Supreme Court clarifies incentive eligibility for industrial units: Kerala State Electricity Board vs. Rubfila International (15 November 2022)

Date of the Judgment: 15 November 2022

Citation: 2022 INSC 1131

Judges: Justice Ajay Rastogi and Justice C.T. Ravikumar.

Can an industrial unit claim electricity tariff incentives from the date of energization, or is the date of commercial production the deciding factor? The Supreme Court of India recently addressed this question in a dispute between the Kerala State Electricity Board and Rubfila International Limited. The core issue revolved around the interpretation of a government order providing incentives for new industrial units. The court clarified that the date of commercial production, not the date of energization, is the relevant date for determining eligibility for these incentives. The judgment was delivered by a two-judge bench comprising Justice Ajay Rastogi and Justice C.T. Ravikumar.

Case Background

Rubfila International Limited, the respondent, is an industrial unit that began commercial production on March 26, 1995, and was energized on September 16, 1995. The Government of Kerala issued a Government Order (GO) on February 6, 1992, which provided certain electricity incentives for new industrial units that started commercial production between January 1, 1992, and December 31, 1996. These incentives were to be granted for a period of 5 years from the date of commencement of commercial production.

Initially, a dispute arose regarding whether the incentive period should be calculated from the date of commercial production or the date of energization. The High Court of Kerala, in its judgment dated January 18, 2005, ruled that the date of commercial production (March 26, 1995) was the crucial date for determining the start of the incentive period. Consequently, the claim for concessional tariff based on the date of energization (September 16, 1995) was rejected.

Timeline

Course of Proceedings

Following the High Court’s initial decision, Rubfila International Limited filed a review application, arguing that the Kerala State Electricity Board had granted concessions to other industrial units based on the date of energization. The High Court allowed Rubfila to file a representation before the Board. The Board rejected this representation, leading to a second round of litigation.

In the second round, a Single Judge of the High Court ruled in favor of Rubfila, directing that the company should also receive the benefit of a 5-year exemption from enhanced power tariff from the date of energization, similar to what was allegedly granted to another industrial unit, M/s Patspin India Ltd. The Division Bench of the High Court upheld this decision, stating that since the Board had granted concession from the date of energization to M/s Patspin India Ltd., Rubfila should also receive the same benefit.

However, the Kerala State Electricity Board filed a review application, highlighting that the benefit granted to M/s Patspin India Ltd. had been withdrawn by the Board’s order dated November 22, 2001. The High Court dismissed this review application, stating that the withdrawal of benefit to M/s Patspin India Ltd. did not negate the finding in the judgment. This led to the appeal before the Supreme Court.

Legal Framework

The primary legal framework for this case is the Government Order (GO) dated February 6, 1992, issued by the Government of Kerala. This order provided incentives for new industrial units that started commercial production between January 1, 1992, and December 31, 1996. The GO specified that these units were entitled to an exemption from enhanced power tariff for a period of 5 years from the date they started commercial production.

The relevant portion of the GO states that the incentive is applicable “to the units from the date of commercial production which start such production between 01.01.92 to 31.12.96”.

Arguments

Arguments of the Kerala State Electricity Board (Appellants):

• The Board argued that the Government Order dated February 6, 1992, clearly stated that the exemption from enhanced power tariff was to be granted for a period of 5 years from the date the unit started commercial production.
• They contended that the High Court’s decision to grant the exemption from the date of energization was based on a flawed premise, as the benefit granted to M/s Patspin India Ltd. from the date of energization had been withdrawn by the Board’s order dated November 22, 2001.
• The Board submitted that once the parity claimed by Rubfila with M/s Patspin India Ltd. was withdrawn, there was no basis for granting the exemption from the date of energization.
• The Board stated that the date of commercial production for Rubfila was March 26, 1995, and the exemption was correctly extended for 5 years from this date.

Arguments of Rubfila International Limited (Respondents):

• Rubfila argued that they were entitled to the same benefits as M/s Patspin India Ltd., which had allegedly received the exemption from the date of energization.
• They contended that even if the benefit to M/s Patspin India Ltd. was withdrawn, Rubfila was still entitled to a concessional tariff for 214 days to compensate for periods of 50% or more power cuts, as was extended to M/s Patspin India Ltd.
• Rubfila argued that if the 5-year period was calculated from the date of commercial production (March 26, 1995), they should at least receive an extension of the pre-1992 tariff for 214 days due to the power cuts.
• They relied on the Supreme Court’s judgment in S.V.A. Steel Re-Rolling Mills Limited and Others vs. State of Kerala & Others, arguing that similar benefits should be extended to them.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a separate section. However, the core issue that the court addressed was:

1. Whether the High Court was correct in directing the Kerala State Electricity Board to grant the benefit of 5 years’ exemption of enhanced power tariff from the date of energization, based on the parity with M/s Patspin India Ltd., despite the fact that the benefit granted to M/s Patspin India Ltd. was withdrawn by the Board.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Government Order dated 6th February, 1992 was the basis for the court’s decision, as the court relied on the GO to determine the eligibility criteria for incentives, noting that the incentive was to be granted from the date of commercial production.
• The order dated 22nd November, 2001 was crucial, as it demonstrated that the benefit of exemption from enhanced power tariff from the date of energisation to M/s Patspin India Ltd. was withdrawn.
• The order dated 18th October, 2000 was considered to show that the benefit of 214 days was extended to Rubfila to cover the period of power cuts.
• The judgment in S.V.A. Steel Re-Rolling Mills Limited and Others vs. State of Kerala & Others was distinguished by the court as the benefits considered in this case had already been complied with by the Board’s order dated 18th October, 2000.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Adherence to the Government Order: The Court emphasized that the Government Order (GO) dated February 6, 1992, clearly stated that the incentive was to be granted from the date of commercial production. This was a key factor in the Court’s reasoning.
• Withdrawal of Benefit to M/s Patspin India Ltd.: The Court noted that the benefit granted to M/s Patspin India Ltd. from the date of energization was withdrawn by the Board’s order dated November 22, 2001. This withdrawal nullified the basis on which Rubfila claimed parity.
• No Negative Equality: The Court stated that after the withdrawal of the benefit to M/s Patspin India Ltd., Rubfila could not claim negative equality under Article 14 of the Constitution.
• Extension of Benefit for Power Cuts: The Court acknowledged that Rubfila was extended the benefit of pre-1992 tariff for 214 days to cover the period of power cuts, as per the Board’s order dated 18th October, 2000.

Fact:Law Ratio

Logical Reasoning:

The Court considered the alternative interpretation that Rubfila should receive benefits similar to M/s Patspin India Ltd. However, this was rejected because the benefit to M/s Patspin India Ltd. was withdrawn. The Court also considered whether Rubfila was entitled to an extension of the pre-1992 tariff for 214 days to cover the period of power cuts. However, the court noted that this benefit was already extended to Rubfila by the Board’s order dated 18th October, 2000.

The Supreme Court held that the High Court’s decision was not legally sustainable. The Court emphasized the importance of adhering to the terms of the Government Order and noted that Rubfila could not claim parity with M/s Patspin India Ltd. after the withdrawal of benefits. The Court also noted that the benefit of 214 days for power cuts was already extended to Rubfila.

The Court’s decision was based on the following reasons:

• The Government Order dated February 6, 1992, clearly stated that the incentive was to be granted from the date of commercial production.
• The benefit granted to M/s Patspin India Ltd. from the date of energization was withdrawn by the Board.
• Rubfila could not claim negative equality based on a benefit that had been withdrawn.
• The benefit of 214 days for power cuts was already extended to Rubfila.

“The crucial date is date of commencement of commercial production.”

“…the claim of the petitioner for concessional tariff for a period up to 16.09.2000 cannot be granted.”

“Since the date of Commercial Production is 18.01.94. M/s Patspin India Limited, Cons. Code No. 26/2662 is eligible for 5 years concessional tariff from the date of commercial production, i.e., from 18.01.94 to 17.01.1999.”

Key Takeaways

• The Supreme Court clarified that for the purpose of electricity tariff incentives under the Government Order dated February 6, 1992, the date of commercial production is the crucial date, not the date of energization.
• Industrial units cannot claim parity with other units if the basis for that parity has been withdrawn or nullified.
• The principle of negative equality cannot be invoked to claim benefits that are not in accordance with the applicable rules and regulations.
• The judgment reinforces the importance of adhering to the specific terms of government orders and policies.

Directions

The Supreme Court did not issue any specific directions other than setting aside the judgment of the High Court.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that for the purpose of electricity tariff incentives under the Government Order dated February 6, 1992, the date of commercial production is the crucial date, not the date of energization. This judgment clarifies that industrial units cannot claim parity with other units if the basis for that parity has been withdrawn or nullified. There is no change in the previous position of law, but it clarifies the interpretation of the GO dated February 6, 1992.

Conclusion

The Supreme Court allowed the appeals filed by the Kerala State Electricity Board, setting aside the judgment of the High Court of Kerala. The Court held that the date of commercial production is the crucial date for determining eligibility for electricity tariff incentives, as specified in the Government Order dated February 6, 1992. The Court also clarified that industrial units cannot claim parity with other units based on benefits that have been withdrawn or nullified. The judgment reinforces the importance of adhering to the specific terms of government orders and policies.