IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.07.2010 CORAM : THE HONOURABLE Mrs.JUSTICE R.BANUMATHI and THE HONOURABLE Mr.JUSTICE B.RAJENDRAN Writ Appeal Nos.522 and 857 of 2001, W.P.No.18290 of 2000, C.M.P.Nos.7638, 11438 and 12874 of 2001, W.A.M.P.No.19997 of 2001 and W.M.P.No.26495 of 2000 W.A.No.522 of 2001: M/s.Sumangala Steels Limited PIPDIC Industrial Estate Mettupalayam Pondicherry – 605 009. .. Appellant in WA.No.522/2001 and Respondent in W.A.No.857 of 2001/Petitioner Vs. 1.Government of the Union Territory of Pondicherry by its Chief Secretary 2.The Minister for Industries Union Territory of Pondicherry 3.Secretary Industries Department Government of Pondicherry. .. Respondents in WA.No.522/2001 and Appellants in W.A.No.857 of 2001/Respondents W.P.No.18290 of 2000: Sumangala Steels Limited PIPDIC Industrial Estate Pondicherry, registered office at No.45, Chamiers Road Chennai – 600 028. .... Petitioner Vs. 1.Government of Pondicherry represented by the Secretary to Government, Power Department 2.The Superintending Engineer I Electricity Department Pondicherry https://hcservices.ecourts.gov.in/hcservices/ 3.Senior Accounts Officer-cum- Sales Officer under the Revenue Recovery Act Electricity Department Pondicherry. .... Respondents Prayer: Writ Appeals in W.A.Nos.522 and 857 of 2001 are filed under Clause 15 of the Letters Patent against the Order dated 5.1.2001 in W.P.No.15702 of 1997. WP.15702 of 1997: Writ petition filed under Article 226 of the Constitution of India to issue a writ of mandamus to sanction all the benefits conferred on new industries in backward areas brought into effect by the Government of Pondicherry vide Letter No.16(23)/82-SSI (II)/SSI(P) dated.19.12.85 to the petitioners new unit with an installed capacity of 1,40,000 tonnes per annum. Writ Petition in W.P.No.18290 of 2000 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of certiorarified mandamus calling for the records of the third respondent in his proceedings No.87/ED/RG/1A1/1999-2000 dated 18.10.2000 received on 21.10.2000 and quash the same and consequently restrain the respondents from initiating any coercive proceedings under the Revenue Recovery act against the Petitioner for arrears of Electricity charges so long as the Petitioner is a sick industrial undertaking under the Sick Industrial Companies (Special Provisions) Act. For Appellant : Mr.P.S.Raman,Sr.Counsel for in W.A.No.522/2001 Mr.V.P.Raman Respondent in W.A. No.857/2001 and for Petitioner in W.P.No.18290 of 2000. For Appellants : Mr.D.Sreenivasan,Govt.Pleader in W.A.No.857/2001 Pondicherry and for Respondents in W.A.No.522/2001 W.P.No.18290 of 2000. JUDGMENT R.BANUMATHI,J. W.A.No.522 and 857 of 2001: Aggrieved by the order of the learned single Judge in W.P.No.15702 of 1997 dated 5.1.2001 in allowing the Writ Petition holding that the Writ Petitioner – M/s.Sumangala Steels Limited is entitled to the benefits of subsidy for unexpired period ending by 30.9.1992. in W.A.No.857 of 2001, the Government of Pondicherry preferred appeal. https://hcservices.ecourts.gov.in/hcservices/ 2. Being aggrieved by the very same order in W.P.No.15702 of 1997 declining to issue writ of mandamus to sanction all the benefits conferred on new industries in Letter of Government of Pondicherry No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 and also declining to hold that the Petitioner is entitled to full five years of tariff concession within the parameters of G.O.Ms.No.9/91-Industries Development Department (dated 11.2.1991), M/s.Sumangala Steels Limited has preferred W.A.No.522 of 2001. Both the Writ Appeals arise out of the same order and since the points for determination are one and the same, both the Writ Appeals were heard together and shall stand disposed by this common judgment. For convenience, the parties are referred to in their rank in W.P.No.15702 of 1997. 3. The Petitioner is a company incorporated under the Companies Act. It has been carrying on the business of producing steel in its premises in the PIPDIC Industrial Estate at Mettupalayam in Pondicherry from September 1987 and then having a capacity of 10,000 tonnes per annum (in short, "TPA"). The Petitioner filed W.P.No.15702 of 1997 seeking for a writ of mandamus to sanction all the benefits conferred on new industries in backward areas as per the Government of Pondicherry's letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 to the Petitioner's new unit with an installed capacity of 1,40,000 TPA on the following averments: There was a scheme brought into effect by Government of Pondicherry following letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 and as per the terms of which, the industries set up in backward areas were eligible for various benefits such as power subsidy, sales tax exemption and cash subsidy to the tune of 15 percent of capital investment. The power subsidy to Industries, both H.T. and L.T. was a period of five years from the date of commencement of production on a tapering basis i.e., 33 1/3 % for the first three years, 20% for the fourth year and 10% for the fifth year. The Petitioner was sanctioned 5 MVA power in September 1985 and commenced commercial production from September 1987 and it enjoyed the benefits under the subsidy scheme dated 9.12.1985. 4. According to the Petitioner Company, it has proposed a second unit capacity of 1,40,000 tonnes of steel billets per annum. Further case of Petitioner Company is that on 30.6.1987, with a view to instal fresh capacity on a large scale, obtained feasibility certificate from the Electricity Department, Pondicherry Government (ED) for supply of additional power of 20.05 MVA. The Government of India issued an industrial licence to the Petitioner Company. On 17.1.1990, Government of India gave approval to the Petitioner Company for installing fresh capacity of 1,40,000 TPA raising the total capacity of the Petitioner's unit to 1,50,000 TPA, which was in pursuance of minimum economic scale of operation contained in Press Note No.18(10/46/88-LP) dated 13.7.1989 issued by the Government of India. According to the Petitioner, it has obtained the necessary panchayat licence for increase of the power load to 25 MVA and placed firm orders for a substantial part of the plant and machinery for the new unit and also constructed a new factory in the additional area of 3 acres acquired for the new and larger unit. https://hcservices.ecourts.gov.in/hcservices/ Further case of the Petitioner Company is that it had purchased a new 2x12 Metric Tonne furnaces, continuous casting machine, heavy cranes, etc., and installed them. On 11.2.1991, Government of Pondicherry (Industries) reviewed the existing power subsidy scheme dated 9.12.1985 and issued fresh notification G.O.Ms.No.9/91-IND dated 11.2.1991, whereby all industries were excluded from power subsidy scheme except small industries consuming low tension power. However, large and medium industries having power feasibility certificate issued prior to 1.3.1991 and having taken effective steps as stipulated in the said notification continued to be governed by the existing power subsidy scheme. According to Petitioner Company, it has satisfied all three requirements to be eligible for the power subsidy as per Notification dated 11.2.1991. Petitioner Company had further averred that there was a joint inspection by the Electricity department directed by the Government and the same was conducted in November 1992 and a conclusion was reached that nearly 80 percent of the setting up of the plant had been completed and therefore Petitioner Company was eligible for the power subsidy and sales tax exemption. The Petitioner Company further alleged that by 1997, though 4 ½ years had passed, there had been no written response, though the Petitioner had been orally told that the matter was under consideration. Further case of Petitioner Company is that it fully needs the requirement of eligibility to the concessions extended to new industries and it has acted on a reasonable expectation. According to the Petitioner Company, if for any valid reason, the new unit is regarded as expansion of the Petitioner Company's existing small scale industry, the expanded and old unit together should be eligible for the benefits given to the new industries for atleast the unexpired period of the total period of five years expiring on 29.9.1992 and in calculating such unexpired period, the delay in providing power to the new unit would have to be excluded. 5. Strongly resisting the Writ Petition, the Respondent/ Government of Pondicherry filed counter with the following averments: According to the Respondents, the Petitioner Company has already availed power subsidy for a period of full five years from October 1987 to September 1992 amounting to Rs.1,58,26,313/-. The Petitioner Company having already availed power subsidy for a full period of five years would not be entitled to get the benefits and the Petitioner Company had made the present claim twisting facts to make wrongful gain under the pretext of the plea as if it had fulfilled the conditions stipulated in the aforesaid Government Order dated 11.2.1991. According to Respondents, the expansion programme for additional capacity of 1,40,000 tonnes of steel billets per annum is not a new unit since the Management had taken advantage of the Government of India's Scheme of "minimum economic scale of operation", whereby the ceiling capacity of existing mini steel plant was raised to 1,50,000 TPA. The Petitioner Company's application and the Government of India's order clearly reflect expansion and as such it is only an expansion and not a new unit. 6. Further case of Respondent is that the power feasibility certificate obtained by the Unit from the Electricity Department was https://hcservices.ecourts.gov.in/hcservices/ not for a separate unit, but was merely an enhancement of power load already obtained for its existing unit and it had not obtained power feasibility certificate prior to 1.3.1991 for the additional load. The Petitioner Company had raised the loan from ICICI, which was only for expansion of the existing unit and not for starting a separate unit. Products of the original unit and the expanded unit viz., ingots and billets are almost same in nature as the basic raw material for both are iron scrap and power. There are no two units functioning physically in the Industrial Estate, Mettupalayam, Pondicherry and there is only one unit functioning in the site. G.O.Ms.No.9/91 dated 11.2.1991 is not applicable to the expanded industry. There is no equity in favour of the Petitioner Company to justify its claim for power subsidy. 7. Learned single Judge held that the Petitioner Company had sought permission for expansion only and not for a new unit. Referring to the communication from the Government of Pondicherry Electricity Department dated 30.6.1987, the learned single Judge held that merely because the authorities used the expression "proposed industry" it would not mean that the Petitioner Company wanted power supply to be given for a new unit. The learned single Judge took the view that both the ingots and billets are same entities, which are used for re-rolling purpose. However, the learned single Judge held that even though it is a case of expansion the Petitioner Company is entitled to the benefit of subsidy treating the expansion as a separate unit and the subsidy will be restricted for the unexpired period of the subsidy programme and in working it out, the time taken by the Electricity Department for energising will be excluded. 8. Challenging the order of learned single Judge, both Petitioner as well as the Government of Pondicherry have filed these Appeals. At the time of admission, electricity supply was ordered to be restored on conditions, which we would refer to a little latter. 9. On behalf of the Petitioner Company, learned Senior Counsel Mr.P.S.Raman contended that the learned single Judge rightly held that 60 percent capital issued by the unit has been paid up and firm order has been placed for installation of substantial part of the plant and machinery and while so there was no justification that the subsidy should be limited only to the unexpired period of the subsidy programme. The learned Senior Counsel inter alia made the following submissions:- ● The unit manufacturing billets is physically, mechanically and electrically separate and there is no integration between the two units and the unit is having separate ingress and egress and there is no expansion of the existing unit. ●The Petitioner having taken effective steps before 1.3.1991 by having more than 60 percent of the capital issued for the proposed industrial unit and having more than a substantial portion of the factory building constructed with the plant https://hcservices.ecourts.gov.in/hcservices/ and machinery also installed, the Petitioner would be governed by then existing subsidy scheme as per Para 6 of Government Order - G.O.Ms.No.9/91 dated 11.2.1991. ●When the new unit established by the Petitioner produced a product "billets", which was different from the one that had been manufactured by the pre-existing unit (steel ingots), the new unit could not be termed as expansion of the existing one. Reliance was placed upon Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO,(2007) 5 SCC 447. 10. Learned Senior Counsel for the Petitioner would further contend that in any event, a large scale expansion of the existing small scale unit would be necessarily entitled to the subsidy scheme announced by the Government. 11. Taking us through the counter filed in the Writ Petition and the relevant records, the learned Government Pleader Pondicherry submitted that the Petitioner Company had availed power tariff concession for the full five years commencing from 1.8.1997 to 30.9.1992 and had benefited to the tune of Rs.1,58,26,313/-. The main contention of Respondents is that G.O.Ms.No.9/91 dated 11.2.1991 was not intended for the benefit of industries, which were already availing the benefits of the tariff concession, but it was meant for industries, which had not availed the tariff concession and completed their establishing new units by fulfilling conditions stipulated in Paragraph (6) of the Government Order. The learned Government Pleader further contended that the Government of India permitted the Petitioner Company to raise its capacity to 1,40,000 TPA and in the proceedings dated 17.1.1990 Government of India directed the Petitioner Company to obtain a formal endorsement after fulfilling the required conditions specified in paragraph 2 of the order and the said provisional sanction would get life only after the conditions are fulfilled. The further contention of Respondents is that the order dated 17.1.1990 did not confer any right on the Petitioner and it was only provisional. The main contention of the Respondent is that the Petitioner, having availed the tariff concession for full five years period, is not entitled to claim any subsidy benefit under G.O.Ms.No.9/91 dated 11.2.1991 and the claim of the Petitioner is a wrongful one. 12. Upon consideration of the submissions and the materials on record and the order of learned single Judge, the following points arise for consideration: 1. Whether the unit of Petitioner Company manufacturing billets is an expansion of the existing unit or a new unit? 2. Whether the unit of the Petitioner Company manufacturing billets has satisfied essential requisites of G.O.No.9/91 dated 11.2.1991 to claim subsidy benefit? https://hcservices.ecourts.gov.in/hcservices/ 3. Whether the learned single Judge was right in holding that the Petitioner Company is entitled to claim benefits of subsidy for the unexpired period ending with 30.9.1992? 4. Consequently, what are the directions to be issued. 13. Points No.1 to 4: The Ministry of Industries, Department of Industrial Development, Government of India vide their letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 has granted approval for the grant of power subsidy to SSI units, both H.T and L.T. Industries for a period of five years only from the date they go in for production. The subsidy is on a tapering basis i.e., 33 1/3 % for the first three years, 20% for the fourth year and 10% for the fifth year. Petitioner Company has been carrying on business of manufacturing steel ingots in its premises in PIPDIC Industrial Estate at Mettupalayam in Pondicherry from September 1987. Its first unit has capacity of 10,000 TPA and its second unit has additional capacity of producing steel ingots and billets. For its then existing unit Petitioner Company had obtained power feasibility for 20.5 MVA on 30.6.1987. The Petitioner company commenced its production from September 1987 and they enjoyed the benefits under subsidy scheme dated 9.12.1985. Ever since they commenced the production, the Petitioner Company has availed power tariff concession for the full five years period commencing from 1.8.1987 to 30.9.1992 and had benefited to the tune of Rs.1,58,26,313/-. 14. The Petitioner had obtained industrial licence from Government of India by the proceedings dated 17.1.1990 for increasing additional capacity of 1,40,000 TPA raising total capacity to the level of 1,50,000 tonnes. The case of Petitioner Company rests on the premise that the enhancement capacity to the level of 1,40,000 tonnes is permitted to be produced by the Government of India in its Order dated 17.1.1990 and it should be viewed as being a new unit and on that basis, as per G.O.Ms.No.9/91 dated 11.2.1991, power tariff concession should be extended to the Petitioner Company on the basis of industrial policy brought into effect by the Government of Pondicherry vide proceedings dated 9.12.1985. Per contra, case of Respondents is that the Petitioner Company has already availed the power tariff concession for the full five years period commencing from 1.8.1987 to 30.9.1992 and the Petitioner Company is actually beneficiary of the power subsidy scheme commencing from 1.8.1987 to an extent of Rs.1,58,26,313/-. 15. The claim of the Petitioner Company is that the Petitioner Company having obtained industrial licence from Government of India for increasing its capacity to 1,40,000 tonnes of steel billets per annum, it is a new unit. The learned Senior Counsel for the Petitioner Company mainly contended that the new unit is physically, mechanically and electrically separated from the old unit and therefore it has to be treated as a new unit. The learned Senior https://hcservices.ecourts.gov.in/hcservices/ Counsel contended that the new unit to be put up by the Petitioner Company is situated in a three acres plot acquired from PDIC and the said plot is next to its existing unit and new unit is physically separate from the existing unit with separate ingress and egress and mere proximity of the new unit to the existing unit will not detract the same from being a new unit. It was further submitted that the entire plant and machinery for the new unit have been purchased separately and no part of the existing factory has been used in the new unit and the very process of manufacture of steel billets is completely different from that of the manufacture of steel ingots and consequently the new unit is economically separate and distinct from the old unit. He further submitted that electrically also it is separated as a separate extra HT. 100 KV. Sub Station is set up exclusively for the new unit and separate cable connection, metres and other electrification metres have been installed, which are completely distinct from the old unit, which was enjoying 223 K.V. power supply from the general H.T.power line of the industrial estate. 16. In G.O.Ms.No.9/91 dated 11.2.1991, the Government of Pondicherry has revised the power subsidy scheme, which reads as under: "... The power subsidy scheme was implemented by this Union Territory administration since the year 1975. In its earlier form, the scheme envisaged payment of 7 paise per unit of consumption, for all new industries for an initial period of 5 years. The scheme was subsequently revised in April 1985. It now envisages subsidy for a period of 3 years @ 33 1/3%, for the fourth year 20% and for the fifth year at 10%. Due to the upward revision of power charges in the past years, there was corresponding increase for the payment proportionate subsidy to new industries. Accordingly, the quantum of subsidy disbursed to new industries has now increased to Rs.462.00 lakhs in 1989-90 from Rs.6.9 lakhs in 1982-83. The main reason for the increase in expenditure under the scheme is not only due to the revision of tariff from 1985, but also due to the increase in the number of power based industries during the VII plan period. At the time of formulation of the scheme the intention was no doubt to encourage the proliferation of industry within the territory. In actual practice the scheme has attached many power intensive units which are using power as one of the inputs for production. 2. In view of the fact that the scheme is helping only a handful of large industries, with limited employment, a necessity was felt to modify the scheme, not only on the lines suggested by the planning commission, but also to reduce the heavy drain of plan funds. The Planning Commission in the past has been repeatedly advising not to encourage power based industries. 3. In view of the above, the modified scheme was included in the annual plan 1990-91 and submitted to the https://hcservices.ecourts.gov.in/hcservices/ Planning Commission for approval. The Planning Commission has also approved the modified scheme and earmarked funds in the annual plan 1990-91. 4. Based on the above, the Director of Industries has now submitted a proposal vide reference above and requested for approval. He has also stated that the present scheme has ended up, by encouraging only the growth of large & medium Industries which are using power as raw material for production, instead of promoting more Labour intensive industries. 5. After careful consideration and taking into account various factors mentioned above, the Lieutenant Governor has been pleased to raise the power subsidy scheme as under: I. For Pondicherry and Yanam regions: All small scale industries which are energised on to after 1.3.1991, consuming low tension power, alone are eligible for subsidy for the energy charges paid by them at the following rate, subject to a limit of Rs.1.00 lakh per month i)33 ½% for a period of three years. ii)20% for the fourth year. iii)10% for the fifth year. No power subsidy will be paid from sixth year onwards. All other industries consuming High-tension power and those coming under the category of medium and large scale industry will not be eligible for any power subsidy. II.For Karaikal and Mahe regions: All the new low tension and high tension industries which are energised on or after 1.3.1991 are eligible for power subsidy at the rate, subject to a limit of Rs.1.00 lakh per month as follows: i) 33 1/3% for a period of three years. ii) 20% for the fourth year iii) 10% for the fifth year. No power subsidy will be paid from sixth year onwards. 1. All industries including large and medium, which have been issued with Power Feasibility Certificate by the Superintending Engineer (Electricity) before 1.3.1991 and have taken effective steps, viz.60% or more of the capital issued of the industrial unit, has been paid up and a substantial portion of the factory building has been constructed and a firm order has been placed for substantial part of the plant and machinery required for the industrial unit, will be governed by the existing power subsidy scheme in operation, during VII plan period. In case of any dispute on the interpretation of this para the https://hcservices.ecourts.gov.in/hcservices/ decision of the Government shall be final...." (emphasis supplied) In the case before us, the first two clauses are not attracted. We will have to examine whether the Petitioner Company can claim benefit of tariff concession/subsidy for its additional enhanced capacity of 1,40,000 TPA. 17. Claim of the Petitioner Company is that as a new unit, the Company is entitled to subsidy benefits under G.O.Ms.No.9/91. Per contra, the contention of Government is that Government intended to extend benefit only to the pipe line industries, which have completed the respective units substantially and fulfilled he conditions stipulated in G.O.Ms.No.9/91 dated 11.2.1991, whereas the enhanced capacity of the Petitioner Company was only an expansion of the existing unit. According to the Respondents, Petitioner Company had already availed benefit of the subsidy from 1.8.1987 to 30.9.1992 and that it was only an expansion, which aspect is clear from the available materials. Further contention of Respondents is that Petitioner Company had not fulfilled the conditions in G.O.Ms.No.9/91 either as a pipeline unit or as a new unit and only just an expansion under proposal. 18. The learned Senior Counsel for the Petitioner Company mainly argued that it was a new unit and having obtained industrial licence from Government of India on 17.1.1990 and that the Petitioner Company had purchased substantial part of the plant and machinery and installed and required share capital was also raised and therefore the petitioner Company's unit with increased capacity has fulfilled conditions of G.O.Ms.No.9/91. The learned Senior Counsel further contended