned decision of the High Court and the appeal, therefore, fails but
in the facts of the case, there will be no order as to costs.
Before we part with this matter, it appears to us that the question of
tariff for the supply of electricity to the matter plant requires a sympathetic
consideration. In 1975 policy of the Central Government regarding the F
aluminium industry, it was highiighted that despite the increase in the
productive capacity of the aluminium plants in India, the production as a
whole decreased for various factors particularly in view of irregular supply
of electricity to the plants. It was also noted in the said policy that the costs
for generating the power and transmission of power to the plants had G
increased over the years and it was not possible for the Boards to stick to
---( rates agreed earlier for supply of electricity to the aluminium plants. The
Central Government felt the necessity to strike a balance so that the Boards
•
do not suffer and the plants for aluminium get proper supply of electricity
H
246 • SUPREME COURT REPORTS (1992) 3 S.C.R.
A at reasonable rates. It was noted that high rate of tariff and consequential
increase in the price of aluminium caused prejudice to the Boards because Y
the Boards were consumers of aluminium to a considerable extent. It
appears to us that it is oilly desirable that interest of both the Boards and
the aluminium industry are to be reeonciled with a pragmatic approach and
B the Central qovernment, the concerned State Governments and the
Boards should try to evolve a more realistic po!icy by which the interest of
both the Boards and the aluminium industry are safeguarded to the extent
practicable. We have no manner of doubt that if a joint venture is made ._..(
an effective policy may be evolved which will enure to the benefit of both
C the supplier and the consumers in the field of production of aluminium, in
the national interest as a whole.
T.N.A. Appeal dismissed.
-
-
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Electricity tariff"Sign in to search