INDIAN ALUMINIUM CO LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) Indian Aluminium Company is a Company registered under the Companies Act and engaged in the manufacture of aluminium metals at Smelter Complex at Belgaum in the State of faKarnataka. In the year 1966, the Government of Karnataka had undertaken the construction of the Sharavathi Valley Hydro Electricity Project and plant for drawing Hydro Electric generating system to generate large quantity of electric power. The State Government was anticipating generation of large surplus power. The aluminium industry and particularly, the Smelter plant requires large quantity of power for manufacturing operation. The Karnataka State Electricity Board and the State of Karnataka invited the Company to establish Aluminium Smelter Plant at Belgaum by assuring uninterrupted supply of electricity. The Company accepted the invitation and set up a Complex by investing large amount of over Rs. 50 crores.

(2.) A Tripartite Agreement was entered into between the Company, the Board and the State on March 26, 1966. The Agreement inter-alia provided for uninterrupted supply of power and the power was to be supplied for a duration of 25 years. The Agreement also provided for renewal for a further period. On July 15, 1975 the Government of India announced Aluminium Policy and thereupon a fresh Tripartite Agreement was entered into between the parties on August 7, 1976. The second Agreement was almost identical except some minor modifications as to the price for supply of electricity. Clause 6 of the Agreement deals with basis of payment for the consumption of power. Clause 6(c) reads as follows:

(3.) The Electricity (Supply) Act, 1948 is a piece of Central legislation to provide for establishment of the production and supply of electricity and generally for taking measures for electrical developments. Section 49 of the Act deals with the provisions of the sale of electricity by the Board to persons other than Licencees and prescribes the factors to be taken into consideration while fixing the uniform tariffs. On November 21, 1980 the Governor of Karnataka published an Ordinance for amendment of Section 49 of the Electricity (Supply) Act, 1948 and Ordinance became an Act called the Electricity (Supply) (Karnataka Amendment) Act, 1981. Sub-section (5) was added to Section 49 which inter-alia provided that the party to an agreement or any other arrangement entered into prior to the commencement of the amendment Act and providing for supply of electricity by the Board shall notwithstanding anything contained in the agreement, pay in respect of electricity so supplied, price calculated in accordance with the uniform tariff framed from time to time. The State of Karnataka erroneously assumed that Karnataka Electricity (Supply) Amendment Act, 1981 had the effect of modifying the Tripartite Agreement dated August 7, 1976 in respect of reimbursement of excess amount to the Company and declined to reimburse the Company. The Company filed Petitions to challenge the validity of the Amending Act, but the challenge was not accepted by this Court and the Supreme Court in the Judgment reported in AIR1992 SC 2169 , (1992 )2 CompLJ177 (SC ), JT1992 (3 )SC 535 , 1992 (1 )SCALE1157 , (1992 )3 SCC580 , [1992 ]3 SCR213 IndianAlluminium Co. Ltd & Anr. Vs Karnataka Electricity Board & Ors. The Company thereafter instituted Writ Petition Nos. 27361 and 27362/81 under Article 226 of the Constitution in this Court for a Writ of Mandamus directing the respondents to desist from levying or collecting electricity tax at a rate higher than 3% of the invoice amount as specified in Clause 6(c) of the Agreement dated August 7, 1976. The Company also sought Writ of Mandamus directing the respondents to forthwith reimburse the excess amounts realised in respect of the bills issued from November 21, 1980 and continue to make reimbursement of such excess amounts during the subsistence of the Agreement. The relief sought in the Petition was resisted by the respondents inter-alia claiming that the liability undertaken by Clause 6(c) of Tripartite Agreement stands abrogated by enactment of Karnataka Electricity (Supply) Amendment Act, 1981. The respondents pleaded that amended Section 49 of the Act entitles the respondents to recover duty as per the tariff rates and not to reimburse any part thereof to the Company. This Court by Judgment reported in INDIAN ALUMINIUM CO., LTD. v. STATE OF KARNATAKA ILR 1988 KAR 2452 negatived the contention raised on behalf of the respondents. The Division Bench held that the rigours of Section 49 of Electricity (Supply) Act, ex-facie do not by any stretch of imagination wipe out the liability undertaken by the State of Karnataka to reimburse the excess duty as prescribed by Clause 6(c) of the Agreement. The Division Bench further held that the Agreement dated August 7, 1976 between the parties remains intact and the Government of Karnataka is bound to reimburse or indemnify the Company as per Clause 6(c) of the Agreement. In accordance with the findings, the Division Bench held that the Company is entitled to the relief of reimbursement and indemnification and issued Writ of Mandamus to the State to reimburse or indemnify the Company the quantum of tax which is in excess of the rate envisaged by Clause 6(c) of the Agreement dated August 7, 1976. The respondents accepted the Decision but failed to reimburse the excess tax collected. The Company thereupon filed Contempt Petitions Nos. 248 and 249 of 1989 against the Additional Chief Secretary of the State Government for disobedience of Writ of Mandamus. The Contempt proceedings were adjourned for a duration of three weeks on March 29, 1990 to enable the Government to comply with the Writ.