Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2013 Supreme(Online)(Ker) 36245

KERALA HIGH COURT
, J
M/s. INDSIL Electrosmelters Ltd. – Appellant
Versus
State Government and KSEB – Respondent
Writ Petition No. 1111 of 2004

Advocates:
For the Appellants/Petitioners: [Multiple names not explicitly mentioned in the text]
For the Respondents: [Multiple names not explicitly mentioned in the text]

Imposition of royalty on captive power generation without legislative authority violates constitutional provisions and is discriminatory, particularly when no prior contractual agreement exists for such charges.

Headnote:(A) Kerala Electricity Duty Act - Royalty charged on captive power generation - Impugned order levying royalty and electricity duty quashed - Agreement between petitioner and KSEB did not stipulate payment for water usage royalties or controlled release - Imposition is ultra vires and discriminatory violating Article 14 of the Constitution - Executive order cannot levy a tax or charge without legislative backing. (Paras 27, 53, 72, 106)

(B) Writ jurisdiction - Maintainability - Questions of legislative competence and discrimination under Article 14 are within the High Court's purview despite the existence of alternative remedies under the Electricity Act. (Paras 31, 33)

(C) Promissory estoppel - Government representation not to charge royalty for water use is applicable against executive actions but not legislative. (Paras 90, 102)

(D) Retrospective levy - No basis for executive orders imposing liability retrospectively without express statutory authority. (Paras 104, 106)

Facts of the case:
The petitioner challenges a state order imposing a 10% royalty and additional charges for electricity duty on power generated by its hydroelectric project, claiming no previous agreement existed for such levies.

Findings of Court:
The court finds the impugned order to be arbitrary, unreasonable, and violative of constitutional guarantees. The court upholds that the petitioner’s project agreement did not incorporate provisions for the payment of any royalty or charges for controlled water use.

Issues: The main issues included the legality of the royalty and electricity duty imposed, the distinction between captive and independent power producers for levying charges, and questions of discriminatory treatment under state policy. Ratio decidendi: The court concluded that the impugned order lacked legislative authority and imposed charges without a valid contractual basis or justification, reinforcing principles of equality before law and legislative competence according to the Constitution.

Result: Writ petition allowed; the impugned order is quashed.

Table of Content
1. petitioner challenges royalty order. (Para 1 , 2 , 9 , 10)
2. government policy on small hydel projects. (Para 3 , 4 , 5 , 6 , 7 , 20)
3. agreement terms with kseb regarding royalty. (Para 12 , 13 , 14 , 15)
4. changes in governmental order related to claims. (Para 19 , 21 , 27 , 28)
5. arguments against the imposition of royalty. (Para 29 , 30)
6. observations on maintainability of the writ petition. (Para 32 , 34 , 36)
7. discrimination based on project type. (Para 39 , 40 , 41 , 42)
8. arguments regarding controlled release and royalty. (Para 49 , 50 , 51 , 52)
9. court's reasoning on royalty as tax vs charge. (Para 73 , 74 , 76)
10. promissory estoppel argument by the petitioner. (Para 89 , 90 , 91 , 92 , 100)
11. conclusion and order of the writ petition. (Para 104 , 106)

1. In this writ petition filed under Art.226 of the Constitution of India the petitioner - company has assailed the order passed by the Government of Kerala whereby it was directed to levy royalty and the cost component of controlled release of water to Kuthungal Hydro Electric Project on the water utilised by it and it has been quantified that the royalty shall be collected at the rate of 10% of the energy tariff rate of EHT consumers current from time to time for every unit of energy generated. It was further provided in the impugned order that the company was also liable to pay 1.2 paisa per unit as electricity duty for each unit of electricity generated in accordance with the provision of the Kerala Electricity Duty Act . This order dated 03/07/2004 was passed by the Government of Kerala, Department of Power and has been appended as Ext. P11 to the writ petition. The petitioner seeks issuance of a writ of certiorari for quashing the impugned order, Ext. P11.

2. The petitioner is a company engaged in the manufacture of ferro alloys at a factory situated in Pallatheri at Palakkad. The manufacturing of ferro alloys is power intensive and electricity is virtually a raw material used in the manufacturing process.

3. The shortage of power in the State of Kerala, as in other States in India was affecting industrial progress. On 22nd December, 1989, the Government of Kerala through Electricity Department issued a Government Order bearing No. 35/89 / PD informing the public that the State of Kerala had in principle decided that private agencies would be allowed to undertake small / mini / micro Hydel Schemes for generation of power and that the terms and conditions to which they would be so allowed to do would be laid down separately.

4. The State Government received representations from a few private / public undertakings seeking permission pursuant to the said declaration of policy for the setting up of small / mini / micro Hydel Schemes. Considering the representations and after consulting with the Kerala State Electricity Board, the State Government issued a further Government Order being GO (Ms.) No. 23/90 / PD dated 7th December, 1990 (Ext. P1) laying down the terms and conditions on which permission for setting up such hydro power schemes would be granted.

5. Under the policy as laid by the said GO dated 7th December, 1990 read with the earlier GO dated 22nd December, 1989 (the Hydro Power Policy), the private companies were to be allowed to set up sanctioned hydel schemes falling in small / mini / micro hydel schemes category at their own cost with the construction, operation and maintenance being managed by them as per the stipulations to be made by the Government / Board in accordance with the provisions of the Electricity Act , 1910 and the Indian Electricity (Supply) Act, 1948 as were then in force. It was also provided that the captive plant energy fed into the KSEB Grid would be metered at a location in accordance with the Metering Equipment Rules and the quantum of energy less 12% towards wheeling charges, transmission and distribution loss etc. would be delivered free of cost to the agency at their High Tension Terminations at the point

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2013 Supreme(Online)(Ker) 36245

KERALA HIGH COURT, JM/s. INDSIL Electrosmelters Ltd. – AppellantVersusState Government and KSEB – RespondentWrit Petition No. 1111 of 2004

Imposition of royalty on captive power generation without legislative authority violates constitutional provisions and is discriminatory, particularly when no prior contractual agreement exists for such charges.

Cases Referred (3)

KERALA HIGH COURT
, J
M/s. INDSIL Electrosmelters Ltd. – Appellant
Versus
State Government and KSEB – Respondent
Writ Petition No. 1111 of 2004