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Petitioner: Messrs GADOON TEXTILE MILLS And 814 Others VS Respondent: WAPDA And Other
Court Name: Supreme Court of Pakistan Judge(s): Fazal Karim, Saleem Akhter, Mukhtar Ahmed Junejo, Ajmal Mian, Zia Mahmood Mirza Title: Messrs GADOON TEXTILE MILLS And 814 Others vs WAPDA And Other Case No.:C. P. No. 1112-L of 1996C.P. No. 1157-L of 1996C.P. No. 79-P of 1996C. P.No. 819-L of 1996C.P.No.
JUDGMENT
Reported As: 1997 SCMR 641 Result: Petitions dismissed Judgment JUDGMENT AJMAL MIAN, J. ---By this common judgment we intend to dispose of the above appeals and the petitions for leave to appeal. The aforesaid appeals and petitions for leave have arisen out of judgment dated 2-10-1995 of a Division Bench of Peshawar High Court, Peshawar, rendered in Writ Petition go.255 of 1995 and 104 connected writ petitions, filed inter alia by some of the appellants/petitioners impugning the levy of surcharge and additional surcharge and the withdrawal of concession of 50% electricity charges in respect of certain industries situate in Gadoon Amazai Industrial Estate, Swabi, hereinafter referred to as G.A.I.E., by WAPDA (which is one of the respondents), and the -judgment dated 19-12-1995 passed by a Division Bench of Lahore High Court in Writ Petition No. 14612 of 1995 and 1439 connected writ petitions, filed inter alia by some of the above appellants and the petitioners challenging the levy of surcharge and additional surcharge, dismissing the same. 2. The appellants who have their factories have been receiving electricity from the Authority. It seems that a summary for the Cabinet dated 19-11-1991 was submitted by the Ministry of Finance pointing out therein that according to the decision oh the C.C.I. i.e. Council of Common Interests (constituted under Articleof the Constitution) the profits on hydel generation had to be transferred to the Provinces by WAPDA which involved a payment of Rs.6.1 billion by WAPDA to the Provinces. It was further pointed out that no provision for such payment was therefore made in the Federal Budget and that WAPDA had expressed its inability to transfer the net profits to the Provinces for the following three reasons:-- "(i) Under international covenant WAPDA is required to raise 40% of the total development outlay. Unless this is achieved WAPDA would not be able to utilise foreign assistance. (ii) The indicated amounts far exceed the net profits of WAPDA. (i.e) The amount has not been provided in the budget of WAPDA for the current year. It was highlighted that the budgetary position of the Federal Government itself was under strain because of additional requirement necessitated by higher subsidy bills of wheat, defence expenditure and other supplementary grants, which might have to sustain additional deficit of Rupees five billion. It was stated that efforts were to be made jointly through the Federal Budget and WAPDA itself which had the primary responsibility
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for payment of net profits on the hydel generation to the Provinces. It was further stated that in order to generate funds to the extent of Rupees to billion, the following to proposals were submitted for decision of the Cabinet:-- "(i) WAPDA may be authorised to levy a fixed surcharge of paisas 8 per unit on all consumers; or (ii) WAPDA may be authorised to levy a surcharge equivalent to 2.5 % of the total tariff on all consumers every three months for the current financial year. Thus the proposed levy will be staggered in three small installations of December, February and April." It appears that the Economic Coordination Committee of the Cabinet approved the proposal contained in above-quoted sub-para. (ii) of the summary. Pursuant to the above decision, WAPDA issued an office order dated 31-12-1991 addressed to its Chairmen of the Area Electricity Board, informing them that it had decided to impose surcharge at the rate of 2.5 % on the supply charges as defined in WAPDA Schedule of Tariffs on electricity bills to be issued on or after 1-1-1992. It was further stated that surcharge of 10% for the late payment of bills was to be shown separately. They were directed to compute the above 2.5 % surcharge on the following four items:-- "(1) Fixed charges for the Authority's reservation of power for the consumer's billing demand in kilowatt as defined in WAPDA Schedule of Tariff. (2) The charges for the amount of energy actually consumed by the consumer in kilowatt-hour. (3) The Fuel Adjustment Surcharge. (4) The penalty for low power factor." It was also stated that the account of above 2.5 % surcharge shall be kept separately and that above surcharge would not be levied on the following items which are not part of supply charges as defined in WAPDA Schedule of Tariff:-- (i) The electricity duty payable to the Provincial Governments; (ii) Meter rentals; and (i.e) Service rentals. The above surcharge of 2.5 % was increased in December, 1991, February and April, 1992. Pursuant to the above decision, the same was increased to 5.1% with effect from 1-2-1992 through an order dated 6-2-1992--- then to 7.7% with effect from 1-4-1992 by an order dated 20-3-1992. After that in response to WAPDA's letter dated 25-2- 1993, the Federal Government through a Section Officer's letter dated 9-3-1993, authorized WAPDA to increase above surcharge from 7.7% to 10.4% with effect from 16-1-1993. 3. It appears that under the covenants of the loans agreement with the World Bank, WAPDA was to generate 40% of I.C.G. (i.e. Internal cash generation) for its development schemes. In order to meet the above covenants, proposals for increase and rationalisation of electricity tariffs were approved by the Task Force, which were put up for approval of the Federal Government which was accorded on 8-8-1993. Pursuant to the above decision, WAPDA imposed additional surcharge at the rate of 16.1 % with effect from 10-8-1993 by an order dated 9-8-1993. It was also stated in the aforesaid order that the additional surcharge of paisa 25/KWH shall also be applicable to all consumers including the industrial consumers of G.A.I.E. And to the bulk purchaser of power, namely, the Government of Azad Jammu and Kashmir. Thereafter by orders dated 24-11-1994 and 9-7-1995, in addition to above 16.1% additional surcharge, at the rate of 24.3 % and 14.5 % of the gross tariffs were imposed. 4. The above additional surcharge was also to be shown in the consumers' bills separately and was to be computed on the same basis as surcharge on the items referred to hereinabove. 5. The above facts are common in all the aforementioned appeals and petitions for leave. However, in the writ petitions, which were heard by the Peshawar High Court, besides challenging the above levy of surcharge and additional surcharge, withdrawal of 50% reduction in electricity tariff in respect of certain industries established in G.A.I.E. Was also impugned. It may be pertinent to give brief facts in respect thereof. It appears that on 6-10- 1986 the Prime Minister of Pakistan presided over a meeting regarding enforcement of ban on the cultivation of opium, poppy and the establishment of an industrial estate in Gadoon Amazai. The following incentives were offered to the prospective entrepreneurs:-- "(i) exemption from import duty, lqra and surcharge on machinery and raw materials; (ii) ten years tax holiday; (i.e) provision of loans for establishment and operation of the Units from the Financial Institutions and Banks at rates not exceeding 3 per cent mark-up; (iv) at least 50 per cent. Reduction in electricity tariff. " It further seems that WAPDA initially resisted the grant of 50 % reduction in the electricity tariff for the above' new proposed industrial estate on account of financial constraints, but through office letter dated 3-6-1987, in
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exercise of the powers conferred on it by subsection (1) of section 13 read with section 12 and subsection (2) of section 25 of the Act, it notified that all industrial units established within the Industrial Estate in the Gadoon Amazai area of N.-W.F.P. Would be charged at 50% of the normal applicable industrial tariffs of ,WAPDA's Schedule of Tariff enforced under which the supply was allowed. It was also stated ,that this would also include fuel adjustment surcharge. It was further clarified that the other rules, procedures and Abridged Conditions of Supply issued from the to the and other conditions of supply contained in the Schedule of Tariffs shall remain in force until amended, altered, changed, omitted or substituted by it. It is the case of the concerned appellants/petitioners that pursuant to the above incentives offered to them, they established their factories in G.A.I.E. And continued to enjoy the benefits of the above concession till the the the same was withdrawn. It appears that WAPDA submitted a summary for E.C.C. Of the Cabinet in January, 1994, highlighting the losses which it was suffering on account of above 50% concession, namely, Rupees 120 million per year and made following recommendations:-- "7. RECOMMENDATIONS: It is, therefore, recommended that:- The energy-intensive industry like steel furnaces, steel re-rolling mills and plastic industry etc. Be put on negative list for all times to come as the current production of these industries is far in excess of the requirement. Since steel furnace usually recovers its total investment within the first to to three years of its operation, the subsidy to the existing steel furnaces may be withdrawn on completion of their operation of five years. Concession of 50 % may be limited to the first 15 % of the monthly bill of steel industry (i.e. Energy Charges, M.D.I., F.A.S., Low Power Factor Penalty). The concession may be reduced to 25 % for the next 10% of the consumption and the concession may be eliminated altogether for the balance. The revenue loss on account of the provision of this subsidy to consumers may be compensated to WAPDA by adjusting the revenue so lost, against the next profit on hydel power generation being paid to Government of N. W. F. P." Since the matter was deferred in the E.C.C. Meeting held on 24-1-1994, inter alia another summary dated 24-8- 1994 was prepared for consideration of E.C.C., whereupon the following decision was taken by the E.C.C.:-- "The Economic Coordination Committee of the Cabinet considered the Summary dated 24th August, 1994 submitted by the Revenue Division and decided as under:-- (i) Industrialists of Gadoon Amazai should be allowed 25 % concession on the leviable duties for a period of five years at import stage in respect of existing units and for units coming into production till 30th June, 1995. The concession should apply to each imported consignment and up to a maximum of their assessed annual requirement; (ii) 50 % rebate on electricity should be continued for a further period of five years except to the industries included in the negative list of industries; and (i.e) The concessions as in (i) and (ii) above should not apply to the existing or future units in the industries on the negative list. , (iv) A Committee under the convenership of Secretary Finance and comprisingSecretaries Petroleum and Natural Resources, Revenue Division and Water and Power Division as its members should finalise the negative list and monitor operation of the concession etc." It seems that inter alia appellants' factories in Civil Appeals Nos.12, 22, 25, 29 to 33, 37, 56, 60 to 72 and 73 of 1996 have been included in the above negative list and, therefore, they have been denied the aforesaid 50% concession. 6. It may also be pertinent to mention that at the the of granting above concession no period was specified, but E.C.C. Resolved that the above concession would be available up to 28-8-1999 excluding the consumers mentioned in the negative list. This decision was conveyed by WAPDA through its letter dated 23-2-1995. However, this terminus ad quem was reduced to 2-6-1997 through WAPDA s letter dated 8-3-1995. It may be mentioned that the aforesaid negative list, which was approved by the E.C.C., included the following items:-- "A. Edible Products, i.e. Vegetable ghee/cooking manufacturing units; B. Plastic Products (i) Plastic film. (ii) Plastic bags. (i.e) Rigid/flexible pipes. (iv) Plastic bottles.
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(v) Adhesive tapes, manufactured from coated film. (vi) Plastic utensils all sorts and plastic crockery. (vii) Ply-urethance foam and products made thereof. (viii) Polypropylene woven bags. C. Chemical/Dye-Stuff:--- (i) Caustic soda. (ii) Manufacture where only mixing or repacking is involved. D. Metals: (i) Furnaces and rolling/re-rolling mills. (ii) Galvanization units. (i.e) Corrugation units. (iv) Metal containers and utensils, all sorts." 7. The aforementioned writ petitions filed by the appellants/petitioners were dismissed through the aforesaid to judgments passed by Division Benches of Peshawar and Lahore High Courts. Thereupon, a number of petitions for leave were filed. Leave was granted inter alia in Civil Petition No.301-P of 1995 to consider the various contentions noticed in the leave granting order dated 17-1-1996. The above leave granting order was followed in other petitions for leave. The appeals arising from the aforesaid petitions have been fixed out of turn pursuant to the above leave granting order inter alia before this Bench. It seems that during the hearing of the above appeals, inter alia the above petitions for leave to appeal have been filed which have been tagged with the 'above appeals. However, it may be pointed out that in Civil Appeals Nos.667 to 669 and 674 to 676 of 1996 and in Civil Petitions Nos.621-L, 628-L to 630-L. 757-L, 831-L, 832-1;. 835-1 to 842-L, 844-L to 846-L, 856-L to 858-L, 889- L,903-L,968-L,1051-L,1235-L to 1238-L of 1996, the appellants/petitioners were not parties before the High Court. 8. Before taking up the contentions of the learned counsel for the parties, we may examine the legal status of WAPDA. The WAPDA was incorporated by West Pakistan Water and Power Development Authority Act (XXXI of 1958) gazetted on 24-4-1958, hereinafter referred to as the Act. The Preamble of the Act provided the object of its incorporation, namely, to provide for the unified and coordinated development of the water and power resources of West Pakistan. It may be pointed out that WAPDA was intended to cater for West Pakistan as one unit. However, after the fall of Dacca and dissolution of West Pakistan and creation of four Provinces by P.O. No.1 of 1970 (Province of West Pakistan (Dissolution) Order, 1970) gazetted on 30-3-1970, and upon enforcement of the Constitution of Islamic Republic of Pakistan, 1973, hereinafter referred to as the Constitution, and because of Item 3 in Part II of the Federal Legislative List, WAPDA became a Federal subject under the supervision of the Federal Government. The words "West Pakistan" appearing in various provisions of the Act were substituted by the word "Pakistan". A number of adaptations/amendments were made inter alia by P.O. No.4 of 1975 (Federal Adaptation of Laws Order) 1975, gazetted on 1-8-1975, Ordinance No.LXXII of 1979 (West Pakistan Water and Power Development Authority (Amendment) Ordinance, 1979, gazetted on 29-12-1979, and Act NO.XIIl of 1994 (Pakistan Water and Power Development Authority (Amendment) Act, 1994, hereinafter referred to as the Act, gazetted on 6-7-1994. It may be stated that clause (i) of section 2 defines the word "Authority" as means the Pakistan Water and Power Development Authority established under section 3 of the Act. It may be observed that by virtue of subsection (2) of section 3 of the Act, the Authority is a body corporate which is entitled to acquire, hold and dispose of property having perpetual succession and common seal and entitled to sue and be sued. It will not be out of context to mention that the power to dispose of the property was conferred on the Authority by virtue of the amendment incorporated by Act XIII of 1994 dated 6-7-1994. It may further be observed that subsection (1) of section 8 of the Act envisages that the Authority shall prepare, for the approval of the Government, a comprehensive plan for the development and utilization of the water and power resources of Pakistan on a unified and multi purpose basis; whereas subsection (2) thereof gives the detail of the scheme or schemes which the Authority may prepare for a Province or part thereof. It may be instructive to reproduce subsection (2) of section 8 of the Act, which reads as under:-- "(2) The Authority may frame a scheme or schemes for a Province or any part thereof providing for all or any of the following matters, namely:-- (i) irrigation, water-supply and drainage; and recreational use of water resources; (ii) the generation, transmission and distribution of power; and the construction, maintenance and operation of power houses and grids; (i.e) flood control; (iv) the prevention of waterlogging and reclamation of waterlogged and salted lands;
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(v) inland navigation; (vi) the prevention of any ill-effects on public health resulting from the operations of the authority; and (vii) privatise or otherwise restructure any operation of the Authority except the hydel generating power stations and the National Transmission Grid", It will not be out of context to point out that above sub-clause (vii) of subsection (2) of section 8 for authorising privatisation or otherwise restructuring of any operation except the hydel generating power stations and the National Transmission Grid was incorporated by aforesaid Act XIII of 1994. It may be stated that subsections (3) and (4) of section 8 of the Act envisage the submission of above schemes for the approval and sanction of the Government. At this juncture, it may also be pointed out that section 15 of the Act authorises the Authority to amend or modify any approved scheme with the previous sanction of the Government if it involves the increase in the cost of the scheme by more than 15 % of the sanctioned cost or a change in the benefit and cost ratio etc. It may further be observed that subsection (5) of section 8 was incorporated by aforesaid Act XIII of 1994, which enlarged the, spheres of the activities, by providing as follows:-- "(5) Where a scheme is sanctioned by the Government under subsection (4), the Authority may--- (a) undertake any joint venture or work in association with the Provincial Government, an agency, corporation, company, authority or any person and may subscribe to the equities and acquire such other rights and obligations as may be necessary for such joint venture or association; (b) promote, form or sponsor any company or companies having objects of installation of thermal and hydel projects and development and utilization of any resources of energy for generation, transmission and distribution of power and for survey, investigation, exploitation and utilization of resources of energy for generation, transmission and distribution of power; (c) subscribe for, take or otherwise acquire, hold and dispose of shares, bonds, debentures, commercial papers or other securities of any company promoted, formed or sponsored under clause (b) and receive dividends or other payments therefrom and transfer to it any of its land or any other property, movable and immovable, tangible or intangible, against cash, shares, bonds, debentures, commercial papers or other securities as is desirable or necessary to enable it to privatise or otherwise restructure any operation of the Authority; (d) enter into any of the following arrangements which may be consistent with its objects, namely:-- (i) provision of services and personnel; (ii) provision of goods, appliances, plants, machinery and other material; and (i.e) purchasing of electrical capacity and energy from any company specified in clause (b); and (e) enter into any contract or agreement with any company or companies specified in clause (b). Explanation.--For the purpose of this section the expression "privatise" means the transfer or disinvestments of any of its assets, property, rights or liabilities, interest, power houses, grid operation of work, or maintenance thereof, or generation or its distribution, by the Authority, with the prior approval of the Federal Government, for valuable consideration to any person, company or body on ownership basis or for management, control, operation or maintenance, either in joint venture or in association or otherwise and subject to such conditions as the Authority may impose." It may also be mentioned that section 11 of the Act empowers the Authority to have control over waters, power houses and grids etc. Whereas section 12 thereof provides that the Authority shall for the purpose of the Electricity Act, 1910, be deemed to be a licensee and shall have all the powers and discharge all the obligations of a licensee under the said Act. However, proviso to the above section excludes the application of sections 3 to 11, subsections (2) and (3) of section 21, sections 22, 23 and 27 and clauses (i) to (xii) of the Schedule to the said Act relating to the duties and obligations of a licensee. It may further be stated that section 21, which is contained in Chapter V of the Act, imposes obligations on the part of the Authority to submit yearly reports and returns of every financial year before the last day of September next following, a report on the conduct of its affairs for that year. It also envisages placement of a copy of audit report before the National Assembly which is required to refer the same to its Committee on Public Accounts for scrutiny and examination. It may be stated that Chapter VI of the Act deals with the financial matters of the Authority. Subsection (1) of section 22 of the Act provides that there shall be a fund to be known as the "Authority Fund" vested in the Authority, which is to be utilised for the purposes mentioned therein; whereas subsection (2) gives the composition of the Authority Fund as under: "(2) The Authority Fund shall consist of---
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(a) grants made by the Government; (b) loans obtained from the Government; (c) grants made by local bodies as required by the Government; (d) sale proceeds of bonds, debentures, commercial papers or other securities issued by the Authority; (dd) all sums, dividends, shares, bonds, debentures, commercial papers, securities or any other payments received from a company or companies specified in clause (b) of subsection (5) of section 8;" It will not be out of context to point out that aforequoted clause (d) was substituted, whereas clause (dd) was added by Act XIII of 1994. It may further be mentioned that section 23 lays down that the Authority shall be deemed to be a local authority under the Local Authorities Loans Act, 1914, for the purpose of borrowing money under the said Act and the making and execution of any scheme under the Act shall be deemed to be a work which such authority shall be legally authorised to carry out. It may also be stated that subsection (2) of section 23, which was incorporated by Act XIII of 1994, provides that any sum due to the Authority shall be recoverable as arrears of land revenue. It may further be mentioned that section 24 limits the liability of the Government by providing that the liability of the Government to the creditors of the Authority shall be limited to the extent of grants made by the Government and the loans raised by the Authority with the sanction of the Government. It may also be observed that subsection (1) of section 25 of the Act provides that the Authority shall ordinarily sell power in bulk; whereas subsection (2) thereof deals with the fixation of rates by laying down as follows:-- "(2) The rates at which the Authority shall sell power shall be so fixed as to provide for meeting the operating costs, interest charges and depreciation of assets; the redemption at due the of loans other than those covered by depreciation, the payment of any taxes and a reasonable return on investment. " It may further be stated that section 26 deals with the maintenance of accounts by the Authority. Section 27 imposes obligation on the Authority to submit to the Government for approval a statement of the estimated receipts and expenditure in respect of the next financial year. Whereas section 28 provides that the accounts of the Authority shall be audited every year by the Auditor --General of Pakistan in such manner as may be prescribed by the Government. Section 29 empowers the Authority with the approval of the Government to frame regulations for carrying into effect the provisions of the Act. The above resume of the Act indicates that WAPDA is a corporate body having its own charter. It is subject to administrative control of the Federal Government. It is also subject to financial scrutiny by the National Assembly as its audited annual accounts are to be placed before the National Assembly, which in turn refers the same to its Committee on Public Accounts for…
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