STATE OF U.P. AND ORS. v. RENUSAGAR POWER CO. AND OTHERS

It is hightime to reiterate that in the expanding of horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all· the parties. The horizon of the doctrine of lifting of corporate veil is expanding. Here, indubitably, we are of the opinion that it is correct -" that Renusagar was brought into existence by Hindalco in order to fulfil the condition of industrial licence of Hindalco through produc- tion of aluminium. It is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of take over of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for establishing and expanding the ~· power station were taken by Hindalco, Renusagar is wholly-owned subsidiary of Hindalco and is completely controlled by Hindalco. Even G the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has at no point of time indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted . the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of genera- tion of Hindalco. In the impugned order of the profits of Renusagar H

668 SUPREME COURT REPORTS [19881 Supp. 1 S.C.R.

A have been treated as the profits of Hindalco.

In the aforesaid view of the matter we are of the opinion that the corporate veii -should be lifted and Hindalco and Renusagar· be treated as one conce_m and Renusagar's power plant must be treated as the to :own source of generation of Hindalco and should be -liable duty on B that basis. In the premises the consumption of such energy by Hindalco will fall under section 3(1)(c) of .the Act. The learned Additional Advocate-General for the State relied. on several decisions, some of which have been noted. • The veil on corporate personality even though not lifted some- times, is becoming more and more transparent in modem Company C jurisprudence. The ghost of Salomon's case still visits frequently the hounds of Company Law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence. (Tagore Law Lecture 183).

D It appears to us; however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treat- ing -it as the own source of energy. The respondent is liable to duty on Ui_e same and on that, footing alone; this is evident in view of the principles enunciated and the doctrine now established by way of deci- sion of this Court in Life Insurance Corpn of India, (supra) that in the facts of this case sections 3(l)(c) and 4(1)(c) of the Act are to be ipterpreted accordingly. The person generating and consuming energy were the same and the corporate veil should be lifted. In the facts of this case Hindalco and Renusagar were inextricably linked up together. Renusagar had in reality no separate and independent exist- ence apart from and independent of Hindalco.

In the aforesaid view of the matter we are of the opinion that consumption of energy by Hindalco is clearly consumption by Hinda- lco from its own source of generation. Therefore, the rates of duty applicable to own source of generation .have to be applied to such consumption, that is to say. I paisa per unit for the first two generating sets and nil rate in respect of 3rd and 4th generating sets. It is

- appropriate to refer that having regard to the conduct of the State \he power:cuts matter and also the present proceedings the State should riot be permitted to treat consumption of Renusagar's energy by H Hindalco as anything other than different from consumption of energy

STATE OF U.P. v. RENUSAGAR POWER CO. [MUKHARJI, J.J 669

by Hindalco from its own source of generation. We are, therefore, of A the opinion that in the facts of this case the corporate veil must be lifted. and Hindalco and Renusagar should be treated as one concern and if that is taken the consumption of energy by Hindalco must be regarded as consumption by Hindalco from its own source of genera- tion.

Inasmuch as the High Court upheld this contention of the respondent we are in respectful agreement of its views and the appeal directed against this finding of the High Court must, therefore, be rejected.

The, electricity biJI for arrears, subject to consideration of other aspects of the matter, that is to say, the validity of the order of rejec- c tion passed by the State on 16th February, 1982 rejecting the claim for exemption would be treated hereinafter.

In order to appreciate the second aspect of the matter, that is to say, the challenge to the order which has been quashed by the High D Court, it is necessary to recapitulate certain facts. Hindalco made an application to the State Government under section 3( 4) of the Act for exemption on 28th September, 1970. In spite of repeated requests made by Hindalco the State did not take any decision on the said application of Hindalco and also purported to raise and enforce demands under the Duty Act against Hindalco. Hindalco and E Renusagar filed a Writ Petition No. 368 of 1972 ill the High Court of Allahabad on 21st March, 1972. On that very date Hindalco was in- - formed that the application previously made by it had been rejected by the State Government. Hindalco applied for amendment of the writ petition. Reasons for rejection were intimated on 16th June, 1972. Thereafter Writ Petition No. 368 of 1972 was withdrawn. On 21st July, F 1972 Hindalco and Renusagar filed another Writ Petition No. 4521 of 1972 in the High Court of Allahabad challenging the order of rejec- tion. On 17th May, 1974 the High Court delivered judgment quashing the aforesaid rejection and asking the State Government to consider the matter afresh in accordance with Jaw and in accordance with the directions contained in the said judgment. Another Writ Petition be- G ing Writ Petition No. 3921 of 1982 out of which the present appeal arises was filed by Renusagar and Hindalco on 16th April, 1982. The High Court passed an order on 26th September, 1984 quashing the order. The High Court was of the view that the Government was under a mandatory duty to consider certain factors. These were: (1) How did th_e cost of power to the Corporation compare with the cost bf power to i-1

670 SUPREME COURT REPORTS I1988] Supp. 1 S.C.R. similar industries in other States? (2) How the spending of huge sums A by the Government of India in foreign exchange decreased and its keenness to attain self-sufficiency in the country by increasing its in- digenous production in public interest attained? (3) The commitment made by the Government of Uttar Pradesh to the Hindalco to supply power at cheap rate as noticed in the report of Dr. Nagarajarao. (4) B The effect of imposition of duty on the margin of profit available to Hindalco.

The provisions of sub-section (4) of section 3 have been noticed. As we have read the said provisions, it appears to us that the dominance of public interest is significant and we refer to the various factors, namely, (a) prevailing charges for supply of energy in any c area, (b) the generating capacity of any plant, (c) the need to promote industrial production generally or any specified class therof and other relevant factors 'Ind then taking all these factors into consideration, in public interest, to fix different rates of electricity duty in relation to different classes of consumption of energy or allow any exemption D from payment thereof. Various grounds have been made out.

Shri Sen for the respondents is right that in view of the ceilings prescribed the power conferred upon the State under section 3(1) of the Act by itself is valid and does not amount to excessive delegation. See also in this connection the obs~rvations of this Court in Devi Das E Gopal Krishnan & Ors. v. State of Punjab & Ors., [1967] 3 S.C:R. 557 and Ram Bachan Lal v. The State of Bihar, [1967] 3 S.C.R. 1.

Shri Trivedi, learned Additional Advocate-General, State of Ut- tar Pradesh drew our attention to the case of Panama Canal Company v. Grace Line, 356 U.S. 309 2 Lawyers' Edn. 788, where at page 793 of the report while dealing with the facts of that case Justice Douglas observed that, as it was seen in that case, the conflict raged over questions that at heart involved problems of statutory construction and cost accounting: whether an operating deficit in the auxiliary or sup- porting activitie~ was a legitimate cost in maintaining and operating the Canal for purpose of the toll formula. These are matters on which experts might disagree; these involve nice issues of judgment and choice, which required the exercise of informed discretion. In those circumstances Justice Douglas observed that the case was, therefore, quite unlike the situation where a statute created a duty to act and an equity court was asked to compel the agency to take the prescribed action. What was emphasised was that the matter should be far less cloudy, much more clear for courts to intrude. It is also in this connec-

STATE OF U.P. v. RENUSAGAR POWER CO. [MUKHARJI, J.) 671

tion necessary that if technical considerations are involved the Court A feels shy to int~rfere. Reliance was placed on the observations of this Court in Vincent Panikurlangara v. Union of India and others, [1987] 2 S.C.C. 165. There the writ petition involved the claim for withdrawal of 7000 fixed dose combinations and withdrawal of licences of manufacturers engaged in manufacture of about 30 drugs which have been licensed by the Drugs Control Authorities; the issues that fell for B consideration are not only relating to technical and specialised matters relating to therapeutic value, justification and harmfol side effects of drugs but also involved examination of the correctness of action taken by respondents 1 and 2 therein on the basis of advice; the matter also involved the interest of manufacturers and traders of drugs as also the interest of patients who require drugs for their treatment. This Court reiterated that in view of the magnitude, complexity and technical nature of the enquiry involved in the matter as also the far-reaching implications of the total ban of certain medicines for which the petitioner had prayed, a judicial proceeding of the nature initiated was not an appropriate one for determination of such matters. The techni- cal aspects which arose for consideration in a matter of that type could 0 not be effectively handled by a court. This Court also reiterated that similarly the question of policy which was involved in the matter was also one for the Union Government-keeping the best interest of citi- zens in view-to decide. No final say in regard to such aspects came under the purview of the court. E The High Court in the instant case reiterated the necessity of cheap electricity and if cheap electricity was not made available, the cost of indigenous aluminium would go up. It would necessitate import of aluminium causing drain on the foreign exchange of the country. On the other hand, the learned Additional Advocate General for the State of U.P. contended and in our opinion .rightly that primary purpose of ·F the Act as stated in the preamble wa~ to raise the revenue for the development projects. Whether in a particular situation, rural elec- trification and development of agriculture should be given priority or electricity or development of aluminium industry should be given priority or which is in public interest, in our opinion, are value judg- ments and the legislature is the best judge. The High Court in its G impugned judgment referred to the order of the Government. The said order read as follows:

"The Corporation has also emphasized that the Govern- ment of India is spending a huge sum of money in foreign exchange to mee_t the requirements of aluminium in India, H

672 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

with a view to increasing· the aluminium production by A Hindalco Electricity should be made available at cheap rate and exemption should be granted to the Corporation from payment of electricity duty. In this connection it may again be pointed out that the imposition of electricity duty will not affect the productivity of aluminium by Mis Hindalco B as electricity duty is negligible as clearly made out in the earlier paragraphs. Accordingly, the electricity duty is not likely to have any adverse effect on foreign exchange of the country."

Referring to the aforesaid observations of the State Govern- ment, the High Court was of the view that the said observations of the c State Government clearly showed that the State Government did not address itself to the need of promoting aluminium industry for increas- ing production of aluminium which would in the long run save foreign exchange. We are unable to agree. What was paramount before intro- duction of the development programme and how the funds should be allocated and how far the Government considers a negligible increase and rise in the cost of aluminium for the purpose of raising monies for other development activities are matters of policy to be decided by the Government. It is true as the High Court has pointed out that the question regarding public interest and need to promote indigenous industrial production was related with the question of exemption of duty. But what the High Court missed, in our opinion with respect, was that a matter of policy which should be left to the Government. Read- ing the order of the Government, it appears to us that the Government had adverted itself to all the aspects of sub-section (4) of section 3 of the Act. It is true that certain amount of encouragement was given to Hindalco to start the industry in a backward area. After considerable point of time the very low rate of duty was charged. But if we need other sectors of growth and development for example, food, shelter, water, rural electrification, the need for encouragement to aluminium industry had to be subordinated by little high cost because that is a matter on which the Government as representing the will of the people is the deciding factor. Price fixation, in our opinion, which is ulti- G mately the basis of rise in cost because of the rise of the electricity duty is not a matter for investigation of Court. This question was examined by this Court in Union of India and another v. Cynamide India Ltd. and another, [1987] 2 S.C.C. 720 where one of our learned brothers who delivered the judgment of the High Court of Allahabad was a party. There in exercise of the powers under section 3(2)( c) of the H Essential Commodities Act, the Drugs (Prices Control) Order,

STATE OF U.P. v. RENUSAGAR POWER CO. (MUKHARJI, J.] 673

1979 was made. The Central Government thereafter issued notifica- tion thereunder. At page 741 of the report, Chinnappa Reddy, J. A speaking for the Court referring to a passage of the Administrative Law by Schwartz with approval expressed the view that those powers were more or less legislative in character. Fixation of electricity tariff can also to a certain extent be regarded of this category. Chinnappa Reddy, J. observed at page 735 of the report that price fixation is more in the nature of a legislative activity than any other. He referred to the fact that due to the proliferation of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative; quasi-judicial decisions tend to merge in legislative activity and, conversely, legislative activity tends to fade int.o. and present an appearance of an administrative or quashudicial activity.· Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is 'diffieult in theory and impossible in practice'. Reddy, J. insisted that it.is necessary that the -li!le must sometimes be drawn as different legal righis and con- sequences may ensue. It appears to us that sub-section (4) of section 3 of the Act in the set up is quasi-legislative and quasi-administrative in so far as it has power to fix different rates having regard to certain factors and in so far as it has power to grant exemption in some cases, in ·our opinion, is quasi-legislative in character. Such a decision must be arrived at objectively and in consonance with the· principles of natural justice. It is correct that with regard to the nature of the power under section 3( 4) of the Act when the power is exercised with reference to any class it would be in the nature of subordinate legisla- tion but when the power is exercised with reference to individual it would be administrative. Reference was made in this connection to the cases of Union of India v.. Cynamide India Ltd. (supra) and P.J. Irani v. State of Madras, [1962)2S.C.R.169at 179-180and 181-182. F If the exercise of power is in the nature of subordinate legislation the exercise must conform to the provisions of the statute. All the conditions of the statute must be fulfilled. The High Court was right only to the limited extent that all the relevant consideratiQ!!S must be taken into account and the power should not be exercised 01'1-irrelevant considerations but singular consideration which the High Court, in our opinion, seems to have missed in the judgment under appeal, is these factors, namely, the prevailing charges for supply of energy in any area, the generating capacity of any plant, the need to promote indus- trial production generally or any specified class thereof and other relevant factors cannot be judged disjointly. These must be judged in ad jun ct to the public interest and that public interest is as mentioned in the preamble to raise revenue.

674 SUPREME COURT REPORTS 119881 Supp. 1 S.C.R.

Reference was also made to the observations of the Judicial Com- A mittee in Ryots of Garabandho and others v. Zamindar of Parlakimedi and another, A.LR. 1943 P.C. 164 where the Judicial Committee had to deal with the proviso to section 30 of the Act. It read as follows:

"In settling rents under this section the Collector shall pre- B sume, unless the contrary is proved, that the existing rent or rate of rent is fair and equitable and sliall have regard to the provisions of this Act for determining rates of rent , payable by a ryot."

Viscount Simon L.C. observed that the view taken by the major- ity of the Collective Board of Revenue in making the order which is c now complained of, is that the requirement to "have regard to" the provisions in question has no more definite or technical meaning than that of ordinary usage, and only requires that these provisions must be ,taken into consideration. In their view the prime duty of the Revenue , Officer under Chap. II was to fix a fair and equitable rent, and though D he must be guided by the principles underlying such provisions as were contained in chap. 3, he was not strictly bound by such provisions. The Judicial Committee observed at page 180 of the report as follows:

STATE OF U.P. v. RENUSAGAR POWER CO. [MUKHARJI, J.J 675

question and whenever he has not merely to adjust the lawful rent but to fix what is fair and equitable in variation from the lawful rent which can be exacted in a suit, his settlement is clearly something which no civil Court could do unless specially empowered.

Their Lordships find themselves on this matter in agreement with the view taken by the majority of the Col- lective Board. It is not possible to peruse the proceedings of the Special Revenue Officer in this case without seeing that a number of matters besides the rise in prices of staple food crops were considered by him, and had to be con- sidered by him, if he was to carry out his duty under chap. II. He observed in para. 30 of the final proceed,irtgs dated 10th December 1935:

I hold that the present settlement is also a fresh and initial settlement wherein everything has to be re-classified afresh and new rates of rent have to be fixed. It is not therefore a case of enhancement but of fixing and introduc- ing a new rate of rent based on the principles of equity and faimes as laid down in Chap. II, Estates Land Act."

The High Court in the impugned judgment commented that it was a mandatory duty to separaiely consider these· relevant factors and has committed the error against which the Judicial Committee cau- tioned. The High Court was of the view at page 10 of the judgment that there was a mandatory duty to consider the factors mentioned hereinbefore. All that the section requires was that these factors should be borne in mind but these must be subordinate to the execu- tive decision of the need for public interest. F

In Saraswati Industrial Syndicate Ltd. etc. v. Union of India,

' • ~· t [1975] 1 S.C.R. 956 the Sugar (Control) Order, 1966 came up for consideration. Clause 7(2) of the Sugar (Control) Order had been set out at page 951r of the report. It read as follows: I G ' "Such price or maximum price shall be fixed having regard to the estimated cost of production of sugar determined on the basis of the relevant schedule of cost given in the Report of the Sugar Enquiry Commission (October 1965), subject to the adjustment of such rise in cost subsequent to the Report aforesaid as, in the opinion of the Central H

676 SUPREME COURT REPORTS ' [19881 Supp. 1 S.C.R.

Government, cannot be absorbed by the provision for con- A tingencies in the relevant schedule to that Report." '

Beg, J. as the learned Chief Justice then was, observed that clause 7(2) set out above required the Government to fix the price "having regard to the estimated cost of prbduction of sugar on the B basis of the relevant schedule". The expression "having regard to" only obliges the Government to consider as relevant data material to which it must have regard to.

In so far as the High Court held in this judgment that the power conferred on the State Government was of the administrative nature, the High Court may not be in error. But the High Court held that it c should be in consonance with the principles of natural justice, in our \ opinion-it must be in accordance with natural jl)stice to a limited extent-and such principles of natural justice are enunciated by this . ' Court in several decisions, namely, A.K. Kraipak v. Uni~n of India, A.LR. 1970 S.C. 150; Mis. Travancore Rayons Ltd. v. Union of India, D A.I.R. 1971 S.C. 862 and Amal Kumar Ghatak v. State of Assam & Others, A.I.R. 1971Assam32. -

Keeping in view the aforesaid principles, the High Court examined the petitioners' grievance. Dr. Rajagopalan submitted his report to the State Government in January; 1979. Admittedly, Dr. E Rajagopalan placed reliance on the report of Working Group on Aluminium set up by the Government of India in 1970 and various other reports of Bureau of Industrial Cost and,Price (hereinafter refer- red to as 'BICP'), submitted to the Government from time to time. It is based on the balance-sheet of the appellants and had been made available to the respondents. We have examined the correspondence F that passed between the parties and we are of the opinion that there was no violation of the principles of natural justice because the relev- ant datas were made available to the appellants. It is true that the principles of natural justice must be adhereq to. In this connection reference may be made to S.D. Hotop "Principles of Australian Ad- ministrative Law 6th Edition, Pages 210-212, Cases and Materials on G Review of Administrative Action (2nd Edition) by S.D. Hotop, Wade on Administrative Law, 5th Edition, pages 506/507 and Bennion on Statutory Interpretation, 1984 Edition, pages 140-141. The exercise of power whether legislative or administrative will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary. Similarly, if the power has been exercised on a non-consideration or non-application of mind to re-

STATE OF U.P. v. RENUSAGAR POWER CO. [MUKHARJI, J.l 677

levant factors the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administrative) is exercised on the basis of acts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. See Commis- sioner of Income Tax v. Mahindra & Mahindra Ltd. & Ors., [1983] 3 S.C.R. 773 at 786-787. The present case relates to the particular facts and circumstances of an individual, namely, Hindalco. To the extent, its claim for exemption was entitled to the consideration. In our opinion, the facts and circumstances of the case were examined in consonance with the principles of natural justice. All relevant factors were given consideration but subject to public interest. The High Court considered whether electricity duty was included in the prices of aluminium fixed by the Central Government. On this aspect our atten- C tion was drawn on behalf of the respondents at pages 372-387 of the judgment in Volume B. It was submitted that the assumption that electricity duty was included in the prices of Hindalco fixed by the Central Government formed a basic and a very important considera- tion in the making of the impugned order. We are unable.to agree. It was also submitted that the said assumption was made by the State 0 Government and Dr. Rajagopalan.on the basis of the reports of BICP and the Working Group. The High Court on a perusal of the reports of the BI!=P and the Working Group came to the conclusion that the said assumption of the State and Dr. Rajagopalan is based on non-existent fact and/or is patently erroneous. Apparently such examination by the High Court was not warranted. It was pointed out that Dr. Rajagopa- E lan had determined the adequacy of the profits of Hindalco by relating the same to the original subscribed capital only and had completely ignored the reserves of Hindalco. The aforesaid Qasls, it was held by the High Court is contrary to the well accepted pc;/nciples of return on capital employed/net worth. It is true that Hindalco has made profits much more than it had before the imposition of the duty. The adequ- F acy of the profits or whether it made much more profits is not a consideration which must prevail over public interest and the Govern- ment having taken into consideration this factor, in our opinion, did not commit any error and the High Court was in error in setting aside the order of the Government. It is true that the cost of power to similar industry in other State was a relevant facto~ and the State was under a G mandatory duty to consider the same. The State has taken note of all those factors and has observed that M/s. Hindalco is being supplied with electrical energy at a ,very nominal rate and taking into considera- tion the prevailing practice of levy of electricity duty in other States as well as the provisions stated in section 3(4), the Government have come to the conclusion that there is no justification for allowing H

678 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

exemption from electricity duty to M/s. Hindalco. The Government A did not commit any error which required interference by the High Court in the manner it did . The assurance of cheap power factor was there. But the assurance of cheap power factor does not foreclose the public interest of raising public revenue. "

B In July, 1975 the Central Government fixed uniform· prices of alfiminium for all the producers of aluminium. The Central Govern- ment also fixed uniform sale prices of aluminium applicable to all • producers. The Central Government also fixed individual retention prices (based, inter alia, on the cost of production) for each individual producer. All producers of aluminium were to sell aluminium at the uniform sale prices. Any producer whose retention prices were lower c than the sale prices had to pay difference into the Aluminium Regula- tion Account. Any producer whose retention prices were higher than the sale prices was entitled to receive the difference from the Aluminium Regulation Account. Price, therefore, was no question of the respondent being loser or sufferer. It is true that electricity duty was not included and was also considered in the fixation of the price. That is the only pre-dominant factor, having regard to the technical nature of the order. The impugned order does not suffer from the vice of non-application of mind or non-consideration of the relevant factors and the High Court was in error in interfering with the order of the Government. We are clearly of the opinion that the High Court was in error in interfering with the order in the manner it did. The High Court should not have interfered for interference by the High Court the matter should have been far less cloudy and far more clear.

Natural justice in the sense that a party must be heard before- hand need not be directly followed in fixing the price. Reference in this connection may be made to the observations of this Court in Prag lee & Oil Mills and another etc. v. Union of India, [1978] 3 S.C.R. 293, where at page 325 of the report, this Court observed that in the ulti- mate analysis, the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid. In this connection reference may also be made to Shree Meenakshi Mills Ltd. v. Union of India, 11974] 2 S.C.R. 398, where this Court dealing with the Cotton Textile (Control) Order, 1948 at page 419 of the report observed that if fair price is to be fixed leaving a reasonable /' margin of profit, there is never any question of infringement of funda- H mental right to carry on business by imposing reasonable restrictions.

STATE OF U.P. v. RENUSAGAR POWER CO. IMUKHARJI, J.] 679

Unreasonableness and natural justice have to be judged in that con- A text. In that view of the matter non-supply of the basis of the report of the BlCP does not by itself, in our opinion, in the facts and circum- stances of the case make the order of the State Government vulnerable to challenge.

In Laxmi Khandsari etc. etc. v. State of U.P. & Ors., (1981] 3 B S.C.R. 92 this Court was dealing with the Essential Commodities Act, 1955 and the Sugarcane (Control) Order, 1966 and observed that in determining the reasonableness of restrictions imposed by law in the field of industry, trade or commerce, the mere fact that some of the persons engaged in a particular trade may incur loss due to the imposi- tion of restrictions will not render them unreasonable because it is manifest that trade and industry pass through periods of prosperity c and adversity on account of economic, social or political factors. At page 129 of the report rejecting the plea that before fixing a price the rules of natural justice should be adhered to, this Court emphasised, referring to the observations in the case of Saraswati Industrial Syndi- cate Ltd. v. Union of India, [1975] 1 S.C.R. 956 that price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. There is scope for trial and error in such sphere. Judged by that standard, the impugned order in this case, in our opinion, is not bad.

In support of the proposition that the principles of natural justice had been violated in passing the impugned order, five decisions were referred to, namely, State of Orissa v. Mr. (Miss) Binapani Dei, [1967] 2 SCR 625; A.K. Kraipak v. Union of India, A.LR 1970 S.C. 150; Mohd. Rashid v. State of U.P. A.LR. 19(9 S.C. 592; S.L. Kapoor v. Jagmohan and others, A.LR. 1981 S.C. 136 and Maneka Gandhi v. Union of India, A.LR. 1978 S.C. 597. The principles of these cases will have no application to the facts of this case. There has been no violation of the principles of natural justice to the extent appiicable to the order of this nature.

Reference was made to the observations in the case of India Sugars & Refineries Ltd. v. Amravathi Service Co-operative Society G Ltd., [1976] 2 S.C.R. 740 where at page 746 of the report, this Court observed that the power to grant exemption to factories from payment of additional price is intimately connected with the right Of sugarcane growers to claim additional price. In granting of such power, principles of natural justice should be followed. In such a case a duty to act judicially does arise. H

680 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

This Court in Commissioner of Income Tax, Bombay and others A v. Mahindra and Mahindra eimited & Ors., [1983] 3 S.C.R. 773 at page 786 of the report, dealt with the parameters of the Court's power of judicial review'of adri:tinistrative or executive action or decision. Indisputably, it is a settled position that if the action or decision is perverse or is such that no reasonable body of persons, properly B informed, could come to or has been arrived at by the authority misdi- recting itself. hf-adopting a wrong approach qr has been influenced by irrelevant or extraneous matters, the Court would be justified in interfering with the same. See also the observations at page 787 of the report. In this. case the parameters had been adhered to. All relevant factors had been borne in mind. It is true that each factor had not been independently considered, but these had been borne in mind. In our c opinion, the Government did not act in violation either of the princi- ples of natural justice or arbitrarily or in violation of the previous directions of the High Court.

In the premises, the High Court was in error in setting aside the order of the State Government in its entirety. The High· Court should have allowed the claim of Hindalco for the reduced rate of bill on the basis that Renusagar Power Plant was its own source of generation under section 3(1)(c) and the bills should have been-made by the Board on that basis. But the.High Court was in error in upholding the respondents' contention that the State Government acted improperly and not in .terms of section 3(4) of the Act and in violation of the principles of natural justice. We, therefore, allow the appeal to the extent indicated above and set aside the judgment of the Allahabad High Court to that extent and restore the State Government's impugned order subject to the modification of the bills on the basis of own source of generation. We, therefore, direct that the electricity bills must be so made as to give· Hindalco the benefit of the rate · applicable to its own source of generation from Renusagar Plant.

The appeal is disposed of in those terms. The electricity bills must be computed as indicated above. After recomputation and pre- serltation of such bills the respondents will pay the same within two months thereof.

In view of the facts and circumstances of the case, the parties will pay and bear their own costs.

RANGANATHAN, J. I agree. On the second issue, I think it is difficult to define the precise nature of the power conferred on the

STATE OF U.P . .-. RENUSAGAR POWER CO. IRANGANATHAN, J.] 681

State Government under Section 3(4) of the Electricity Duty Act and 1 A have doubtS' whether the sub-section can at all be interpreted as con- ferring a right on individual consumers to require that, in the light of the material adduced by them, the rates applicable to them should have been fixed differently or that they should have been exempted from duty altogether. However, it is unnecessary to pursue this aspect B further as I agree with the conclusion of my learned brother that, in this case, the respondent's representations have been fully considered and the requirements of natural justice have been fulfilled and that there is no warrant to interfere with the order of the State Government.

S.L. Appeal disposed of.