Nagalakshmi Flour Mills (P) Ltd. vs The Superintending Engineer, Anna Electricity Distribution Circle, and 2 others Dindigul

This appeal is directed against the order of the learned single Judge in W.P.NO. 3534 of 1989, dated 31.8.1994. The writ petition relates to the

action of the respondents in withdrawing the concessional rate of tariff on the ground that the petitioner was not eligible for availing the concessional

rate because it is a branch unit of the appellant unit elsewhere. According to the petitioners, they established a unit at Hosur in or about April 1961,

which was given the benefit of concessional tariff by the Court. The Board by letter dated 9.8.1995, demanded payment of Rs. 2,36,767-83 on

the ground that the petitioners'' unit at Hosur is nothing but a branch unit and therefore, they are not eligible for the grant of concession. Challenging

this demand, it is contended that it is a new industrial undertaking and not a branch unit; that the action is vitiated by principles of natural justice;

that the dispute as to whether the Unit at Hosur is a branch unit or a new industrial undertaking cannot be unilaterally decided by the respondents

and that the respondents are estopped from denying the status of the petitioners'' unit as a ""new industrial undertaking"".

The learned single Judge, at para 20 of the order has held that factual questions as to whether the petitioner''s units were new industrial

undertakings or only branch units can be canvassed only in a civil suit and since the Board has a right to demand the arrears of electricity charges

due to them under statutory provisions and they have also a right to disconnect the supply. The learned Judge has further held that it is not for the

Board to approach the civil court, but for the petitioners who are aggrieved to approach the civil court, and dismissed the writ petition.

The appellant before us contended that the facts involved in the writ petition need not require any further investigation and therefore, it is not a

question to be canvassed before the civil court and the withdrawal of tariff concession given to the petitioner company after five years of utilisation

is illegal. The electricity Board has issued certain concession subject to certain conditions viz.:

1) This tariff concession is applicable only once to a consumer for new industrial undertaking and will not be available for subsequent expansion or

diversification of production.

2) If a consumer starts a branch mill for the manufacture of the same products, the branch mill is not eligible for the concession.

It is also contended that M/s Nagalashmi Flour Mills Pvt. Ltd., Dindigul is a new company incorporated under the Companies Act. M/s United

India Flour Mills Pvt. Ltd., Madras is a company incorporated much earlier and is functioning at Madras. In law, one company cannot be said to

be a branch of another company and an industrial unit run by one company cannot be said to be a branch unit of another company merely for the

reason that one or two directors of the companies are common. Even a subsidiary company cannot be said to be a branch of the holding company

since both are independent legal entities. Unless it is shown that the affairs of the subsidiary companies are completely controlled by the holding

company. He further contended that under Sec. 370 of the Companies Act there may be more companies under the same management. Still they

are legal entities and cannot be styled as sister companies.

The question involved is whether the respondent Board is entitled to withdraw the concession between the period 30.11.77 to 30.4.82 without

a show cause notice and an opportunity of being heard?

To deny concessional tariff under the relevant Rule, it should be a branch unit manufacturing the same product. Amendment to Explanation-I of

the Tamil Nadu Revision of Tariff Rates on supply of Energy Act, 1978 (Tamil Nadu Act 1 of 1979) contemplates for the purpose of electricity

tariff concession, what the term ""New Industry"" shall mean. It reads thus:

For the purpose of electricity tariff concessions for new industries, the term ""New Industries"" shall mean a new investment by any entrepreneur

including by an existing industry in any area, provided the assets of the existing industry are not transferred and shown as assets of the new

industry.

There is no material to show on the point that the assets of any industry is transferred and shown as the assets of the petitioner company. Whether

any such assets transferred to the petitioner company is a matter for verification after affording an opportunity to the petitioner. In any case, one

company cannot be said to be a branch unit of another company merely because they are under the same management. It is conceded by the

learned counsel for the respondent that no opportunity was given to the appellant before withdrawing the concession. It is true that the Rules of

natural justice restrict the freedom of administrative action and that their observance causes certain amount of time and money. But, time and

money are likely to be well spent if they reduce the friction between parties, indicative of fairness and promote efficiency rather than impede it. A

decision which is made after notifying the grounds and hearing the party who is likely to be affected, will not only be more acceptable, but it will

also be of better quality. It has long been settled law that a decision which offends against the principles of natural justice is outside the jurisdiction

of the decision-making authority. In the instant case, no such notice was given. Therefore, we see no justification for withdrawing the concession

without providing an opportunity of being heard. On this ground, we set aside the order of the learned single Judge, keeping open all the

contentions of the appellant and the respondent Board may issue a show cause notice notifying him the grounds for withdrawing the concession

and after affording an opportunity of being heard which includes the argument and evidence within a reasonable time, with reasons to be stated and

may pass such suitable orders in accordance with law within six months from the date of this order and the amount deposited in pursuance of the

direction of this Court in this appeal to carry an interest of 10% p.a. from today, till such time the matter is disposed of and to be adjusted towards

the amount if payable by the appellant. Accordingly, the appeal is allowed and the parties to bear their own costs.