Kerala High Court
Binani Zinc Limited vs State Of Kerala on 8 March, 2019
Equivalent citations: AIRONLINE 2019 KER 508
Bench: K.Vinod Chandran, Ashok Menon
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
&
THE HONOURABLE MR.JUSTICE ASHOK MENON
FRIDAY, THE 08TH DAY OF MARCH 2019 / 17TH PHALGUNA, 1940
W.A.No.981 of 2007
AGAINST THE JUDGMENT IN OP 9565/1996 DATED 02-03-2007
OF HIGH COURT OF KERALA.
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APPELLANT/PETITIONER:
BINANI ZINC LIMITED, BINANIPURAM,
REPRESENTED BY ITS ADVISOR SHRI GEORGE THOMAS.
BY ADVS.
SRI.JOSEPH MARKOSE (SR.)
SRI.JOSEPH KODIANTHARA (SR.)
SRI.MATHEWS K.UTHUPPACHAN
RESPONDENTS/RESPONDENTS:
1 STATE OF KERALA,
REPRESENTED BY THE COMMISSIONER AND
SECRETARY TO THE GOVERNMENT,
INDUSTRIES (J) DEPARTMENT, SECRETARIAT, TRIVANDRUM.
2 COMMISSIONER AND SECRETARY TO GOVERNMENT,
POWER (A) DEPARTMENT, GOVT. OF KERALA, TRIVANDRUM.
3 KERALA STATE ELECTRICITY BOARD,
VYDYUTHIBHAVANAM, PATTOM, TRIVANDRUM,
REPRESENTED BY ITS SECRETARY.
4 CHAIRMAN, KERALA STATE ELECTRICITY BOARD,
VYDYUTHIBHAVANAM, PATTOM, TRIVANDRUM,
5 THE SPECIAL OFFICER (REVENUE),
KERALA STATE ELECTRICITY BOARD, VYDYUTHIBHAVANAM,
PATTOM, TRIVANDRUM.
W.A.No.981 of 2007 - 2 -
6 THE FINANCIAL ADVISOR AND CHIEF ACCOUNTS OFFICER,
KERALA STATE ELECTRICITY BOARD,
VYDYUTHIBHAVANAM, PATTOM, TRIVANDRUM.
7 CHIEF ELECTRICAL INSPECTOR TO GOVERNMENT (STATUTES),
GOVT. OF KERALA, TRIVANDRUM.
BY ADVS.
R3 TO R6 BY SRI.RAJU JOSEPH (SR.)
SRI.K.T.PAULOSE, SC, KSEB.
R1, R2 & R7 BY SR.GOVT.PLEADER SRI.RENIL ANTO.
SRI.C.K.KARUNAKARAN, SC, FOR KSEB
SRI.JOSE.J.MATHEIKAL, SC.
SRI.P.SANTHALINGAM (SR.)
SRI.S.SHARAN, SC, K.S.E.BOARD
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 05.02.2019,
THE COURT ON 08.03.2019 DELIVERED THE FOLLOWING:
W.A.No.981 of 2007 - 3 -
"C.R."
K.Vinod Chandran & Ashok Menon, JJ.
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W.A. No.981 of 2007
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Dated this the 08th day of March, 2019
JUDGMENT
Vinod Chandran, J.
The judgment of the learned Single Judge in O.P.No.9565/1996 stands challenged before us in this appeal by the petitioner, M/s Binani Zinc Limited, a Company established in the year 1966.
2. Availability of cheap power and uninterrupted supply is an essential precondition for rapid industrialization. And industrialization is an essential pre-requisite for economic growth of any State. This is a classic case of how the successive dispensations of governance, in this State; going by the sobriquet of "Gods Own Country", have turned the industrial climate of the State to one worse than that of any imaginable purgatory. The State extends promises of power supply, both uninterrupted and at concessional rates, to lure industrialists and entrepreneurs to set up new and expand, diversify or modernize the old, industrial establishments. When that is done and the period of concession is over the entire State machinery is unleashed on these establishments, often with an uncalled for W.A.No.981 of 2007 - 4 - vengeance, to take back the concessions with levy of interest and penalty, driving the industries to abrupt closure. Allegations are made, as in this case, of the terms and conditions of the concessional scheme having been not complied with, raising serious questions on the efficiency of those entities including the K.S.E.Board, all under the Government control tasked with monitoring the grant of these concessions and its continuance.
3. The appellant-Company had carried out modernization and technology up-gradation in accordance with Exhibit P1 notification and the eligibility having been certified by the appropriate authority the concessional tariff was granted by the respondent-KSEB. Subsequently the Companies eligibility, except for a reservation made of a smelter furnace, was affirmed by the General Manager, District Industries Centre (GM,DIC). Even then cancellation of the entire concession granted was attempted after the period of concession, which was challenged before this Court. A re-consideration was ordered which resulted again in cancellation. The subsequent order was challenged in the instant writ petition, which was dismissed with a limited remand on quantification. Aggrieved by the decision, the petitioner-Company is in appeal before us. We heard learned Senior Counsel Sri.Joseph Kodianthara appearing for the W.A.No.981 of 2007 - 5 - appellant and learned Senior Counsel Sri.Raju Joseph appearing for the KSEB.
4. Sri Kodianthara argues that Exhibit P1 G.O. dated 06.10.1986 clearly lays down the unequivocal terms of eligibility of an industrial unit for availing the concession of pre-1982 tariff; whether newly established or modernized, expanded or diversified. The eligibility would be certified by KSIDC/KFC/General Manager, DIC, on their responsibility and based on that certification of eligibility, KSEB would supply power at pre-1982 tariff. It is argued that Exhibit P1 is identical to the provisions contained in numerous sales tax exemption notifications granted to newly expanded, modernized industrial units, which has to be certified by the Industries Department or the financier-Corporation; both arms of the Government. It is urged that once eligibility is certified, the Government, Industries Department or the KSEB cannot dispute the certification made by the appropriate authority empowered to so certify the eligibility. In the instant case, KSIDC had issued Exhibit P3 eligibility certificate. The GM, DIC also had conducted a detailed enquiry as well as visited the factory premises and neither the KSIDC nor the GM, DIC have, at any point of time, found Exhibit P3 certificate to be incorrect, and neither of them have sought to withdraw or cancel their certifications. W.A.No.981 of 2007 - 6 -
5. The reliance placed upon Southern Ispat Ltd. v. State of Kerala [(2004) 4 SCC 68] in the impugned judgment is misplaced, argues Sri.Kodianthara. The facts therein are quite distinguishable from that available in this case. The certificate relied on in Southern Ispat Ltd. was not at all in terms of an almost similar G.O., which was the subject matter of that case. The learned Single Judge could not have ignored the findings of the Division Bench of this Court as entered into in the earlier round of litigation as is discernible from the judgment produced at Exhibit P18. The various documents produced herein are referred to specifically to advance the assertion made of expansion and modernization far in excess of the requirement in Exhibit P1 and the commencement of commercial production within the due date. The energisation referred to by the Government now, is with respect to the further expansion carried out by the Company, which are not relevant for the concessions as per Exhibit P1. The appellant industry is constantly in the process of modernization and every energisation subsequently granted cannot be raked up to deny a concession already granted, is the argument.
6. Per contra, the learned Senior Counsel Sri.Raju Joseph appearing for the KSEB would contend that the appellant did not establish to the satisfaction of the KSEB W.A.No.981 of 2007 - 7 - that the entire unit was modernized/replaced, and therefore, they were not entitled to concession as per the G.O. There was a High Level Committee appointed, pursuant to Exhibit P18 judgment, which heard the appellant and declined the concessions; being satisfied that the Company had not complied with either the requirement of capital investment or the commencement of commercial production within the due date, as evidenced by the energisation orders. There can be no reliance placed on the certificate issued by the KSIDC, since they had absolutely no machinery to ensure verification of the essential requirements of capital investment as also ensuring commercial production within the due date. The KSIDC had merely proceeded on the basis of the details submitted by the Company, as confessed by them in the communication addressed to the Committee. Exhibit P18 judgment or the findings therein have no relevance at all since the earlier order of cancellation was interfered with only on the ground of violation of principles of natural justice. The impugned decision cannot at all be faulted and the limited remand made for re-quantification has already been carried out. Sri. Raju Joseph urges that the appeal be dismissed.
7. The 5th respondent filed a counter-affidavit contending that KSIDC had issued Exhibit P3 certificate solely based on the document produced by the company and the W.A.No.981 of 2007 - 8 - certificate issued by the Company's Chartered Accountant, without verifying the correctness of the claim made by the company. The company had earlier raised a claim that all the plant and machinery were replaced and modernized making them eligible for concessional tariff for five years with effect from 18.12.1986. That claim was found to be unsustainable and incorrect, because the old smelting furnace was not scrapped. It was also essential as per the G.O. that commercial production should commence prior to the cut off date mentioned in the G.O. and only such units or plants would be eligible to get the benefit of the concessional tariff. No verification, whatsoever, was made by the KSIDC prior to issuing the certificate, because it did not have the machinery for doing so. The energy consumed by the old smelting plant, which was not modernized, had to be ascertained. The Company was not in a position to give the date of commencement of commercial production as also the particulars regarding sanction for energisation given by the Electrical Inspector. No details were produced by the petitioner before the Committee, which was constituted for the purpose. The matter was referred to the Chief Electrical Inspector to find out the date of energisation of the new plants. With reference to the records maintained under Rule 63 of the Indian Electricity Rules, it was reported vide W.A.No.981 of 2007 - 9 - Exhibit R5(a) that major modernization was given sanction for energisation only on 09.08.1988 and 15.12.1988 as evidenced by Exhibits R5(b) and R5(c). The commercial production could have commenced only thereafter.
8. Sri. Raju Joseph emphasises that KSEB was directed by the Government to look into the matter and take a decision on the basis of Exhibit R5(a) report and it was after considering all these reports and records that Exhibit P17 order was passed. That order was quashed by a Division Bench of this Court vide Exhibit P18. Consequent to which fresh show cause notice was issued and after noticing the contention raised by the petitioner-company, Exhibit P23 order was passed. According to the respondent, major plants, which involved 80% of the consumption of the petitioner-Company, were energized only consequent to the cut off date. Exhibits P24 and P25 are only consequential orders. Exhibit P23, according to KSEB, is perfectly in order.
9. Electricity tariff in Kerala was enhanced on 01.09.1982. In order to promote industrial growth in the State of Kerala, the Government issued an order dated 03.08.1983 granting relief to industries, established and commencing commercial production between the period 01.09.1982 to 02.09.1987, to continue payment of electricity at the tariff prevailing prior to 1982, for a period of five W.A.No.981 of 2007 - 10 - years, from the date of commencement of such production. The benefit extended to existing industries required expansion, diversification or modernization during the relevant period. The Government came out with Exhibit P1 G.O. dated 06.10.1986 providing inter alia concession of pre-revised rates to units where modernization involves scrapping of old plant and equipment. Kerala State Financial Corporation (KFC) and Kerala State Industrial Development Corporation (KSIDC), both statutory Corporations set up with the objective of promoting business, commercial enterprise and industries within the State; fully under the control of the Government, were authorised by the Government to issue eligibility certificates to industries availing benefit of the notification, with their financial assistance. In all other cases, the GM, DIC was authorised to certify the units eligible for the concession.
10. The appellant-Company also installed new plant and machinery, upgrading technology for the purpose of modernization which involved large capital investments with the financial assistance of KSIDC. Exhibit P2 application was submitted on 14.02.1987 together with Exhibit P2(a) statement before the KSIDC for the purpose of issuance of eligibility certificate in terms of Exhibit P1 notification. Accordingly, Exhibit P3 certificate was issued on 18.02.1987 W.A.No.981 of 2007 - 11 - by the KSIDC stating inter alia that commercial production started in the Company with the modernized plant and machinery and that it was eligible for the concession granted as per Exhibit P1 for a period of five years with effect from 18.12.1986. Exhibit P4 is the certificate issued by the Chartered Accountant who certified the audited accounts of the Company for the year ending 31.12.1967 having disclosed a total project cost of Rs. 494.50 lakhs; which stood completed in April 1967. Exhibit P4(a) again is the certificate issued by the very same Chartered Accountant certifying investment of Rs.1844 lakhs having been made for modernization as on 31.01.1987 of the modernization scheme completed in December 1987. The above certificates are necessitated since, under Exhibit P1, modernization enabled coverage under the notification only when the fixed capital investment of an existing industrial unit is enhanced by at least 25% of the initial investment and commercial production is commenced between 01.09.1982 and 02.09.1987. The certifying authority was also stipulated as the KFC and KSIDC, both under Government control, when they have financed the project, since the disbursement & utilization of funds and commencement of commercial production are aspects which any prudent financier would monitor and supervise closely. W.A.No.981 of 2007 - 12 -
11. Relying on Exhibit P3 certificate; which by its very declaration of eligibility under the notification, vouchsafed the capital investment by way of modernization to be above the stipulated 25%; the Chief Engineer (Electrical) General, of the KSEB issued Exhibit P5 order declaring that the petitioner-Company is eligible for concessional rate of electricity in accordance with Exhibit P1 for a period of five years from 18.12.1986. However, it was clarified that only those units in the factory, which were actually modernized would be entitled for the concessional rate. Exhibit P6, consequential order dated 26.06.1987, was also issued by the Special Revenue Officer seeking the readings of the energy meters with effect from the date of energization of the relevant plants, which were modernized in order to work out the amount to be refunded/adjusted. Vide Exhibit P7 letter dated 06.08.1987 the company informed the Special Revenue Officer that all sections of the plant were scrapped and new machinery installed and hence the entire industry was entitled to get the benefit. Pausing here, for a moment it has to be observed that if the approvals of the Electrical Inspector and the KSEB under Section 63 was not obtained for the modernized unit, then there would have been no commencement or continuance of supply to the newly installed plant, expending more than Rs.18 crores. There is hence a W.A.No.981 of 2007 - 13 - system in place where the Government owned statutory Corporation, who financed the modernization project, certifies the coverage enabled under the notification. The KSEB on that basis and obviously on independent evaluation of the modernized plant and machinery, enable commencement of supply to the modernized plant, grants the concession to the energy supplied which supply presumably is always under the supervision of the Board.
12. KSEB then laid a claim before the Government vide Exhibit P8 letter dated 28.04.1989 requesting reimbursement of the amount lost by KSEB due to granting of concession to the petitioner-Company; which is as per the terms of Ext.P-1. It was by Exhibit P8, during the period of concession itself, sought the opinion of the Industries Department as to the claim of the Company that their modernization involved substantial scrapping of the old plant and machinery enabling them to claim concessional rates for the entire energy supplied. We have to immediately notice that this was something the KSEB themselves could have or should have verified at the time of grant of concession. Obviously the above clarification was sought only in the circumstance of the KSEB seeking recompense from the Government, of the concession granted, for reason of the specific terms of concessional grant requiring such refund in W.A.No.981 of 2007 - 14 - the years when the KSEB is unable to show minimum 3% return on its capital investment. We cannot but observe that the recompense claimed was in the context of the terms of the concessional grant, as agreed between the KSEB and the Government, and a situation of such refund having arisen cannot prejudice the grant itself nor can there be a reconsideration of the eligibility merely on that circumstance having arisen.
13. Be that as it may, the Government sought the views of the Company on the said clarification sought, in answer to which, the company submitted Exhibit P9 series. The GM, DIC was directed to enquire and report regarding the claim put forth by the Company and clarification sought by the KSEB. Exhibit P10 is the submission by the Company to the GM, DIC. Based on the report submitted by the GM, DIC the Government vide Exhibit P11 order dated 24.01.1990 informed the Financial Adviser and Chief Accounts Officer of KSEB that most of the major equipment, except an old smelting furnace in the factory were scrapped and replaced, and therefore, except for the power consumed by the smelting furnace, the petitioner-Company is entitled to electricity supply at pre-1982 rate.
14. However, the Financial Adviser and Chief Accounts Officer of KSEB issued Exhibits P12 and P13 letters W.A.No.981 of 2007 - 15 - to the petitioner-Company demanding payment of 75% of the supplementary bill for Rs.1,66,63,361.68, and also to install a separate meter for the old smelter unit. Challenging that, the petitioner company filed O.P.No.5860/1990 before this Court and obtained an interim stay of the recovery, on condition of the petitioner paying a specified sum towards electricity charges. Exhibit P14 representation was made by the petitioner on 01.04.1991 to revise the bills in accordance with the concessional tariff. There was a discussion between the representatives of the Company and the Chairman of KSEB, in the presence of the Commissioner and the Secretary to Government, Power Department and certain terms were agreed to between the parties in accordance with which, the Chief Electrical Inspector and the representatives of the KSEB were to assess the proportionate consumption and maximum demand of old and new plants. The KSEB was supposed to re-calculate the amount on that basis. The amount due on 75:25 basis for internal and imported power consumption was to be re-worked. The amounts paid, were to be adjusted by the KSEB towards the bill payable in October 1992 and the balance to be paid in 11 equal instalments immediately thereafter, and the Court cases had to be withdrawn. In accordance with the agreement, a team of officials consisting of Chief Electrical Inspector and Special Officer, KSEB, Revenue and W.A.No.981 of 2007 - 16 - local Engineers of the KSEB visited the company. But no steps were taken to revise the bill for the period from September to December 1992.
15. The petitioner was then quite abruptly, served with Exhibit P17 communication informing the company about the cancellation of Exhibit P5 order of the Chief Engineer (Electrical) General, KSEB, which granted the concession to the petitioner. Hence, the petitioner was constrained to challenge it by filing O.P.No.9587/1994. That Original Petition was allowed by a Division Bench of this Court vide Exhibit P18 judgment dated 01.09.1995 and Exhibit P17 order was quashed on the ground of violation of principles of natural justice and the KSEB was directed to pass fresh orders in the matter.
16. Accordingly, Exhibit P19 notice was issued informing the petitioner of the proposal to cancel the concession granted vide Exhibit P5 order. The petitioner submitted Exhibit P20 reply stating that such a decision is illegal. Thereafter, Exhibit P21 supplementary notice was issued on 20.03.1996 giving the details on the basis of which action was proposed to be taken. Exhibit P22 reply was sent by the petitioner. After hearing the representative of the petitioner-Company, Exhibit P23 order was passed by the KSEB on 06.05.1996, cancelling Exhibit P5 concession and ordering W.A.No.981 of 2007 - 17 - recovery of the arrears of electricity charges payable by the petitioner together with interest at the rate of 24%. Exhibit P24 demand was raised by the Special Officer, Revenue, KSEB demanding Rs.2,80,58,359/- and Exhibit P25 bill was issued, in which, a demand for 24% interest was proposed to be made separately.
17. The petitioner thus filed the instant Original Petition, challenging Exhibits P23, P24 and P25. It was contented that the action taken by the KSEB has to be quashed for the very same infirmities, which were there in Exhibit P17, found by this Court vide Exhibit P18 judgment. The petitioner's right to get concessional tariff on the basis of the certificate issued by the KSIDC has been upheld in Exhibit P18 judgment, and therefore, the KSEB cannot ignore that judgment and now contend that the certificate obtained from KSIDC was fraudulent and incorrect, was the argument. The Board has relied on the certificate issued by the Electrical Inspector, which is not a fact in contemplation of in Exhibit P1 G.O. The sanction for energization was obtained on various dates after the cut off date, ie: 02.09.1987; was one of the grounds for cancellation. We cannot but wonder as to why then the KSEB acted on Exhibit P3 issued by the KSIDC and sanctioned the concession as per Exhibit P5 dated 21.03.1987 after the commencement of commercial production. W.A.No.981 of 2007 - 18 - If the approval of energisation was lacking, then there could not have been supply of power to the modernized unit. True, the Company was an existing one and it had a power connection earlier to its modernization. But a massive modernization to the extent of Rs.18 crores cannot be continued with the power supply unless the energisation is approved under Rule 63 of the Indian Electricity Rules. The appellant has contented that the action of the KSEB is vitiated by malafides and principles of promissory estoppel. The legitimate expectation flowing from the promise held out in Exhibit P1 notification cannot be denied to the appellant, who has on that sole basis carried out massive expansion investing crores of amounts far in excess of the 25% escalation to initial investment as prescribed in the notification, which argument we accept in the compelling circumstances.
18. The Chief Electrical Inspector also filed a statement stating that a Committee was constituted by the Government vide order dated 08.10.1993 consisting the Commissioner and Secretary (Power), Chairman of the KSEB as well as the Chief Electrical Inspector to examine the issue involved in the dispute between the petitioner and the KSEB. A report regarding the completion of the work was furnished by the Electrical Contractor to the Electrical Inspector only on 21.03.1988 and the scheme for installation of two W.A.No.981 of 2007 - 19 - rectifiers was approved by the Chief Electrical Inspector on 17.03.1988. Inspection was done on 24.03.1988 and certain defects pointed out were rectified. Consequent to which energization of the plant was done on 09.08.1988. It is on the basis of this finding that it was concluded that commercial production did not commence on 18-12-1986 as claimed by the company and vouched by KSIDC. The production could have commenced only consequent to energization which was subsequent to the cut off date. Consequent to this finding, the Committee recommended cancellation of Exhibit P5 concession granted to the Company. The appellant filed a reply to the statement of the Chief Electrical Inspector stating that the sanction given for energization of the rectifier on 09.08.1988 relates to different units established in 1988, and hence the basis for cancellation of Exhibit P5 is not at all sustainable. The sanction obtained subsequently was not for the modernization project completed in December 1986, as certified in Exhibit P3 was the specific defence set up.
19. The learned Single Judge formulated four points for consideration:
(1) Whether this Court in Exhibit P18 decision has held that the petitioner is entitled to get the benefit of pre-1982 tariff and therefore reopening the same by Exhibit P23 is impermissible?W.A.No.981 of 2007 - 20 -
(2) Whether the KSEB is bound by Exhibit P3 certificate issued by KSIDC?
(3) Whether Exhibit P23 has been passed in violation of the principles of natural justice?
(4) Whether the finding of KSEB that the petitioner is not eligible for concessional tariff is unreasonable in the facts and circumstances of the case?
20. The learned Single Judge found that the contention of the petitioner regarding Exhibit P18 decision with respect to the granting of sanction is not acceptable, because the Division Bench had directed KSEB to consider the matter afresh. If it was found that the concession granted was proper, then the issuance of notice and reconsideration directed would be an empty formality. The Division Bench had given liberty to the KSEB to take fresh decision in compliance with the principles of natural justice. The learned Single Judge held that the argument that KSEB is bound by Exhibit P3 certificate issued by the KSIDC, is not acceptable. The contention of the petitioner that the decision taken in Exhibit P23 was in violation of principles of natural justice was also repelled. On the point regarding whether the petitioner is entitled to concessional tariff, the learned Single Judge held that the challenge against Exhibits P23, P24 and P25 is not sustainable and that the claim of the petitioner for concessional tariff of the plants W.A.No.981 of 2007 - 21 - of the industrial units for which final sanction for energization was obtained as per Exhibit P19 series mentioned in Exhibit P18 judgment, prior to the cut off date, shall be reconsidered by the competent authority of the KSEB and the petitioner was given liberty to produce before the KSEB any other sanction order concerning any plant, within a period of one month, and based on those documents, claim for concessional tariff for those plants alone was directed to be reconsidered by the competent authority of the KSEB after giving an opportunity to the petitioner for hearing within a period of two months, and thereafter, to issue revised bill regarding the arrears. Subject to the above directions, the writ petition was dismissed.
21. The learned Single Judge relying on Southern Ispat Ltd., found that there can be no eligibility for concession found based merely on the certificate issued by the KSIDC. In the fore cited decision, it was held that the certificate issued by the KFC could not be held to be conclusive, and that it could only be taken as one of the facts to be considered by the KSEB in the light of all other relevant materials. We are of the opinion that the over emphasis placed on this decision is, on the facts applicable herein, misplaced. The certificate relied on in Southern Ispat Ltd. was not at all in terms of the G.O. considered in W.A.No.981 of 2007 - 22 - that case and it was addressed to "Whosoever it may concern"
and not to the KSEB in particular. The certificate specifically stated that it was issued "as per the records submitted by the company". That is not so in the instant case. We also find other distinguishing factors in the present case, which makes inapplicable the cited decision of the Hon'ble Supreme Court.
22. Southern Ispat Ltd. was a newly established Company claiming concessional tariff, whereas the appellant is an existing industrial unit who claims the concession on the basis of the further investment made for modernization and expansion, where commercial production is already underway and the aspect of commencement has to be understood as putting to use the modernized plant and machinery. There the claim of concessional tariff, in the year 1995, was in accordance with a policy declared by the Government in 1992. The date of commencement of commercial production, as per the subject policy was on or before 31.12.1996. The Company itself was incorporated in June, 1995 and the application for power allocation was made in July. There was considerable delay in granting it which was alleged to be on account of sheer lethargy of the Board. However it was found that the State was reeling under acute power shortage and this added to the delay. Coupled with this the Company itself had W.A.No.981 of 2007 - 23 - delayed the payments for the purpose of drawing high tension lines to the factory site. Admittedly, the amounts to be deposited under the Own Your Electric Connection (OYEC) was itself made only on 16.12.1996. There was absolutely no possibility of the commercial production having commenced before 31.12.1996 was the concurrent finding of this Court, which was not interfered with by the Supreme Court.
23. Southern Ispat Ltd. had a contention that they had commenced commercial production using a generator of 125KVA. The Supreme Court found that the end product of the industrial unit being alloy steel, MS Sections, CTD bars and steel castings it hardly stands to reason that production activity of that magnitude commenced with a generator. It was admitted that the plant was energized only subsequent to the cut-off date. The power allocation was to the tune of 2000 KVA, which capacity consumption would not have been possible with a generator. It is also pertinent to note that the company had paid security deposit for executing the power supply agreement after the expiry of the period of concession. The certificate that was issued by the KFC in that case was never accepted or acted upon by the KSEB, and through out they had held that it was an improper certificate. The Company had accused the KSEB for delaying the energisation of the unit, whereas, the KSEB had put the W.A.No.981 of 2007 - 24 - blame on the company for not taking appropriate steps sufficiently early.
24. On the other hand, here, as was pointed out by the learned Senior Counsel, appellant-company had taken all necessary steps for modernization and the production commenced and continued after the new units were energized and there was no requirement of line drawing or power allocation since the unit was an existing one. The process of technology up-gradation and expansion was a continuing process and the subsequent energizations now referred to by the Board to cancel the concession were not part of the earlier modernization based on which the concession was claimed.
25. According to us, this case stands on quite distinct facts from Southern Ispat Ltd. and there are certain findings in Exhibit P18 judgment which have acquired finality and cannot be raked up by either parties. Exhibit P1 is the notification relevant to this case. As per the notification, even for modernization there is a commencement of commercial production, which date has to be, on or before 02.09.1987. Exhibit P1 also authorises or empowers KSIDC or KFC to certify the eligibility, provided they finance the units. The recompense to be made by the State, of the loss occurred to KSEB for reason of concessional tariff, is a condition in W.A.No.981 of 2007 - 25 - Exhibit P1, which has been incorporated since, the KSEB has to show a minimum 3% return on the capital investment as per the Electricity (Supply) Act, 1948. However, it is to be emphasized that the eligible units are not to be prejudiced by this clause which regulates the relationship between the KSEB and the Government, the latter of whom is obliged to compensate the KSEB for loss occasioned due to the policy of the latter. The beneficiary of Ext.P-1 cannot be prejudiced by reason only of an occasion for recompense has arisen.
26. Exhibit P3 is a certificate issued by the KSIDC which finances the appellant-Company, specifically under Exhibit P1 notification. Unlike the certificate issued by the KFC in Southern Ispat Limited, Exhibit P3 speaks of the certificate having been issued as authorised by Exhibit P1. The certificate issued by the auditor of the Company, again, merely quantifies the initial expenditure for the setting up of the unit and the amounts expended for modernization. This is imperative insofar as Exhibit P1 requiring at least investment of 25% in excess of the initial investment. The appellant which had initially commenced production in the year 1967 had done so, investing around Rs.494.50 lakhs, as evidenced from Exhibit P4. In modernization, as is indicated in Exhibit P4, the cost was of Rs.1,844 lakhs, far in excess of 25% of the initial investment. The Auditors Certificate is W.A.No.981 of 2007 - 26 - based on the audited accounts of the public limited Company; which audit is also statutory in nature. Exhibit P3 cannot at all be likened to the certificate issued in Southern Ispat Ltd. When the authority empowered to issue such a certificate has issued one, there can be no dispute raised on such eligibility by the KSEB especially after the period of concession expired. We also notice that on the production of the eligibility certificate issued by the KSIDC, the KSEB had also approved the concessional rate as per Exhibit P1 G.O., by Exhibit P5. The KSEB had only made a reservation as to the applicability of the rates to the particular units, which are subjected to modernization. This was an aspect which could have been verified at the initial instance itself when the concession was sanctioned.
27. Investment claimed of Rs.18 crores is not something which could escape the eye of even the layman, much less the KSEB. The KSEB has been supplying power and billing the unit from 31.12.1986 and it cannot be understood as having extended the concession without verifying the modernized units and ascertaining the specific modernization carried out. If that be the case, then we can only say that the KSEB would have to suffer the loss and whether it is entitled to recompense from the Government by the terms of Exhibit P1 G.O. is again a matter between the Government and W.A.No.981 of 2007 - 27 - the KSEB, which cannot at all prejudice the appellant or the concessional tariff granted to the appellant. We say this specifically looking at Exhibit P6, wherein a request is made to the appellant to provide the readings and energy meters from the date of energisation of the unit. Exhibit P6 was issued in June, 1987 and immediately thereafter Exhibit P7 dated 06.08.1987 was issued by the appellant, asserting that the existing unit has been completely scrapped and a new complex is in place. The KSEB obviously did not take any further proceedings and it was later in 1989 that Exhibit P8 was issued to the Government seeking recompense of the loss occasioned in that year for reason of the KSEB not being able to achieve minimum 3% return on the capital investment. Merely for the reason of a situation of recompense from the Government has arisen, the Board raked up the already concluded issue and sought for a clarification from the Industries Department. The appellant promptly responded to the query of the Government as per Exhibit P9 and also submitted details of the modernization scheme to the GM, DIC by Exhibit P10 dated 16.12.1989. The GM, DIC conducted an inspection, based on which a report was submitted to the Government. Exhibit P11 dated 24.01.1990 indicates that the report of the GM, DIC was in favour of the appellant, with only the reservation being of an old Smelting Furnace being W.A.No.981 of 2007 - 28 - continued in the premises. It was re-confirmed that the KSEB can charge the pre-1982 tariff for the units in the appellant-Company except the old Smelting Furnace. This reservation made, led eventually to the cancellation of the concessional tariff by Exhibit P17 order of the KSEB, which was found to be passed in violation of the principles of natural justice, by a Division Bench of this Court. Exhibit P18 judgment set aside Exhibit P17; but, however, permitted re-consideration by a Committee constituted by the Government. The fulcrum of the argument of both the appellant and the State revolve around the effect of Exhibit P18 judgment.
28. Having gone through Exhibit P18 judgment, we cannot say that the reconsideration directed was open on all aspects. We also have or own reservation about Exhibit P17 and the conclusions reached therein; but, however, we would not look into that as of now, since the said order has been set aside by the Division Bench. All the same, we have to emphasise that the Division Bench after detailing the facts, specifically stated so in paragraphs 6 and 7:
"6. All these admitted facts go to show that the question of eligibility of the concessional tariff and the question regarding the eligibility excluding the old furnace and the claims of adjustment were all concluded and agreed upon, thereby the W.A.No.981 of 2007 - 29 - petitioner-Company is entitled to and acquired a vested right for the concessional tariff announced by the Government. The Government as well as the Board is estopped from going on those commitment and the petitioner-Company is entitled, on the basis of principle of reasonable expectations, to conduct themselves on the basis of concessional tariff.
7. After all these settled matters the Board wanted to ignore the said concession. It is elementary and basic duty on the part of the Electricity Board as well as the Government to put the petitioner on notice after giving an opportunity to decide about the question whether the concessions have to be withdrawn or not. The respondents cannot make any decision adverse to the petitioner-Company without giving them an effective opportunity".
The learned Single Judge found that this cannot be read in isolation. But, we find that reading the judgment in its entirely, the effect of the declarations made in the above extract cannot be effaced or erased.
29. The reservations made by the Division Bench, which were open for consideration of the Committee constituted by the Government were the following:
(i) The consumption of the old melting plant;
(ii) The date on which the new plants were commissioned and the old plant seized to exist;
and W.A.No.981 of 2007 - 30 -
(iii) The significance of the sanction accorded for modernization on 09.08.1988 and 05.02.1991; On the subsequent energisations, referred to herein above at
(iii); the Division Bench itself had found that Exhibit P19 series would indicate the sanction accorded by the Chief Electrical Inspector in energising the electrical installations from the year 1987 onwards; which finding the Board cannot now detract from. The Division Bench then referred to various decisions and quashed the order of the Board withdrawing the concession on the ground of violation of principles of natural justice. Subsequent to this, Exhibit P19 notice was issued which was responded to by Exhibit P20 and a further communication raising specific points were also made by the Board as per Exhibit P21; which was responded to by Exhibit P22. Exhibit P23 is the order which has led to Exhibit P24 demand and Exhibit P25 bills; the sustainability of which we are called upon to decide.
30. Exhibit P23 details the various facts and has also considered the argument of Exhibit P18 judgment having concluded the issue of eligibility. Exhibit P23, however, finds the entire issue open for consideration of the Board, which we cannot accede to, especially noticing the extracts made from Exhibit P18 judgment. We have already dealt with W.A.No.981 of 2007 - 31 - the certificate issued by the KSIDC, which cannot be challenged at a later stage. We have to notice here that Exhibit P17 order, initially issued, withdrawing the concessional tariff granted was issued as late as in 18.05.1994; when the period for which the appellant was eligible for concessional rate was between 18.12.1986 to 17.12.1991. The concession granted in 1986 and extended upto 1991 was sought to be withdrawn in 1994.
31. Further, the certificate issued by the KSIDC is sought to be invalidated on the contention that KSIDC had informed the Committee constituted by the Government that the certificate was issued based on the certificate of the Chartered Accountant and the resolution of M/s.Binani Zinc Limited and that the certifying authority had been fraudulently induced to issue the certificate in question with ulterior motives. Immediately we have to notice that the KSIDC, as we saw in the initial part of this judgment, is a statutory Corporation completely under the control of the Government. If laches had been occasioned in carrying out a duty enjoined upon the statutory Corporation, then necessarily action should have been taken against the officials of the Corporation. We also have to observe that based on the above certification the KSEB itself had granted the concessional tariff as per Exhibit P5. We cannot take it W.A.No.981 of 2007 - 32 - that the concessional tariff was granted in the year 1987 and continued till 1991, during which period definitely regular readings would have been taken of the power consumption; without even verifying whether there is actually, a modernization effected by the appellant. If that is the case the officials of the KSIDC and KSEB are responsible, both of which are controlled by the Government.
32. Be that as it may, we have to specifically notice the clarification said to have been issued by the KSIDC, relied on by the Board in the impugned order. We extract hereunder Exhibit R5(d):
"NOTE Sub:- Eligibility Certificate issued by KSIDC in 1987 for M/s.Binani Zinc Ltd. To avail concessional power tariff -
1. Vide G.O.(P)20/86/PD dated 6.10.1986, new industrial units or units undertaking substantial expansion/ diversification/modernization were made eligible for pre- 1-9-1982 tariff, provided the unit started production (after completion of original project/ expansion/modernization) between 1.9.1982 and 2.9.1987. Government had authorised KSIDC/KFC/DIC to certify the eligibility in terms of completion of the project/commencement of production.
2. M/s.Cominco Binani Zinc Ltd. (presently Binani Zinc Ltd.) requested KSIDC to issue Eligibility Certificate for pre 1-9-1982 tariff for the modernization scheme completed on 18.12.1986. The W.A.No.981 of 2007 - 33 - company's application in the prescribed format apart from their own certification, was supported by their Auditors' Certificate stating that:
a) Cost of original project of }
Cominco Binani Zinc Ltd. } Rs.494.50 lakhs
completed in April 1967 }
b) Cost of modernization scheme }
completed in December 1986 } Rs.1844.00 lakhs
as per Books of Accounts of }
the Company }
3. The published Annual Report of the company for
1985-87 also confirm that the creation of additional fixed assets for the modernization programme has been completed. During the period, from October, 1985 to March 1987, the additional investment for modernization is Rs.15.35 crores (out of Rs.18.44 crores).
4. It will be noted that the increase in fixed assets is 376% (as against minimum 25% stipulated in the Government order). KSIDC, therefore, issued the Eligibility Certificate No.CER/21 dated 18.2.1987 for pre 1-9-1982 tariff applicable for the period from 18.12.1986 to 17.12.1991 for the modernized portion in the company only.
5. The Chief Engineer (Ele) General & MM, KSEB, vide his proceedings dated 21.3.1987 sanctioned concessional power tariff for the company specifying that the concessional rates will be applicable only to the particular unit, which was subjected to modernization.W.A.No.981 of 2007 - 34 -
6. The company had power connection from 1964 onwards and adequate power was available without additional power connection.
7. KSIDC's role was only to issue Eligibility Certificate to indicate the date of completion/ commencement of production of any new project/ expansion/modernization. The implementation of the Government Order including fixing the quantum of power, for which concessional power tariff is available, is done by the KSEB only. As such, KSIDC has no role, whatsoever, in fixing the quantum of power consumed by the unit for which concessional tariff was applied."
33. We do not see a whisper much less a statement having been made as to the KSIDC having no machinery to ensure the modernization effected or that the certification was made merely on the basis of the Chartered Accountant's certificate. On the other hand the KSIDC firmly stands by the certification made by it as to the eligibility of the appellant under Exhibit P1. It specifies that the report of the Auditor can be verified as to its veracity from the published Annual Report of the Company. The Annual Reports of a Public Limited Company is statutory in nature and is verifiable from the Office of the Registrar of Companies. We W.A.No.981 of 2007 - 35 - reiterate that the statutory financial Corporations were enjoined with the power to certify the eligibility under Exhibit P1, since they, as financiers, would be the best placed to certify the actual modernization. The modernization definitely was on the basis of the finance availed from the statutory Corporation, the employment of which in making capital investment is under the strict monitoring of the financier. The project report also would have been approved by the financiers and the disbursal would be on stages, ensuring the employment of funds already disbursed. It cannot be said that a financier does not have the machinery to ensure implementation of a project, it has financed and certify the capital investment as also the commencement of commercial production. We specifically notice the statement in the above extract that no additional power allocation was required for the purpose of commencing the production in the modernized units installed. The certificate of the Chartered Accountant were relied on only to evidence the initial investment and that made on modernization; the stipulatyed escalation, being a requirement as per Exhibit P1 notification. We find the attempt of the Board in Exhibit P23 to invalidate the certification of eligibility of the KSIDC to be without proper authority, illegal, arbitrary and on extraneous grounds, which do not emanate from the W.A.No.981 of 2007 - 36 - communication of the KSIDC. The KSIDC's communication has been misread or not read at all.
34. We also see from Exhibit P23 that it had noticed the finding in Exhibit P18; that Exhibit P19 series reveals the Electrical Inspector having issued energisation sanction under Rule 63(3) of the Indian Electricity Rules; but, however, Exhibit P23 attempts to get over the said finding by contending that the KSEB has no authority to accord permission. Then, necessarily the Electrical Inspector had accorded permission and it was the KSEB's approval that was lacking. If that be so, then the supply should have been disconnected. In this context, we notice certain grounds as found in Exhibit P17, against which we expressed doubts earlier. Exhibit P17 spoke of the responsibility of the consumer to fix a sub meter with approval from the Board. This was never an issue as raised by the Board in the various communications addressed, either to the consumer or to the Government. The sanction of the concessional tariff at Exhibit P5 also does not suggest such a measure. On the future verification as suggested by the Industries Department, it was found that a Smelting Furnace alone, was not scrapped. Exhibit P17 also indicates that there was a direction to the consumer to fix a separate meter for the Smelting Furnace. Admittedly meter was installed, because the W.A.No.981 of 2007 - 37 - ground in Exhibit P17 is that the meter was not tested or sealed by the Board's officials and that there was nothing produced to indicate the authentication on operation, of the above meter. Again the question arise as to how then did the Board record the consumption of the consumer and bill them in accordance with such consumption. As we noticed herein above, Exhibit P18 specifically indicated that Exhibit P19 series of documents produced in that case clearly indicated the approval of the Electrical Inspector. What was left for consideration was the significance of the subsequent sanctions accorded for modernization of 09.08.1988 and 05.12.1991. We understand this as a specific direction to bifurcate the consumption to the units which were subsequently modernized on the aforementioned dates, since they are not eligible for the concessional tariff. Sadly, there could be no such bifurcation since there was not insistence from the KSEB to so install separate meters, when new units were installed during the period of concession.
35. What remained, according to us, for consideration after Exhibit P18 was, as the Division Bench enumerated; firstly, the consumption of the old Melting plant, secondly, the specific date on which the new plants were commissioned and thirdly, the significance of the sanction accorded for modernization in 1988 and in 1991. W.A.No.981 of 2007 - 38 -
36. Viewed from this perspective, the consumption of the old Smelting plant would be evident from the meter installed for the same. The commencement of the commercial production, as we noticed, has been certified by the KSIDC. The grounds of lack of adequate machinery to assess capital investment and fraud having been employed, to invalidate the certification has already been held by us to be improper and illegal. As for the subsequent energisation approvals, the appellant itself takes a stand that these were of modernization carried out later to that relevant for Exhibit P1 notification. If that be so those units obviously cannot have supply at the concessional rate. When the KSEB granted such further energisations, they should have been vigilant to provide or direct provision of separate meters for reading the consumption to such units, not entitled to the concession. However there has been no such bifurcation of supply or consumption carried out of those which were modernized and energised as per the sanction in 1988 and 1991. The KSEB is guilty of laches, if such bifurcation was not carried out, since they were aware that the supply to the completely modernized unit except the old Smelting Furnace was on concessional tariff.
37. On the questions framed by the learned Single Judge, we have to hold that Exhibit P18 decision of a W.A.No.981 of 2007 - 39 - Division Bench of this Court had held that the appellant-petitioner is entitled to get the benefit of pre-1982 tariff. We have held that the KSEB is bound by Exhibit P3 certificate issued by the KSIDC. We do not find a way to set aside Exhibit P23 on grounds of violation of principles of natural justice; but on the ground of un- sustainability of the findings therein, we have interfered with Exhibit P23 and we are of the definite opinion that it has to be set aside. We also hold that the finding of the KSEB that the appellant-Company is not eligible for concessional tariff is quite unreasonable especially when there was no such suspicion raised either on furnishing the eligibility certificate or when the power supply was commenced and continued to the modernized plant and machinery during the period of the concessional tariff.
38. What we find relevant as of now is only the consideration of the consumption of the old Smelting Furnace, which cannot be at the concessional tariff. We also find that the expansion carried out of the plant and machinery and sanction accorded in 1988 and 1991 would not be entitled to the concessional tariff. However, when such modernization was subsequently carried out and sanction accorded for power supply, there was no separate meter affixed to record the consumption to those units which were set up in 1988 and W.A.No.981 of 2007 - 40 - 1991. This again is an omission on the part of the KSEB, who was aware that such modernization carried out and electric supply approved is to the new units, during the period of concession as availed under Exhibit P1 notification. Hence, it was incumbent upon the KSEB to insist for separate meter to read the consumption of power by such units established in 1988 and 1991. That having not been done, there is absolutely no reason why we should permit the KSEB now to interfere with the concession granted during the five year period especially when it is practically impossible to bifurcate the consumption of units modernized in 1986 and then in 1988 and 1991. However, we noticed that the old Smelting Furnace was issued with a separate meter. The units of electric power consumed by the Smelting Furnace definitely should be declined concession. With only the above reservation, we set aside Exhibit P23 order.
39. As we noticed initially, the grounds on which the concessions were withdrawn are that; KSIDC, a statutory Corporation had issued a certification of eligibility, without proper verification, even on fraudulent inducement and KSEB has granted the concessional tariff, permitting the supply through out the entire period of concession, without verifying the actual modernization or the extent to which it has been carried out. This is blatant admission of abject W.A.No.981 of 2007 - 41 - inaction and absolute carelessness, bordering on criminal negligence on the part of the officers of entities and corporate bodies, owned and regulated by the State, if the grounds are accepted. There is no warrant for us to assume that the beneficiary of a concession, proclaimed as a policy of the Government, would be dishonest from the inception and seek to appropriate the proceeds by all means without complying with the specific terms of the policy. If we so presume, then we have to assume that such appropriation would be with the active connivance of those Officers of the State; enjoined with the duty coupled with the power to grant the concession in accordance with the policy; who would have also taken the proverbial lick of the finger dipped in the sugar bowl. We are averse to make such assumptions and presumptions, in an adjudication, nor is it expected of us. But the fact remains that the beneficiary here in, was first confronted with the prospect of withdrawal of the concession already granted, after three years of expiry of the period of concession. A beneficiary of a concession granted as a policy, the terms and conditions of which were verified at the time of the grant, cannot be asked to produce evidence of compliance, essential for the grant, long after the expiry of the period during which the concession was availed. This is especially so when the eligibility, grant and continuance W.A.No.981 of 2007 - 42 - were to be at the behest, supervision and monitoring of entities enjoined with duties to the State and its citizens.
The Writ Ap peal is allowed, reserving the right of the KSEB to issue fresh bills for the old Smelting Furnace if and only if the consumption readings are available separately. Parties are left to suffer their respective costs.
Sd/-
K.VINOD CHANDRAN JUDGE Sd/-
ASHOK MENON JUDGE W.A.No.981 of 2007 - 43 - APPENDIX APPELLANT'S ANNEXURES & EXHIBIT:
ANNEXURE I TRUE COPY OF THE PLAN WITH THE ENDORSEMENT OF CHIEF ELECTRICAL INSPECTOR.
ANNEXURE A TRUE COPY OF LETTER DATED 30/03/2007 FROM THE KSEB.
ANNEXURE B TRUE COPY OF THE LETTER DATED 04/05/2007 TOGETHER WITH ADDITIONAL PROOF SUBMITTED BY THE APPELLANT TO KSEB.
ANNEXURE C TRUE COPY OF LETTER DATED 03/08/2007 FROM KSEB TO THE APPELLANT.
ANNEXURE D TRUE COPY OF LETTER DATED 08/09/2007 TOGETHER WITH ANNEXURES THERETO FROM THE PETITIONER TO KSEB.
ANNEXURE E TRUE COPY OF LETTER DATED 29/09/2007 FROM KSEB TO THE APPELLANT.
ANNEXURE F TRUE COPY OF LETTER DATED 19/10/2007 TOGETHER WITH ANNEXURES THERETO SUBMITTED BY THE APPELLANT TO KSEB.
ANNEXURE G TRUE COPY OF ORDER DATED 05/11/2007 RECEIVED BY THE APPELLANT FROM CHIEF ENGINEER (COMMERCIAL AND TARIFFS).
ANNEXURE H TRUE COPY OF LETTER DATED 01/08/2011 ISSUED BY THE CHIEF ENGINEER (COMMERCIAL AND TARIFF), KERALA STATE ELECTRICITY BOARD, TRIVANDRUM TO THE APPELLANT.
ANNEXURE I TRUE COPY OF ORDER DATED 09/02/2010 PASSED BY THE DIVISION BENCH OF THIS HON'BLE COURT IN IA NO.944/2007 IN WA NO.981/2007.
ANNEXURE J TRUE COPY OF THE LETTER DATED 10/08/2011 ISSUED BY THE PETITIONER TO THE CHIEF ENGINEER (COMMERCIAL AND TARIFF), KERALA STATE ELECTRICITY BOARD, TRIVANDRUM.
dkr/vku.
[ true copy ]