STATE OF KERALAversusINDIAN ALUMINIUM CO. LTD. AND ORS.

                             STA TE OF KERALA                                        A
                                        v.
                INDIAN ALUMINIUM CO. LTD. AND ORS.

                                 APRIL 6 1999

                     [V.N. KHARE AND R.P. SETHI, JJ.]                                B

       Electricity (Supply) Act, 1948 : Ss.49 (3) and 49 (5) (as amended by
 Act 7 of 1983)-Company-Special agreement with the Board for supply of
 Electricity at concessional rates-Amendment in Act-Fixation of uniform C
 tariff-Effect of-Held, special agreement entered into was not annulled as
 a whole-Payment of duty by company a concessional rates not effected in
 any manner-Neither State Government nor Board entitled to demand duty
 at a rate over and above what was provided in the exemption order-Kera/a
 Electricity Duty Act, 1963 : S.4.
                                                                                     D
       Constitution of India, 1950 : Article 14-'-Electricity (Supply) Act, 1948:
 S.49(5) (As amended by Act 7of1983)-Validity of-Held, Sec. 49(5) creates
 no bar on the Board to enter into any special agreement with any consumer
 including appellant-company-No hostile discrimination against appellant-
 company-Thus, not violative of Article 14 of the Constitution.                      E

       Respondent-Company engaged in manufacturing aluminium, en.tered
 into an agreement with State Electricity Board for supply of electricity at
 concessional rates, under sec. 49(3) of Electricity (Supply) Act, 1948. The
 State Government by inserting sub-section (5) in section 49 of the Act by           F
 Amendment Act, 1983, rescinded the supply of electricity at concessional
 rates. On challenge, High Court upheld the validity of sub-section (5) of the
 Act but set aside the notice of demand of duty at higher rates. Aggrieved,
 both the appellant-State and Respondent-company have preferred the present
 appeals.
                                                                                     G
          On behalf of appellant-State it was contended that once the special
   'agreement stipulating supply of electricity at concessional rates was annulled
 . by virtue of sub-section (5) of Section 49 of the Act, the concession granted
    to the Company for paying duty at concessional rates also stood abrogated
, and, therefore, the company was not entitled to any concession in the matter       H
                                       465
     466                     SUPREME COURT REPORTS                    [1999] 2 S.C.R.

· A of payment of duty and liable to pay at the uniform rates under the Act, and
     the view taken by the High Court was erroneous.

           On behalfofthe respondent-Company it was contended that it was open
     to the Board to enter into a special agreement under the provisions ofsub-
 B   section (3) of Section 49 with other similarly situated consumers, but the
     appellant-company alone has been deprived from entering into a special
     agreement. Thus, by virtue of sub-section (5) of Section 49 of the Act, it has
     been picked up for hostile discrimination which was violative of Article 14
     of the Constitution.

 c         Dismissing the appeals, this Court

          HELD : 1.1. By virtue of insertion of sub-section (5) in Section 49 of
   the Electricity (Supply) Act, 1948 the special agreement entered into between ·
   the Board and Company as a whole was not annulled and only thing that was
 D annulled was the agreement relating to rates of electricity payable by the
   company under the agreement and further the said Amendment Act did not
   in any manner affect the payment of duty by the Company at the concessional
   rates. [471-E-F)

           1.2. On a perusal of sub-section (5) it is clear that by this amendment
 E the agreement entered into between the company and the Board was not
     rescinded. What was rescinded, was the connectional rates at which the             -.--
     company was receiving electricity. The agreement, as a whole, was not
     rescinded. For other purposes it remained intact. It is also clear from the
     fact that, _on insertion of sub-section (5) in Section 49 of the Act in the year
 F   1983 no fresh agreement was entered into between the Board and the Company
     and the old agreement continued. Had there been an abrogation of the entire
     agreement, the Board would not have supplied electricity to the company.

          At no point of time, the Board after passing of the Amendment Act
 G   stopped supplying electricity to the company or entered into any fresh·
     agreement for supply of electricity. [470-G-H; 471-A)

           Indian Aluminium Company Ltd. v. Karnataka Electricity Board, (1993)
     2 sec 266, relied on.

 H         2. Neither the State Government nor the Board was within its r!ghts
                    ST A TE v. INDIAN ALUMINIUM CO. LTD.                      467
     to demand from the company electricity duty at the rate over and above what A

•   ·has been provided in the exemption order. Section 4 of the Kerala Electricity
     Duty Act, 1963 provides that it is open to the State Government to reduce
     the rate at which the duty is leviable on such consumer from payment of duty
     subject to the terms and conditions imposed by the Government. In the
     instant case the State has granted partial exemption in the matter of duty B
     to the Company which was neither annulled or abrogated not rescinded by
     any fresh order. Therefore so long as the exemption order continued to
     remain in force the Company was not liable to pay specified duty under Sec.

-    4 of the 1963 Act. Thus, High Court was right in setting aside the demand
     of duty which was based without reference to the statutory exemption provided C
     to the appellant-company. [471-G; 472-C-E]

          3.1. Sub-section (5) of Section 49 is not violative of Article 14 of the
    Constitution. Sub-section (5) has been enacted only to rescind the agreement
    for supply of electricity at concessional rates incorporated in the special
    agreement prior to the Act of 1983 and it did not create any bar in future        D
    to enter into an agreement under Sec. 49(3) of the Act. Neither sub-section
    (3) nor sub-section (5) of Sec.49 places any restriction on exercise of power
    of the Board to enter into a fresh agreement with the appellant-Company for
    supplying electricity at concessional rate. By the Amendment Act, sub-
    section (3) of Section 49 has not been affected and so long as it remains in      E
    force, there is nothing to prevent the Board from exercising power to enter
    into any special agreement with any consumer including the appellant-
    company. [473-D-H; 474-AJ

           3.2. Appellant~Company was the only consumer with whom the Board           F
    had a special agreement when sub-section (5) was inserted in Section 49 of
    the Act, and, therefore, it was that agreement which was to be dealt with to
    enable the Board to collect the normal tariff under section (1) of Section 49
    of the Act. This was done only to bring the appellant-company under the
    umbrella of uniform tariff. Thus, there was a reasonable basis for
    classification deducible from the objects and reasons to make the uniform         G
    tariff rate applicable to the appellant-company and to rescind the concessional
    rate which the appellant-company was enjoying. By the said provision the
    appellant-company was brought at par with the other similarly s_ituated
    consumers. The appellant-company has been treated alike and the said
    amendment has made the Company liable to pay the electricity charges at           H
    468                    SUPREME COURT REPORTS                    [I 999] 2 S.C.R.

A normal tariff applicable to other similarly situated consumers.
                                                              [472-G-H; 473-A-B]

          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2007 of 1990 Etc.

B         From the. Judgment and Order dated 17.2.89 of the Kerala High Court
    in O.P. No. l 0002of1983.

         G. Prakash, J.B. Dadachanji & Co., K.R. Nambiar, Ms. Malini Poduval
    and T.G. Narayanan Nair for the appearing parties.

C         The Judgment of the Court was delivered by

           V. N. KHARE, J. These appeals are directed against the judgment and
    order dated 17.2.89 of the Kerala High Court in O.P. No. 10002 of 1983,
    whereby the High Court has held, that the concessional rates for supply of
    electricity incorporated in special agreement under Section 49 (3) of the
D   Electricity Supply Act, 1948 (hereinafter referred to as the 'Act') entered into
    between the Indian Aluminium Company Ltd. (hereinafter referred to as the
    'company') and the Kerala State Electricity Board (hereinafter referred to as
    the 'Board') was validly rescinded by the statutory amendment incorporating
    sub-section (5) in Section 49 of the Act by the Act no. 7of1983. The High
E   Court has further found that the demand of duty at the rate specified under
    the Kerala Electricity Duty Act which was in <fXcess of concessional duty was
    invalid. Consequently, the said demand of duty was quashed. It is in this way
    the State of Kerala is in appeal against the quashing of demand of duty,
    whereas the company has come up to this High Court against that part of
F   the judgment whereby the High Court has upheld the validity of sub-section
    (5) of Section 49 of the Act. The State of Kerala after the judgment under
    appeal was delivered filed a review petition but the saine was also rejected.
    The said order is also under challenge in Civil Appeal No. 2008 of 1990.

          The appellant-company is engaged in the business of manufacturing
G   aluminium, having its head office at Calcutta. The company after having been
    assured of supply of electricity which is raw material for manufacture of
    aluminium at concessional rates decided to set up its factory at Alupuram in
    the then State of Travancore. It was in this context that on 30. 7 .1941 an
    agreement was entered into between the company and the then State of
H   Travancore for supply of electricity at fixed rate of a period of 35 years w.e.f.
       STATE v. INDIAN ALUMINIUM CO. LTD. [V. N. KHARE, J.]                469

1. 7 .1941. It was alleged that on the basis of assurance and undertaking given A
by the erstwhile State of Travancore for supply of regular electricity of
cheaper rate, the company had set up its aluminium factory at Alupuram,
although alumina required for manufacture of aluminium was brought from far
off places, like Bihar incurring heavy freight and other expenses. In the year
1948, the State of Travancore was integrated with the Cochin State and the B
agreement entered into in the year 1941 was treated as binding. The agreement
of 1941 was subsequently modified by another agreement dated 15.8.1955 and
continued to be in force when the state of Kerala was formed under the State
Reorganisation Act, 1956. On 1.4.1957 the Board was constituted and the
earlier agreement entered into was treated as agreement under sub-section (3) C
of Section 49 of the Act. Again, in the year 1963, a fresh agreement was
entered into which was to be in force for a period of25 years from 1.1.1965.
Subsequently, again on 18.9.1965, another agreement was entered into for
supply of 12,500 KWs for another period of 25 years from 1.1.1996 with an
option for renewal in favour of the company for a further period of 25 years.
In these agreements, it was stipulated that the Board would supply electricity D
at concessional rates to the company. In the year 1969 the Board in exercise
of its power under Section 79 read with Sections 49 and 89 of Electricity
(Supply) Act issued an Order dated 28.11.1969 known as "The Kerala State
Electricity B?ard Extra High Tension Tariff Order 1969" fixing the rate of tariff
for supply of electricity to Extra High Tension consumers. On the basis of the E
said Order the Board demanded from the Company High Tension Consumption
charges of higher rates fixed by the Tariff Order ignoring the terms of agreement
entered into under sub-section (3) of Section 49 of the Act. The said demand
was challenged by the Company and ultimately this Court struck down the
said demand holding that the Board was not entitled to claim more than the F
charges specified in the special tariff agreement entered into between the
parties. Thereafter, the Government of Kerala issued an ordnance which was
subsequently replacttd by an Act known as Electricity (Supply) Amendment
Act, 1983, whereby a new sub-section (5) was inserted in Section 49 of the
Electricity (Supply) Act. Based on this new provision, the Board issued
demands claiming electricity charges at rates notified for Extra High Tension G
consumers prescribed by the Kerala Electricity Board Extra High Tension
Tariff Revision .Order 1982. The Board also demanded duty at higher rates
other than the concessional rates-a rate of which the duty was being paid by
the company. It is in this way the company challenged the validity of sub-
section (5) of Section 49 of the Electricity (Supply) Act, whereby the electricity H
    470                      SUPREME COURT REPORTS                      [lp99] 2 S.C.R.
                                                                               t
A supply to the company at concessional rates was rescinded and the company
    was brought under the uniform tariff.

          As stated above, the High Court by its judgment and order under
    appeal, upheld, the validity of sub-section (5) of the Act, however, it set aside
B   the notice of the demand of duty at higher rates. It is in this way the State
    of Kerala teing aggrieved, is in appeal before us.

        _The argument of learned counsel appearing for the State of Kerala is
  that once the special agreement stipulating supply of electricity at concessional
  rates was annulled by virtue of sub-section (5) of Section 49 of the Act, the
C concession granted to the company for paying duty at concessional rates
  also stood abrogated and, therefore, the company was not entitled to any
  concession in the matter of payment of duty and liable to pay. at the .uniform
  rates under the Kerala Electricity Duty Act, and the view taken by the High
  Court is erroneous. In order to appreciate tpe argument qf learned counsel
D appearing for the State of Kerala, it is n~cessary to extract sub-section (5) of
  Section 49 of the Act which was brought in, in Section 49 by the Amendment
  Act of 1983 whi~h runs as under :-

                "(5) The party to art agreement or any other arrangement entered
            into prior to the commencement of the Electricity (Supply) Kerala
E           Amendment Act, 1983 and providing for supply of electricity by the
            Board shall, notwithstanding anything contained in the instrument of ·
            such agreement or, other arrangement or in any law including this Act,
            in force at_ such commencement, pay, in respect of the electricity
            supplied after, such commencement, such price (by whatever·name
F           called) .calculated in accordance with the uniform tariff framed or
            modified from time to time under sub-section ( 1) and applicable to the
            category to which such party belongs."

    On a perusal of sub-section (5) it is clear that by this amendment the agreement
    entered into between the company and the Board was not rescinded. What
G   was rescinded, was the concessional rates at which the company was receiving
    electricity. The agreements as a whole, was not rescinded. For other purposes
    i! remained intact. It is.also clear from the fact that, on insertion of sub-section
    (SJ in Section 49 of the Act in the year 1983, no fresh agreement was entered
     into between the Bo.ard and the company and the old agreement continued.
H   Had there been an abrogation of the entire agreement, the Board would not
       STATE v. INDIAN ALUMINIUM CO. LTD. [V. N. KHARE, J.]                471

have supplied electricty to the company. At no point of time, the Board after      A
passing of the amendment act stopped supplying electricity to the company
or entered into any fresh agreement for supply of electricity. Similar situation
arose in the case of Indian Aluminium Company ltd. v. Karnataka Electricity
Board, [1993] 2 SCC 266, wherein this Court clarified that by virtue of sub-
section (5) and sub-section (6) of Section 49 of Electricity (Supply) Act, the     B
entire agreement was not annulled as a whole, but the agreement insofar as
it related to rate and price of the electricity consumed by the company, stood
annulled. The relevant passage runs as under :-

           "It is, therefore, made clear that the tripartite agreement which was   C
        operative at the time of enforcement of the amended provisions of
        Section 49 of the Electricity (Supply) Act does not .stand annulled as
        a whole but provisions of the said agreement relating to the
        applicability of the rate and price of the electricity consumed by the
        appellant-company stand annulled in view of the said amended
        provisions of the Act. The annulment of the said tripartite agreement      D
        should, therefore, be understood in such limited extent whenever,
        such expression appears in our judgment."

We are, therefore, of the view that by virtue of insertion of sub-section (5)
in Section 49 of the Act the special agreement entered into between the Board      E
and company as a whole was not annulled and only thing that was annulled
was the agreement relating to rates of electricity payable by the company
under the agreement and further the said Amendment Act did not in any
manner affect the payment of duly by the Company at the concessional rates.
                                                                                   F
      Yet there is another reason to hold that under law the Company was not
required to pay duty as demanded by the Board and of the State.

      Section 4 of the Kerala Electricity Vuty Act provides that every consumer
is required to pay to the Government a duty calculated at the rate specified
therein. It is also provided therein that it is open to the State Government to    G
reduce the rate at which the duty is leviable on such consumer or to exempt
such consumer from payment of duty subject to the terms and condition
imposed by the Government. Section 4 of the Act is quoted below :-

        "4. Levy of Electricity Duty on consumers.- every consumer belonging       H
    472                    SUPREME COURT REPORTS                      [1999] 2 S.C.R.

A           to any of the classes specified in column (2) of the Schedule shall pay
            every month to the Government in the prescribed manner a duty
            calculated at the rate specified against that class in column (3) thereof:

                 Provided that in cases where the· supply of energy to a consumer
B           is regulated by an agreement entered into between the Government or
            the licensee and the consumer it shall be competent for the Government
            either to reduce the rate at which duty is leviable on such consumer
            or to exempt such consumer from payment of duty under this section
            subject t0 such terms and conditions as may be imposed by the
            Government."
c
    It is not disputed that State of Kerala has granted partial exemption in the
    matter of payment of duty to the company. It is not the case of State of Kerala
    that the exemption so granted has been annulied or abrogated or rescinded
    by an·y fresh Order. Therefore, so long as the exemption Order continued to
D   remain in force, the Company was not liable to pay specified duty under
    Section 4 of the Kerala Electricity Duty Act. Neither the State Government nor
    the Board was within its rights to demand from the compa?y electricity duty
    at the rate over and above what has been provided in the exemption Order.
    We are, therefore, of the opinion that the High Court was right in setting aside
E   the demand of duty which was based without reference to the statutory
    exemption provided to the appellant-company.

         In C.A. No. 155/1998, it was urged on behalf of the company that by
  virtue of sub-section (5) of Section 49 of the Act, the appellant company has
                                                                                         -
  been picked up for hostile discrimination and as such .the said provision is
F violative of Article 14 of the constitution. According to the learned counsel
  it is open to the Board to enter into a special agreement under the provisions
  of sub-section (3) of Section 49 with other similarly situated consumers, but
  the appeliant-company alone been denied that benefit, and in future the
  appellant-company has been deprived of from entering into a special agreement
G under sub-section (3) of section 49 of the Act. We find the argument of
  learned counsel is totally misplaced. We have seen in the earlier part of the
  judgment that the appellant-company was the only consumer with whom the
  Board had a special agreement when sub-section (5) was inserted in Section
  49 of the act, and therefore, it was that agreement which was to be dealt with
H to enable the Board to collect the normal tariff under section (I) of Section
••
            STATE v. INDIAN ALUMINIUM CO. LTD. [V .N. KHARE, J.]                473

     49 of the Act. This was done only to bring the appellant-company under the A
     umbrella of uniform tariff. Thus, there was a reasonable basis for classification
     deducible from the objects and reasons to make the uniform tariff rate applicable
     to the appellant-company and to rescind the concessional rate which the
     appellant-company was enjoying. By the said provision the appellant-company
     was brought at par with the other similarly situated consumers. The appellant- B
     company has been treated alike and the said amendment has made the Company
     liable to pay the electricity charges at normal tariff applicable to other similarly
     situated consumers. By the Amendment Act, sub-section (3) of Section 49
     ha's not been affected. It still exists in the Act and it is always open to the
     Board to enter into a special agreement under sub-section (3) of Section 49 C
     of the Act with any consumer, including the appellant-company. So long as
     Section 49(3) remains in force, there is nothing to prevent the Board to
     exercise that power in favour of the consumers, including the appellant-
     company. However, this power under section 49(3) is subject to sub-section
     (4) of Section 49 of the Act, whereby the said power has to be exercised D
     without showing any undue influence to any consumer. Neither sub-section
     (3) nor sub-section (5) of Section 49 places any restriction on exercise of
     power of the Board to enter into a fresh agreement with the appellant-
     company in case the appellant-company makes out a case for supplying
     electricity at a concessional rates. Had the legislature intended that in future
     no special agreement was to be entered into under sub-section (3) of Section E
     49, the legislature could have very well omitted sub-section (3) of Section 49
     of the Act, but has deliberately retained it with the result that, if in future
     circumstances demand, the Board can enter into a special agreement subject
     to the provisions of sub-section (4) of Section 49 of the Act. Sub section (5)
     has been enacted only to rescind the agreement for supply of electricity at F
     concessional rates incorporated in the special agreement prior to the Act of
     1983 and it did not create any bar in future to enter into an agreement under
     Section 49(3) of the Act. The appellant-company, as well as other similarly
     situated consumers, are entitled to enter into an agreement with the Board if
     circumstances so demand, so long as sub-section (3) of Section is in force. G
     Before the High Court, as well as here in this appeal, it was stated on behalf
     of the State that sub-section (5) of section 49 has not taken away the right
     of the Board to exercise its power to enter into an agreement with the
     appellant-company it the circumstances so demand. Under such circumstances
     we do not find any merit in the contention that by the Amendment Act that H
    474                   SUPREME COURT REPORTS                 [1999] 2 S.C.R.

A it is open to the Board to enter into special agreement with other consumers
    while denying such benefit to the appellants-company. We, therefore, hold
    that sub-section (5) of Section 49 is not violative of Article 14 of the
    Constitution.

B        For all these reasons, we do not find any merit in these appeals. The
    appeals are according dismissed. These shall be no order as to costs.

    S.V.K.T.                                               Appeals dismissed.