Industries Ltd. & ANR Vs. Union of India
& Ors  INSC 168 (31 March 2000)
A.P.Misra D.P. WADHWA,J.
seek leave to appeal under Article 136 of the Constitution from the judgment
dated February 3, 2000 of the Division Bench of Calcutta
petitioner is engaged in the manufacture of steel. Second petitioner is a
shareholder of the first petitioner and is also a director. First petitioner
established its factory for production of steel in 1998.
petitioners in the writ petition filed in the High Court claimed the following reliefs:
- "a) A declaration do issue declaring that the petitioners and similarly
placed other units in the steel industry are eligible and entitled to avail of
financial assistance from the Steel Development Fund;
Declaration do issue declaring that granting of financial assistance and/or
loans out of the Steel Development Fund, to the fifth respondent, TISCO and Rashtriya
Ispat Nigam Ltd., to the exclusion of the petitioners and similarly placed
other units in the steel industry is arbitrary, discriminatory,
unconstitutional, illegal and bad in law;
Writ of Mandamus do issue commanding the respondents not to convert the loans,
granted to the fifth respondents and others out of the Steel Development Fund,
into equity share capital in any manner whatsoever;
Writ and/or in the nature of Mandamus do issue commanding the respondents to
grant financial assistance and/or loans to the petitioners out of the said
Steel Development Fund;
Writ and/or in the nature of Mandamus do issue directing the concerned
respondents and each of them to forthwith recover the loans granted by them to
the fifth respondent, TISCO and Rashtriya Ispat Nigam Ltd. so that such funds,
upon realisation may be utilised for the new projects of the petitioner company
and similarly situated other new entrants in the steel industry;
Writ of Prohibition prohibiting the concerned respondents and each of them,
their men, servants and agents, from converting any part of the loans and/or
interest owned by the fifth respondent, TISCO and Rashtriya Ispat Nigam Ltd.
into equity share capital in any manner whatsoever and also from granting any
further loan or financial assistance, directly or indirectly, to the said fifth
respondent, TISCO and Rashtriya Ispat Nigam Ltd.;
Writ of Certiorari do issue directing the concerned respondents and each of
them to certify and transmit to this Hon'ble Court all records pertaining to
the decision of conversion of loans into equity, so far as the fifth respondent
concerned and decision for renewal of loans for a long period at a nominal rate
of interest so far as TISCO is concerned so that such purported decisions
and/or proposals may be quashed and/or set aside and conscionable justice may
Rule Nisi in terms of prayers above;
injunction do issue restraining of the concerned respondents and each of them,
their servants and agents from converting the loans granted to the fifth
respondent and/or TISCO or Rashtriya Ispat Nigam Ltd. into equity share capital
and also from granting any further intention or renewal of the loans granted to
the said respondent may manner whatsoever;
order do issue directing the respondent Nos. 1 to 4 to forthwith take steps for
(illegible) of the outstanding (illegible) to the fifth respondent and others
with interest accrued thereon and not to grant any renewal of the outstanding
loans or any fresh loans without first considering the case of the petitioners;
interim order in terms of prayers above;
Cost of and incident to this application be borne and paid by the respondent;
Such further order or orders be made and/or direction or directions be given as
this Hon'ble Court may deem fit and proper." In
effect the petitioners want restraint on the Union of India and the Joint Plant
Committee from utilisation of the Steel Development Fund for the sole benefit
of SAIL and TISCO. Learned single Judge of the High Court by his order dated August 5, 1999 dismissed the writ petition and
imposed cost of Rs.10,000/- on the petitioner in favour of each of the
appearing respondents intervening in the proceedings.
petitioners filed appeal before the Division Bench of the High Court which, as
noted above, was dismissed by judgment dated February 3, 2000 by concluding: -
"To sum up.
Petitioner/appellant has locus standi and can invoke the jurisdiction under
Article 226 of the Constitution of India.
appellant cannot claim parity with the plants/ industries in the public sector.
Steel plants/industries in public sector can be treated differently than the
plants/industries in the private sector, including the matter of loan advanced
from the Steel Development Fund.
case of Public Sector Industries (SAIL) Government can waive the interest or
even can write off the loan itself.
Government decides to extend any financial help to Private Sector Industries
out of the amount available in the Fund (amount available out of the Fund means
corpus of the fund excluding loan advanced to SAIL and TISCO). The
representation of the petitioner for loan/financial assistance from the Steel
Development Fund may be considered along with other similarly situated steel
plants/industries in Private Sector.
appeal is accordingly stands disposed of." Looking at the prayer in the
writ petition, we were at a loss to know as to why TISCO was not made a party.
We have not been able to get any satisfactory reply from the petitioners as to
why it did not think it necessary to implead TISCO as the respondent when the
relief is sought against it. It cannot be just an error. Omission of the name
of TISCO from the array of respondent is deliberate.
expects a party to approach the Court honestly and not to play hide and seek.
However, TISCO of its own did intervene. We may examine what is Steel
Development Fund (SDF) and how it is utilised. Central Government in exercise
of its powers under Section 3 of the Essential Commodities Act,
1955 issued the Iron and Steel (Control) Order, 1956 (for short the
'Order'). Clause 15 of the Order gives power to the Controller to fix price at
which any iron or steel may be sold. Under Clause 17-B Central Government would
set up committee, etc. Central Government set up a Joint Plant Committee (JPC)
under Clause 17-B by notification dated April 7, 1971. Composition of the Committee was
as under: - "(a) The Joint Plant Committee COMPOSITION (i) The Iron and
Steel Controller Chairman (ii) One representative each of the | main Steel
Plants, that is to say | the Tata Iron and Steel Company | Limited, the Indian
Iron and Steel | Company Limited, the Hindustan | Members Steel Limited, Rourkela,
the | Hindustan Steel Limited, Bhilai | and the Hindustan Steel Limited, | Durgapur.
| (iii) One representative of the Ministry of Railways." Notification
prescribed various functions of the Joint Plant Committee. Paragraph 8 of the
notification would be relevant and is as under: - "(8) The Committee may
determine, announce and list prices (base prices as well as extras) from time
to time of all categories of iron and steel not subject to price control under
clause 15 of the iron and steel (Control) Order, 1956. The prices so determined
will be ex-works prices. The Committee shall add a fixed element of equalised
freight to the ex-works prices announced from time to time in order to ensure
that buyers of steel all over the country pay the same railway freight
irrespective of the distance from the source of supply. The Committee may take
such measures as it considers necessary or desirable to ensure that buyers of
iron or steel all over the country pay the same price." This notification
was amended by another Notification dated December 27, 1978. Under the heading
"Functions" paragraphs 9A and 9B were inserted, which are as under: -
"(9A) The Committee may add an element to the ex-works price determined
under sub-clause (8) for constituting a fund for modernisation, research and
development with the object of ensuring the production of iron and steel in the
desired categories and grades by the main steel plants. In the matter of
operation of this fund, the Committee shall perform its functions in accordance
with and subject to such regulations or directions so may be issued by the
Central Government from time to time.
The Committee may also add any other element to the ex-works prices determined
under sub- clause (8) to enable it to discharge its functions and to implement
specific scheme entrusted to it by the Central Government." There was
further amendment to this notification by another notification dated January 16, 1992. All paragraphs 1 to 13 under the
heading "Functions" in the original notification were substituted by
the following paragraphs:
The Joint Plant Committee shall be responsible for carrying out generally the
functions of co- ordinating the demand and the supplies of all or any of the
categories of iron or steel produced by the members of steel plants in respect
of Defence. Small Scale Industries Sector, the Exporters of Engineering Goods
and the North Eastern Region, and shall also assist the Development
Commissioner for Iron and Steel in ensuring supplies thereof on priority in
terms of the Distribution Guidelines.
The Committee may obtain from producers processors, dealers and consumers of
iron and steel such information and data as it may require in discharging the
functions specified under this Notification as well as for maintaining a
comprehensive data base in respect of duty matter including production movement
and prices. It may also form such statistical and other units as may be
necessary for the discharge of its functions.
The Committee may evolve suitable organisation, methods and procedures to
review carefully the general market situation, fluctuations in free market
prices, the trends of production, availability and movement of iron and steel,
and for this purpose, the Committee shall arrange for effective and timely flow
of information from all concerned, including the iron and steel plants.
The Committee may from time to time require the member steel plants to add the
element listed below to their ex-works prices of all or any of the categories
of iron and steel and to remit the same to the Committee within such periods as
may be specified.
element of price towards the steel Development Fund for financing schemes,
projects properties and other capital expenditures for modernisation, research and
development, rehabilitation, diversi- fication, renewals and replacement,
balancing up additions to capacity, major new investments or any other programme
for improving the quantum or technology of efficiency of production of Iron and
Steel or their quality.
The Committee shall perform its functions relating to the Steel Development
Fund in accordance with the subject to such orders or directions as may be
issued by the Central Government in this behalf from time to time.
element of price for enabling the Committee to discharge its functions and to
implement specific schemes entrusted to it by the Central Government.
element of price towards the Engineering Goods Exports Assistance Fund.
(NO. SC/1/6/91-D.III) ASHOK KUMAR, Jt. Secy." It would be seen that
paragraph 9A in the first amended notification was substituted by paragraph 4
another notification dated April 21, 1994
was issued further amending notification dated April 6, 1971. It amended the original notification as under: - "In
Clause 2 of the said notification, in sub-clause (a):- (a) in paragraph 4 item
(i) shall be omitted and such omission shall not affect the action taken or
things done under that item on or before such omission.
paragraph 4 the following paragraphs shall be inserted namely:
The Committee shall be responsible for the management and operation of the
corpus of the Steel Development Fund and interest received and accrued thereon
in accordance with and subject to such orders or directions as may be issued by
the Central Government in this behalf from time to time.
93-D-II) S. NAUTIYAL, JR. SECRETARY." It will thus be seen that SDF has no
statutory backing. SDF has been created by administrative orders.
has been from the SAIL and TISCO. The question is what of the petitioner has in
the SDF when it was not even born and fund was created and how the petitioner,
a competitor, would have any right to claim the fund. Fund has not passed into
the hands of the Government. It finds mention in the books of SAIL and TISCO as
credited to the Central Government. Joint Plant Committee itself has no role to
play in the utilisation of SDF as such. It acts as per the directions of the
Central Government. The purpose for which the SDF has been created is clearly
spelt first in para (9A) of notification dated December 27, 1978 and then in para (4) of the notification dated January 16, 1992.
is no challenge to either of the two notifications.
petition was filed on February
14, 2000 and came up
for admission on February
28, 2000. On February
18, 2000, Central Government in the Ministry of Steel wrote a letter to SAIL
which is as under : "Sub : Financial and Business Restructuring of Steel
Authority of India Ltd. Sir, I am directed to your letter No.CH/2/2/-C(iv)
dated 16th September 1998 and subsequent clarifications/discussions on the
above subject and to state that SAIL's proposal seeking approval of the
Government for its financial and business restructuring has been considered by
the government and approval for the following proposals is hereby given: 1.
restructuring of SAIL by waiving of loans advanced to it from Steel Development
Fund to a value of Rs.5073 crore and Rs.381 crore from the Government of India.
of Government guarantees with 50% interest subsidy for loan and interest
thereon of Rs.1500 crore to be raised by SAIL from the market to finance
reduction in manpower through voluntary retirement scheme. 3. Provision of
Government guarantee for loan and interest thereon of Rs.1500 crore (including
Rs.500 crore already agreed) to be raised by SAIL from the market primarily for
meeting repayment obligation on past loans during 1999-2000. 4. To initiate the
process of divestment of the following non-core assets while protecting jobs of
the existing employees as per milestones to be indicated seprately. (a) Power
Plants at Bokaro, Durgapur and Rourkela - 2X60 MW Captive Power Plant-II at the
Rourkela Steel Plant and the Central Power Training Institute at Rourkela. -
2X50 MW Captive Power Plant-II at the Durgapur Steel Plant. - MW [2X55 MW plus 12 MW Back Pressure Turbine] Captive
Power Plant-I, 3Xz60 MW Captive Power Plant-II and steam generating capacity of
660 MT/hour at the Bokaro Steel Plant. (b) Oxygen Plant-2 of Bhilai Steel
Plant. (c) Salem Steel Plant (SSP), Salem.
Ally Steel Plant [ASP], Durgapur. (e) Visvesvaraya Iron and Steel
Limited (VISL), Bhadrawati. (f) Fertilizer Plant at Rourkela. 5. Conversion of IISCO into a
joint venture with SAIL holding minority shareholding. The Government noted
that this is one of the largest restructuring proposals considered by it
involving an amount of over Rs.8000 crore and financial restructuring alone was
not a long term solution, Government has directed that Ministry of Steel sign
an MOU with SAIL for implementation of a business restructuring plan with
detailed milestones. It has been further decided that a Committee of
Secretaries must examine and review at appropriate intervals the business
restructuring plan with reference to detailed milestones and submit a progress
report on a six-monthly basis to the Cabinet Committee on Economic Affairs
(CCEA)." As seen above, SDF was created by notification issued under
clause 17(B) of the Control Order. Main steel plants form the primary units of
the Joint Plant Committee. It were only the member steel plants or the main
steel plants who were subjected to add an element of their ex- works-price and
remit the same towards the SDF. SAIL and TISCO were the member steel plants.
SAIL was having four plants at Bhilai, Bokaro, Durgapur and Rourkela. Indian Iron and Steel Company Ltd.
subsequently got merged with SAIL. By Notification dated January 16, 1992 the Central Government withdrew the
price restrictions under the Control Order and thereafter by Notification dated
April 21, 1994 contributions by the member steel
producers towards the SDF was also discontinued. It is the Central Government,
which Exercises control over SDF though there is no backing of any statutory
provision for creation of the SDF. The primary object of SDF was to enable the
main steel producers for modernisation, research and development with the
object of ensuring the production of iron and steel in the desired categories
and grades by the main steel plants. Other steel producers who were known as
secondary producers were not members of the Joint Plant Committee. They were
not subjected to add an element of ex-works price of steel but could add any
element of their choice and not to make remittance of the same to the SDF. It
does not stand to reason as to how these secondary producers are entitled to
claim any amount from the corpus of SDF or to get some directions issued
respecting the use of SDF. The petitioner started production only in April 1998
when four years prior to that remittance to SDF had been discontinued. It is
not disputed that the petitioner was not a member of the Joint Plant Committee
and did not remit any amount towards the corpus of SDF. The question is if in
these circumstances the petitioner could advance a claim or exercise a right on
the SDF in any manner. It were the members of the Joint Plant Committee who
were made bound to add an element of ex-works price and to remit that amount
for the constitution of SDF. It has been stated by the first respondent, Union
of India, through the affidavit filed by the fourth respondent, Joint Plant
Committee, that funds out of SDF were disbursed to the members Steel Plants by
the SDF Managing Committee as per directions issued by the Central Government
from time to time. It is then submitted that since early 1990's there has been
a general recession in the steel industry. SAIL had approached the Central
Government for its financial and business restructuring. SAIL had taken over
Indian Iron and Steel Company Ltd., a sick company in the year 1978. Indian
Iron and Steel Company Ltd. is wholly owned subsidiary of SAIL. The proposal
given by SAIL to the Central Government contained various components and
measures including waiver of loans from the SDF made over to members Steel
Plants which were under SAIL.
will be noticed that the amount of SDF was not in fact remitted to the Central
Government but was shown as credit to the Central Government in the books of
SAIL and its members steel plants. This proposal of SAIL, it would appear, has
since been accepted by the Central Government by its letter dated February 18, 2000 which we have reproduced above.
While there was price control under the Control Order during the period
1978-1994 when the remittance to SDF were made by main steel producers, the
petitioner was nowhere in the picture and was not subjected to any price
control like the main steel producers. The petitioner and other steel producers
were free to produce and sell the iron and steel products in the market on the
been pointed that price fixed by the petitioner of its products was much higher
than the control price which included elements of SDF. While the collection and
remittance to SDF has been discontinued w.e.f. April 1994, the petitioner made
its claim for the first time in 1999 which would appear to be rather
incongruous. It is submitted that the claim made by the petitioner is not bona
fide and writ petition has been filed with ulterior motives, which are not
difficult to fathom. SAIL had stressed immediate need for restructing and modernising
all the main steel plants. Due to recession, SAIL has been passing through
severe financial position and has to suffer a loss of Rs.1574 crores in 1998-99.
It has further to suffer burden of interest to the tune of Rs.2017 crores per
annum for modernisation. In the aforesaid circumstances, the petitioner does
not have any right to claim any relief in the writ petition pertaining to utilisation
of SDF. It is quite apparent that from the very nature of the creation of SDF,
manner of remittance to SDF and purpose of its utilisation, it is a fund
created ultimately for the utilisation by the member steel producers only. We
do not think it is a fit case where this Court in the exercise of its powers
under Article 136 of the Constitution of India should grant leave to appeal
from the impugned judgment of the High Court. Leave to appeal is refused.
Special Leave Petition is dismissed.