# INDIAN ALUMINIUM COMPANY LIMITED AND ANR v. KARNATAKA ELECTRICITY BOARD AND ORS

- **Citation:** [1992] 3 S.C.R. 213
- **Court:** Supreme Court of India
- **Decided:** 1992-05-13
- **Bench:** N.M. Kasliwal, G.N. Ray
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-aluminium-company-limited-and-anr-v-karnataka-electricity-board-and-ors-11546
- **Pages:** 34

## Headnote

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 competence-Provisions should not be constJUed with na"ow or pedantic ap
proach-Should be interpreted broadly and liberally.
H
213
A
B
214
SUPREME COURT REPORTS
(1992) 3 S.C.R.
The appellant-Company established its Aluminium Smelter Plant at
Belgaum in the State of karnataka. On March 26, 1966 a tripartite agreement 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.
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 challenging 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
E
F
in the category of other power tariff industries included in the category of
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 concessional rates, the principle of promissory estoppel was applicable and
consequently the demand of tariff contrary to agreement was. illegal and
arbitrary.
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
legis

## Text

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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 competence-Provisions should not be constJUed with na"ow or pedantic ap
proach-Should be interpreted broadly and liberally.
H
213
A
B
214
SUPREME COURT REPORTS
(1992) 3 S.C.R.
The appellant-Company established its Aluminium Smelter Plant at
Belgaum in the State of karnataka. On March 26, 1966 a tripartite agreement 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.
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 challenging 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
E
F
in the category of other power tariff industries included in the category of
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 concessional rates, the principle of promissory estoppel was applicable and
consequently the demand of tariff contrary to agreement was. illegal and
arbitrary.
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 D
consumers categorised in a particular industry there was no justification
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 G
in mind that 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. (236 D-F]
H
A
B
216
SUPREME COURT REPORTS
(1992) 3 S.C.R.
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
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 suc1categorisation 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]
F
5. 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
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 DepartA
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.
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
E
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
A
B
218
SUPREME COURT REPORTS
(1992) 3 S.C.R.
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,
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 restrainD 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 :
The Indian Aluminium Company Limited registered under the ComF
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-
-
.1,--
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
plant within the State of Karnataka by assuring that uninterrupted supply
of electricity would be given to the smelter plant. Accordingly the Company
established a factory with its smelter plant at Belgaum.
B
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 (Amendment) 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 Government 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.
F
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
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 (Supply) 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 agreement 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
J
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 KV A on 27.5.1981. The Board had thereafter
increased the rate periodically from time t.o time as follows :
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
01.09.86
Rs. 68.01
B
c
The Company contended that the increased tariff was not enforceable
against the Company in view of the agreement between the parties. However, 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 Company 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 uninterrupted 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. Uninterrupted 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-cumelectrolytic 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 considerably 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 unremunerative 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 conB sumer, namely, the company was given the benefit of a reduced consumption 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 reference 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 atF
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
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
,J.._ ..
•
'
INDIAN ALUMINIUM CO. v. ELECTRICITY BOARD [RA\', J.]
225
on the following grounds :
(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) 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.
A
B
( 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 Industries Development and Regulation Act and hence falls
under Entry 52 of List I of Vllth Schedule of the ConstituF
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
B
c
D
E
F
G
H
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.
(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
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.
(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
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 constituted a fundamental term of the agreement. Similarly such a
clause does not amount to a solemn assurance or representation 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.
(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
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.
(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.
To appreciate the respective contentions of the parties on the ques·
B
c
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 promulgated by Central Government under the Essential Commodities Act 1955
empowered the Central Government to regulate the movement of sugarF
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 ref erred 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
A
B
c
D
E
F
G
H
228
SUPREME COURT REPORTS
(1992) 3 S.C.R.
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, therefore, be no question of legislative incompetence qua the Provin-·
cial Legislatures in regard to similar pieces of legislation
enacted by the latter.
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 -
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
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
of the industry would also be comprised in E'l.try 27 of List II
except where they were the products of the controlled industries when .they would fall within Entry 33 of List III.
This being the position it cannot be said that the legislation
which was enacted by the Centre in regard to sugar and sugarcane 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
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
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 legislation enacted by the Centre and the State Legislature together,
there was any repugnancy, a contention which will be dealt with
hereafter."
B
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 Government 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.