Case Analysis of State of U.P. v. Renusagar Power Co., [1991] 70
Comp. Cas. 127 (SC).
ABSTRACT
Submitted to - Prof. Aratrika Deb
Submitted from - Prachie Singh
500061214 / R450217078 BA. LL.B (Energy Laws) Third year A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations. This protection is not ironclad or impenetrable. Where a court determines that a company's business was not conducted in accordance with the provisions of corporate legislation (or that it was just a façade for illegal activities) it may hold the shareholders personally liable for the company's obligations under the legal concept of lifting the corporate veil.
Disallowing request for exemption from levy of electricity duty under sub-section (4) of section 3 of the U.P. Electricity Duty Act, 1952 (’the Act’), as amended, the appellants issued notice of demand asking respondent Renusagar Power Co., to pay electricity duty on the energy supplied by it to respondent No. 2, Hindalco, for industrial purposes. Being aggrieved by the decision of the State Government, the respondents filed a writ petition in the High Court. The High Court allowed the writ petition, holding that the impugned order of the State Government was not maintainable in law, and quashing the order as well as the notice of demand above said. Being aggrieved by the decision of the High Court the appellants moved this Court for relief. The issue raised was, Whether the respondent Renusagar Power Co. Ltd., was ’own’ source of generation of electricity for respondent No. 2, the Hindalco, under section 3(1)(c) of the Act? It was held that The person generating and consuming energy were the same and the corporate veil should be lifted. Hindalco and Renusagar were in-extricably linked up together. Renusagar had in reality no separate and independent existence apart from and independent of Hindalco. Consumption of energy of Hindalco is consumption of Hindalco from its own source of generation. Therefore, the corporate veil must be lifted and Hindalco and Renusagar should be treated as one concern.
