INDIAN ALUMINIUM CO LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) Petitioner No.1 is a company engaged in the manufacture of aluminium metal and has a smeltor complex at Belgaum. It is alleged that in response to "An I nvitation to Investors in Industry" published by the Government of Karnataka in 1966, the petitioners set up a smeltor complex and an aluminium plant at Belgaum on the basis of the assurances given by the State Government in the said brochure. An agreement was entered into between the 1st petitioner, the State Government and the State Electricity Board (hereinafter referred to as the Board) on 26-3-1966 for supply of electric power at a fixed rate for the duration of the agreement. In the said agreement provision was made for supply of power at a fixed rate with electricity tax at stipulated rate for a period of 25 years with an option for renewal for a further period of 25 years. On the basis of the terms and conditions of the aforesaid agreement, it is claimed by the 1 st petitioner, that it set up the complex making investment of several crores of Rupees.. After the announcement of Aluminium Policy by the Government of India on 15-7-1975 a new agreement was entered into between the State, the Board and the 1st petitioner on 7-8-1976 in which clause 6(c) provided freezing the rate of electricity tax on the electricity supplied to the petitioners at 3% of the invoice amount for the first 25 years which ends on 21-10-1994 and thereafter at a rate not exceeding 6% of the invoice amount during the next 25 years. The State Government also agreed to reimburse the 1 st petitioner in respect of excess payments to be made by the 1 st petitioner towards any tax, duty, cess etc., which is in excess of 3% for the first 25 years and at 6% for the next 25 years on the invoice amount. This agreement resulted in a right to the petitioners for reimbursement from the State Government in respect of excess tax paid or payable by it. The Board was collecting the price of electricity supplied to the petitioners as also levied the tax limiting the same to the rates mentioned in clause 6{c) of the aforesaid agreement.

(2.) The Electricity (Supply) (Karnataka Amendment) Ordinance 1980, replaced by Karnataka Act 33 of 1981 came into force with effect from 21-11-1980, which amended Section 49 of the Electricity (Supply) Act, 1948, providing for a consumer of electricity to pay the price towards the electricity supplied calculated in accordance with the uniform tariff framed or modified from time to time and applicable to the category to which such consumer belongs irrespective of contracts that may have been entered into with parties. On 18-8-1981 the State Government issued a notification revising the rate of electricity tax on units of energy consumed by different classes of consumers in exercise of its power under Section 3 of the Karnataka Electricity (Taxation on Consumption) Act, 1959 and the Board demanded taxes from the petitioners at the revised rate. To this demand of higher taxation the 1st petitioner lodged its objection as being contrary to clause 6(c) of the agreement and sought for confining the rate of tax at 3% of the invoice amount, the Board took the stand that that agreement stood abrogated by reason of the amendment made to the Electricity (Supply) (Karnataka Amendment Act). The petitioners thereafter called in-question the constitutional validity of the provisions of the Karnataka Electricity Supply (Amendment) Act and also for a declaration that the said provisions do not apply to the petitioner-Company, before this Court. This Court on a consideration of the contentions raised therein dismissed the petition holding that the Aluminium industry belongs to that class of industry falling within HT-1A and the promissory estoppel pleaded cannot be applied and the contention as to the consent given by the Chairman was also rejected. It is stated that this matter is in challenge before the Supreme Court. The 1st petitioner-Company also filed another Writ Petition wherein the petitioners sought to restrain the enforcement of the revised rates of electricity tax with effect from 18-8-1981 and or for a direction to the 1st respondent to reimburse the petitioners the amounts paid in excess of 3% of the invoice amount as specified in Clause 6(c) of the agreement between the parties. It was held in that Decision that the Electricity (Supply) (Karnataka Amendment) Act 1981 operates in a different field and does not cover the questions of taxation and therefore the terms governing reimbursement and indemnification are not nullified by that enactment although the contract in other respects was not enforced in relation to the rates. On this aspect it was stated as follows:

(3.) It is contended on behalf of the petitioners that: (1) the impugned Act is arbitrary and unreasonable and is enacted with a view to deny the mandamus issued by the Court; (2) the impugned Act does not remove the defect or invalidity pointed out by this Court and also does not provide for retrospective operation of such removal of defect and hence a mere validation clause introduced is a direct confrontation with the judiciary by a legislative Judgment; (3) a contractual right having crystallised into a mandamus of this Court, it cannot be neutralised or defeated even by legislature and therefore the impugned Act is ultra vires the powers of the legislature; (4) when this Court had held that there is no unjust enrichment on the part of the petitioners in the matter of collection of tax and had held that the contract has not come to an end even with the enactment of the Electricity (Supply) (Karnataka Amendment) Act referred to earlier and the clause in relation to indemnification or reimbursement under clause 6(c) of the agreement was still in force and the said clause 6(c) was enacted pursuant to powers under the Electricity (Taxation on Consumption) (Amendment) Act making a provision under the Act is contrary to the findings recorded by this Court in the earlier Writ Petition and therefore a direct interference with the Judgment of this Court; (5) even legislative enactment must pass the muster of arbitrariness and reasonableness as envisaged under Article 14 of the Constitution and this Court having found that there is no unjust enrichment on the part of the petitioners and clause 6(c) is entered into by way of an exemption clause and the contract was still subsisting it was irrational, unreasonable and arbitrary on the part of the legislature to have made this enactment and therefore beyond the scope of validation powers of the State; (6) even otherwise, the respondents are estopped from enforcing the provisions of the impugned Act against the petitioners on the doctrine of promissory estoppel; (7) It was lastly contended that at any rate even if the mandamus issued can be nullifed by the impugned enactment the same could be given effect to only prospectively and not retrospectively and until then the respondents are bound to reimburse and indemnify the petitioners.