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Case Analysis of State of U.P. v. Renusagar Power Co., [1991] 70

Comp. Cas. 127 (SC).


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.

Key Notes – Debts, Façade, Aggrieved, Exemption, Extricably