M/S Southern Ispat Ltd. Vs. State of Kerala & Ors
 Insc 203 (25
Balakrishnan & B. N. Srikrishna. Srikrishna, J.
judgment of the Division Bench of the Kerala High Court dismissing writ appeal
no.2614/2001 of the appellant is challenged before us in this appeal. The writ
appeal itself was to impugn the judgment of the single Judge dismissing O.P.
No.9007/1999 by the appellant.
view to encouraging the industrial process in the State of Kerala, and as a measure of incentive, the
State Government decided as a matter of policy that new industrial units
established in the State would be exempted for a period of 5 years from payment
of enhanced power tariff which had come into effect on 1.1.1992. This policy
was reflected in the G.O. (MS) No.4/92/ID dated 6.2.1992 which indicated that
the concession would be available:
to the units from the date of commercial production which start such production
between 1.1.1992 and 31.12.1996.
manufacturing units only and not to service and entertainments units;
To existing units for substantial expansion/ modernisation / diversification.
The concession in such cases will be available only for the consumption of the
new machinery and equipment which add to the capital asset, by not less than 25
% of the existing fixed capital investment excluding land and building the
installation of which is to be certified by the competent authority.
For modernisation, to industrial units having a contract demand not exceeding
500 KVA. In such cases, new equipments alone will be eligible for the
Government order also indicated that the eligibility for the concessions would
have to be certified by the Kerala State Industrial Development Corporation
(KSIDC) / Kerala Financial Corporation (KFC) in respect of units funded by
them, or by the Director of Industries and Commerce in other cases, and by the
concerned General Manager, District Industries Centres in respect of Small
Scale Industrial units. It was also declared in Government order that the
industrial units which set up their captive power generating units for their
own consumption would be exempted from payment of electricity duty to the
extent to which they generate power for their own consumption. The said concession
was made available to the units which may have started commercial production or
set up captive power generating units between 23.9.1991 and 31.12.1991.
26/27.6.1995 the appellant company was registered with the Registrar of
Companies office at Palakkad in Kerala State. The company intended to
manufacture alloy steel M.S. Sections, C.T.D. Bars, Steel Castings and allied
products. The company had an authorised capital of Rs.550 lakhs out of which
shares worth Rs.205 lakhs were issued to and subscribed by the Directors and
their friends and rest were issued to and subscribed by the public. The
appellant company also raised loans from the Kerala State Industrial
Development Corporation and the Kerala Financial Corporation for setting up the
unit. According to the appellant, the total project cost was Rs.820 lakhs. Land
was purchased in Kottai village in Palakkad District of Kerala and construction
of buildings and installation of machinery for steel melting and re-rolling was
17.7.1995 the appellant made an application to the Chief Engineer, Kerala State
Electricity Board ('KSEB') for allocation of 2450 KVA of power. The appellant
requested for registration of its application and sought a feasibility
certificate for the allocation of power at the earliest to facilitate sanction
of loan from KFC /KSIDC and working capital from South Indian Bank Ltd.
about 17.6.1996 the appellant made a representation to the Ministry of Steel,
Government of India to persuade the KSEB to expedite the sanction of power. The
Regional Development Commissioner for Iron and Steel, Government of India,
Ministry of Steel, addressed a D.O. letter dated 3.7.1996 to the Chairman KSEB,
strongly recommending the urgent sanction of the power to the appellant. By a
letter dated 16.7.1996 the Chairman, KSEB, informed the Regional Development
Commissioner for Iron and Steel, Madras that the State of Kerala was
facing acute shortage of electrical energy and that the KSEB was resorting to
all possible ways to tide over the situation. As a part of their efforts to
bring down the energy consumption, they had even banned new domestic
connections. Hence, the Chairman said, "in the present scenario I am not
in a position to think of giving power allocation to a power intensive industry
like steel producing unit" and said "if the situation improves, the
application of M/s Southern Ispat Ltd., can be taken up". The said reply
was forwarded to the appellant by the office of the Regional Development
Commissioner for Iron and Steel.
letter dated 10.9.1996 addressed to the appellant the KSEB sanctioned power
allocation to the extent of 1950 KVA at 11 KV with contract demand of 1950 KV
to the appellant's factory. The allocation was made subject to the following
Supply is liable to be restricted or cut of during power shortage period after
Power should not be used for industrial purpose between 6 P.M. to 10 P.M. or any other restrictions
necessitated by local condition or otherwise when imposed should be strictly
Charges payable as minimum will have to be paid even if power is not availed of
within three months from the date on which the readiness of the Board to supply
power to you is intimated.
Specific provision regarding the above condition will be incorporated in the
service connection agreement.
have to execute a power supply agreement in the form to be specified by the
Deputy Chief Engineer, Ele. Circle, Palakkad and agree to pay the tariff and
other charges specified by the Board from time to time as per rules in force in
the Board within 6 months from the date of this letter failing which the
allocation sanctioned will stand cancelled.
have to request remit the required amount under OYEC scheme which may be ascertained
from the Assistant Executive Engineer, Electrical Major section, Parali.
power allocated can be availed only after drawing separate 11 KV feeder from Parali
Sub Station (Extentsion of 1.12 KM of S/C line and duplicating 2.3 KM of the Kottayi
feeder) for which OYEC amount has to be remitted by the applicant.
power allocated can be given only after providing separate outlet in the 110 KC
Sub Station, Parali and the cost of work has to be met by the application under
Executive Engineer KSEB Palakkad informed the appellant by a letter dated
3.10.1996 that an estimate amounting to Rs.8,73,200 had been sanctioned for the
power allocation work to the appellant under Own Your Electric Connection
(OYEC) basis. The appellant was called upon to remit a sum of Rs.8,73,200/- in
cash, at the earliest, to the electrical section. On 11.11.1996 the appellant
wrote a letter to the Executive Engineer, Electrical Division, KSEB Palakkad
informing him that it had completed all civil works at the site and erected
over 50% of plant and machinery and that other machines were in transit and
were expected to reach very shortly. He, therefore, requested that instructions
be issued to the Executive Engineer Electrical, Parali to accept the amount of
Rs.8,73,200 so that the KSEB electrical work may start to meet the
requirements. On 12.11.1996 the Executive Engineer Electric Division Palakkad
addressed a letter to the Deputy Chief Engineer, Electrical Circle, Palakkad on the subject. He pointed out that an
estimate for Rs.8,73,200 towards construction of 1.12 Kms 11 KV overhead line
and duplicating 2.3 KM of Kottayi feeder from 110 KV sub station Parali for
giving high tension connection under OYEC basis had been sanctioned in favour
of the appellant. He also stated that the appellant was ready to remit the
amount on OYEC basis and requested further instructions in the matter.
about 14.11.1996 the appellant sent a letter to the Deputy Chief Engineer, Electrical Circle, Palakkad thanking him for the
inspection of the work site on 12.11.1996. It also enclosed a Charted
Accountant's certificate detailing the investment of Rs.379.68 lakhs and a
photocopy of KSIDC's letter dated 11.11.1996 giving full details.
the letter requested permission to deposit the amount of Rs.8,73,200 at
Electrical Major Section, Parali so that the construction of line may begin. A
copy of the letter from KSIDC requesting expedition and commission of the
project was also forwarded.
that the KSEB was deliberately delaying the matter, so that the appellant would
not be able to carry out commercial production before the cut off date of
31.12.1996, the appellant submitted a scheme to the Government of Kerala for
generation of 125 KVA electrical energy by installation of a diesel power
generating set in its factory. By the letter dated 6.12.1996 of the Chief
Electrical Inspector to the appellant sanction for the scheme was granted
subject to the following conditions:
Copy of Power allocation sanction for additional loads if required should be
obtained from the K.S.E.Board/ Licensee and a copy of the same forwarded to
Installation of all switch boards and distribution boards should be in
conformity with Rule 51 (1) (c) of I.E. Rules, 1956.
Fuses should be graded properly and selected based on the rating of cables. Low
watt loss fuses shall be selected.
of the installation should conform to provisions in I.S.3043/87.
Isolation facility should be provided for all equipments within a distance of 3
meters from equipments conforming to Rule 50(1)(d) of I.E. Rules, 1956.
M.V. installation should conform to I.S. 732.
Installation of all cables should be as per standards.
energy meter should be provided in the generator circuit which should be got
tested and sealed by Kerala State Electricity Board/ Standards Laboratory
attached to this Department and a copy of the test report should be forwarded
to Electrical Inspector.
Sanction from K.S.E.B. under Section 44 of Supply Act 1948 should be obtained
and copy forwarded to the Electrical Inspector.
Only materials with I.S. certification as required under QCO should be used.
The Electrical Inspector should ensure this.
Only energy efficient equipments shall be used in the installation.
Completion report should be submitted to this office for arranging inspection.
The voltmeter and frequency meter may be provided before the breaker in the
generator control panel." On 6.12.1996 the appellant also applied to the
Secretary of Kottayi Gram Panchayat for permission to install and utilise a
diesel generator set of 125 KVA for its factory with the help of which it was
proposed to use a 10 HP motor.
11.12.1996 the appellant forwarded a cheque for Rs.8,73,200 to the Assistant
Executive Engineer, Electrical Major Section, Parli and requested him to accept
it towards the estimate for the construction work to be carried out. He was
also requested to draw up an agreement so that it can be executed and the
security amount be deposited.
to the appellant, it purchased stamp papers for executing the agreement with
KSEB for supply of electricity on 9.12.1996. On 11.12.1996 the Assistant
Executive Engineer, Parali accepted the cheque of Rs.8,73,200 towards the cost
of construction of electric line. By an order made by the Chief Engineer
Transmission (North) Kozhikode, on 12.12.1996 sanction was accorded for an
estimate amounting to Rs.13,10,000 for modification of sub-station for
providing 11 KV Outlet at 110 KV sub-station, Parali and registered as
21/96-97. It was directed by the order that the cost on account of this had to
be met from the deposit to be made by the beneficiary under OYEC Scheme.
13.12.1996 the appellant gave a declaration to the KSEB that the private
generator set installed at the premises of its factory would not be synchronised
with KSEB board mains and that a meter would be installed. On the same day the
agreement on stamp paper of Rs.60 was forwarded to the Assistant Executive
Engineer, Electrical Major Section, Parli, Palakkad for being processed. He was
also requested to intimate the amount to be deposited towards security. On
16.12.1996 the appellant deposited a sum of Rs.13,10,000/- with the KSEB as
directed in the order of the Chief Engineer.
appellant moved the High Court of Kerala by O.P. No.6456/1997 seeking a writ of
Mandamus directing the KSEB and its officers to take urgent and immediate steps
to give sanctioned power connection to the appellant's factory at Kottayi and
also sought an interim order for grant of power connection temporarily from the
feeder line to the neighbouring industrial unit, M/s Elgi Tyre & Treads
Ltd. Kottayi, so as to enable the petitioner to maintain nominal production and
marketing of its products and reduce the overheads and other losses.
petition was disposed of by a learned single Judge of the Kerala High Court by
an order dated 11.4.1997 with the direction to the Deputy Chief Engineer,
Electrical Circle, Vydyuthi Bhavan, Palakkad, to consider and take a decision
on Exhibit P-15 (the appellant's representation dated 23.12.1996) addressed to
him highlighting the grievances of the appellant, with notice to the
petitioner, within a period of three weeks.
to the directions made by the High Court, the KSEB considered the grievances
made by the appellant and the appellant was informed as under by letter dated 23.5.1997
have been directed by the Secretary/ K.S.E.B.
to intimate you the decision regarding your representation vide Ex. P-15 in the
I may inform that:
Power allocation to the extent of 1950 KVA was granted to you by the Chief
Engineer (Distt. North), Kozhikode on 12.9.1996 on the specific
power can be availed only after drawing separate 11 KV feeder from Parli
Sub-Station under OYEC; and
power can be given only after providing separate outlet in the 110 KV
Sub-Station / Parli under OYEC.
above conditions were stipulated taking into consideration all technical
aspects such as loading on 11 KV feeder, Voltage regulation, flexibility of 11
KV lines, existing Power system/ line capacity etc. As you have already
remitted the OYEC for all the above works (a) & (b) above, action has been
taken by the Executive Engineer/ Elec. Division/ Palakkad to finalise the
tenders for the construction of 11 KV new feeder.
into account the existing consumers in the 11 KV Elgi Feeder and all technical
aspects, I regret to inform that it is not technically feasible to connect your
factory load from the existing Elgi feeder.
I may inform that due to acute Power shortage, the Board has ordered a total
ban on new connections to the Power Intensive units during the period of Power
cut, w.e.f. 30.7.1996.
faithfully Sd/- EXECUTIVE ENGINEER IN/C." For a period of almost two years
the appellant made no grievance, nor took any other steps. The appellant moved
a writ petition No.OP 9007/1999 before the High Court of Kerala challenging the
bill for charges for electrical energy supplied to the appellant's industrial
unit at rates in excess of the pre-1992 tariff rates. This writ petition was
moved on 31.3.1999 and challenged the invoice no.23602 dated 23.3.1999 by which
the appellant was called upon to pay a sum of Rs.2,28,578/- towards consumption
of electricity during the month of February, 1999.
judgment dated 3.7.2001 the learned single Judge who heard the writ petition
dismissed the writ petition holding generally that appellant had not complied
with the conditions subject to which power supply at concessional tariff rates
have to be made. Being aggrieved thereby, the appellant filed writ appeal
no.2614/2001 which was dismissed by the Division Bench by the judgment impugned
before this Court.
contended by the appellant that the delay in sanction and supply of electric
supply was only on account of the tardy manner in which the KSEB functioned. It
is also urged that, despite the lethargy shown by the KSEB, to meet the
deadline the appellant had installed its own diesel generator set and commenced
"commercial production" on 14.12.1996. The appellant relied on
certain invoices for sales made to customers in the month of December, 1996, a
certificate dated 11.9.1998 issued by the KSFC, the copies of the nil return
made to the commercial taxes department, declaration made to the superintendent
of Central Excise and Register of daily stock in support of its contention that
it had commenced 'commercial production' in the month of December, 1996.
was also made to the assessment order issued by the Sales Tax Department and
the Balance Sheet of the company as on 31.3.1997 for this purpose.
respondents strongly refute the contentions urged and support the judgment of
the Division Bench of the High Court as being correctly decided on the facts of
Division Bench rightly pointed out, the question to be decided in this case is
essentially a question of fact, namely, whether the appellant had started
'commercial production' between 1.1.1992 and 31.12.1996 so as to be entitled to
power supply at concessional tariff rates. As a rule, it is not the practice of
this Court to interfere with factual findings which have been concurrently
recorded by two courts below.
the learned single Judge and Division Bench have concurrently answered all
factual findings against the appellant. On that ground itself the appellant
must fail. Nonetheless, as the appeal was argued with some seriousness, we
propose to deal with the facts and examine the factual findings only from the
point of view of interference under our special jurisdiction under Article 136.
Division Bench of the High Court rightly pointed out that though the policy of
granting concessional tariff was announced by the State Government on 6.2.1992,
followed by the KSEB order dated 27.3.1992, the appellant did nothing till or
about June 1995. It is only in June 1995 that the appellant company was
incorporated and an application for power allocation was made on 17.7.1995. The
appellant's factory had yet to be constructed and machinery to be transported
and installed after the construction of the factory building . Undoubtedly, the
application was moved on 17.7.1995 in anticipation. The material on record
suggests that there was acute shortage of electricity as a result of which even
domestic power connections were being refused. The high tension power supply
required by the appellant had to be specially arranged by drawing the
electrical lines on the OYEC basis by construction of PSC polls along the line
at the Appellant's cost. This amount was deposited on 11.12.1996, only a few
days before the concession was about to lapse. Having examined the
correspondence on record, we are not in a position to accept the contention of
the appellant that the respondents had acted with undue tardiness or lethargy.
Further, the remittances of Rs.8,54,700/- and Rs.3,45,200/- made by way of
security deposit for executing the power supply agreement were actually made on
1.2.1997 and 4.2.1997, after the expiry of the period of concession.
KSEB made the power allocation on the specific condition that power would be
supplied subject to drawing of 11 KVA exclusive feeder line from 110 KV Parali
station under the OYEC scheme. The electric wiring was completed in the factory
of the appellant and the wiring contractor submitted completion certificate on
29.8.1998. There were some deficiencies which were rectified by the appellant
only on 1.12.1998.
electrical inspector is required to sanction the electrical wiring, and this
was done on 14.12.1998. Power supply commenced only on 19.2.1999. Thus, upto
and including 19.2.1999 the appellant had not functioned with the power
supplied by the KSEB either temporarily or on permanent basis.
contention of the appellant that commercial production had commenced in
December 1996 can hardly be accepted. The appellant was setting up the factory
for manufacturing of alloy steel M.S. Sections, C.T.D. bars, Steel ingots and
so on with a planed production of 24000 tons of iron and steel ingots and 24000
tons of iron and steel bars, coils etc.. It hardly stands to reason that
"commercial production" of such a factory could have commenced by
using of a 125 KVA diesel generator set. There is also no material on record to
show that the appellant had run the factory by using 125 KVA generator set
during the period December 1996 to February 1999. It is pointed out by the High
Court, and rightly in our view, that even the diesel unit could also not be
used until permission was obtained under Rule 65 of the Indian Electricity
Rules, 1956, from the Chief Electrical Inspector. Such permission was obtained
from the Chief Electrical Inspector only on 14.12.1998. Thus, it is clear that
even the order for energisation of the 125 KVA diesel generator set was
accorded to the appellant only in 1998.
these circumstances, we find it difficult to accept the contention of the
appellant that 'commercial production" had started in December 1996 by
using diesel generator set as alleged.
appellant contends that the certificate issued by the Kerala Financial
Corporation dated 11.9.1998 is conclusive evidence of the fact that the
appellant had commenced "commercial production" in December 1996.
Interestingly, the KFC's certificate is very guarded and states:
is to certify that Southern Ispat Limited has commenced its commercial
production of C.i. Shot and grits with the help of Generator set as Kottayi in Palakkad
district on the 14th day of Decembr, 1996 as per records submitted by the
company." (Emphasis is ours) In the first place, we are unable to accept
that the certificate issued by the KFC is conclusive in the matter. At the
highest, it may be one of the facts to be considered by the KSEB in the light of
all other relevant material.
High Court has pointed out a series of difficulties in accepting this
certificate as conclusive. Firstly, the certificate has been issued only on
11.9.1998. The certificate is issued "To whom so ever it may
concern". There is no reference to the electrical inspector's findings on
the matter of conditions of appellant's high tension installations, which was a
pre-requisite for the KFC to issue a proper certificate for the purpose of
entitlement to the pre-1992 tariff concessions. There is nothing to show that
the KFC had made any inquiry of their own. On the contrary, as the certificate
shows, the certificate appears to have been issued merely on the basis of
record produced by the company. The record produced by the company could not
have shown that the appellant company had started commercial production. The
High Court has also disbelieved and rejected the other documents relied upon in
support of the appellant's case of commencing of commercial production prior to
High Court points out the fact that promoters of the appellant company had a
factory at Raipur in Madhya Pradesh and the possibility of the Appellant having
bought manufactured goods from there and sold them within the State of Kerala
to create documents to show that the production started before 1996 could not
be ruled out. Even the documents produced by the appellant do not show any
continuous 'commercial production' during the period December 1996 to February
1999. We agree with the conclusion of the High court that it was not sufficient
for showing 'commercial production' that some small items were sold by the
appellant in December 1996 and 'nil' assessment of sales tax was made and a
small excise duty payment was also made. We agree with the High Court's view
that these were all self-serving documents created as evidence for commercial
production prior to the cut off date of 31.12.1996.
an overall assessment of the facts on record, we are not satisfied that the
view taken by the Division Bench of the High Court on facts is so perverse that
it requires interference by this Court under Article 136 of the Constitution.
result, the appeal is dismissed. However, there shall be no order as to costs.