Allowed

Dell Interntional Services India Private Limited v. the State of Karnataka

Karnataka HC6 Jun 2024WP/22327/2017

Case brief

AI extract

What is this about?

The Court allowed a writ petition quashing back-billing demands by BESCOM for a higher electricity tariff against a software company successor (Dell/Perot). The Court held that since original concessional tariff was granted under Millennium IT Policy, no subsequent certificate was needed, and a name change does not alter the company's status or require back-billing.

What did the court decide?

Impugned orders making demand for back-billing charges quashed. Amounts paid pursuant to interim orders to be refunded within four weeks.

Dell Interntional Services India Private… — Pension and Retirement Benefits | Karnataka HC (2024)

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1 - NC: 2024:KHC:19686 WP No. 22327 of 2017

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 6^TH DAY OF JUNE, 2024

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BEFORE

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THE HON'BLE MR JUSTICE N S SANJAY GOWDA WRIT PETITION NO. 22327 OF 2017 (GM-KEB)

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BETWEEN:

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DELL INTERNTIONAL SERVICES INDIA PRIVATE LIMITED (EARLIER KNOWN AS PEROT SYSTEMS TSI (INDIA) PVT LTD), HAVING ITS REGISTERED OFFICE AT NO. PLOAT NO. 123, EPIP PHASE II, WHITEFIELD INDUSTRIAL AREA, BANGALURU 560066. REP BY AUTHORIZED SIGNATORY MR. NITESH RANJAN

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…PETITIONER

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(BY SRI.PRASANTH .V.G., ADVOCATE FOR SRI. J.SAGAR AND ASSOCIATES FOR PETITIONER)

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AND:

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Digitally signed by KIRAN KUMAR R Location: HIGH COURT OF KARNATAKA

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THE STATE OF KARNATAKA THROUGH THE PRINCIPAL SECRETARY TO THE GOVERNMENT OF KARNATAKA, 6TH FLOOR, 5TH STAGE, MS BUILDING, AMBEDKAR VEEDI, BANGALORE 560001.

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ASSISTANT EXECUTIVE ENGINEER (ELECTRICITY) BANGALORE ELECATRICITY SUPPLY COMPANY LIMIATED, E-4, SUB DIVISION, MAHADEVAPURA, BANGALORE-560 001.

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…RESPONDENTS

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(BY SMT. HEMALATHA.V., AGA FOR R-1; SRI. G.C. SHANMUKHA, ADVOCATE FOR R-2)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH SET ASIDE THE IMPUGNED ORDER/ FINAL DEMAND DATED:28.4.2017 VIDE ANNEXURE-B, ETC.

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THIS PETITION, COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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M/s.HCL Perot Systems Private Limited sought for

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power supply from the Karnataka Electricity Board (“ the

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KEB ”) in the year 2001 and the KEB by the order 04.05.2001 sanctioned power Supply at 11 kW to M/s.HCL Perot Systems vide Annexure ‘E’.

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Clause 7 of said order dated 04.05.2001 reads as follows:

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“7. The power tariff applicable to your installation will be H.T.2(a) as in force from time to time.”

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As could be seen from the above, on the application

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preferred by M/s.HCL Perot Systems, the KEB itself proceeded to apply the HT-2(a) tariff. It is not in dispute

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that the HT-2(a) tariff is in respect of the industrial installations and as per the Millennium IT Policy - 2000

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(“ the Millennium IT Policy ”), which was in vogue as on that particular day, the companies engaged in computer software development were entitled to the HT-2(a) tariff as evidenced by the relevant clauses of the Millennium IT Policy, which is produced as Annexure-D and the same reads as follows:

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“POWER:

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9.13 Software companies will be treated as industrial (and not commercial) and electricity tariff applicable to the industrial consumers will be levied on such companies.

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9.14 Continuous uninterrupted and quality power supply being one of the prime requirements for sustenance and growth of Information Technology Industries, these industries would be given priority in sanction and servicing of power and would also be exempt from power-cuts without any time limit.”

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As could be seen from the above clause, it was the policy of the State that all software companies would be treated as ‘ industrial companies ’ and not as ‘ commercial companies ’ and the electricity tariff applicable to the industrial consumers would be levied on such software companies.

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The fact that the KEB applied the HT-2(a) tariff, by itself indicates that M/s.HCL Perot Systems was a software company which was entitled to tariff under the HT-2(a) category as per the Millennium IT Policy. It may also be pertinent to state here that there is no provision in the Millennium IT Policy which required the making of an application by a company engaged in software development seeking a concessional tariff, or for any certificates to be produced in order to avail the concessional tariff.

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It is not in dispute that on the basis of the order dated 04.05.2001 (Annexure-E), the power was supplied to M/s.HCL Perot Systems and the HT-2(a) tariff was

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applied to them. It is also not in dispute that a contract was entered into between M/s.HCL Perot Systems and the KEB pursuant to the order dated 04.05.2001.

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It may be pertinent to state here that the State Government proceeded to issue a Circular dated 10.01.2002 detailing the procedure for administering incentives and concessions for Information Technology and Bio-Technology (“ IT-BT ”) industries. In this Circular, a specific clause was ear-marked for Power Tariff and the same reads as follows:

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“5. POWER TARIFF *:

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The IT & Biotech Companies are treated as “Industrial Consumers” and not “Commercial Consumers” for the purpose of levying electricity tariff as envisaged in the respective policies. The company seeking such concessions shall make an application to KBITS. After due verification of actual requirements of the Power for IT / Biotech activities, the Director IT & Biotechnology, will issue a certificate to the company based on

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which the KPTCL authorities shall levy the Industrial Tariff.

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The concession in power tariff extended to the software companies in para 9.13 of the “Mahithi” – the Millennium IT Policy launched vide GO No.ITD 20 POL 2000 dated 24.05.2000 is withdrawn with effect from 1.10.2003 until further orders.”

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As could be seen from the above-extracted clause, the State Government has reiterated its policy of treating IT-BT companies as industrial consumers and not as commercial consumers for the purpose of levying electricity tariffs.

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However, the Circular did indicate that a company seeking such concession was required to make an application to the Karnataka Power Transmission Corporation Limited (“ KPTCL ”), which would verify the actual requirements of the power for IT-BT activities and the Director, IT & BT would issue a Circular to the

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company, on the basis of which the KPTCL Authorities would levy industrial tariffs.

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It may be relevant to state here that this Circular dated 10.01.2002 (Annexure-A) was obviously in relation to those IT-BT companies which were sought to be set up after 10.01.2002. In other words, the Circular dated 10.01.2002 was essentially in respect of those IT-BT companies which were to commence operation after 10.01.2002.

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It is for this particular reason that the latter part of Clause (5) of the Circular stipulated that the earlier benefit in the form of concession to the power tariff under paragraph 9.13 was being withdrawn from 01.10.2003. This would therefore indicate that from 01.10.2003 any ITBT company intending to start operations was required to adopt the procedure indicated in Clause (5). Obviously, the companies which had started operations before 10.01.2002 were not obligated or required to seek any certification under the Circular dated 10.01.2002.

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As the matter stood thus, on 02.06.2011, an inspection was conducted by the officers of the Bangalore Electricity Supply Company Limited (“ BESCOM ”) and they had noticed during the inspection that the installation had been provided with ETC meter which was recording properly and they also noticed that the installation was built under the HT-2(a) tariff and the registered consumer was “M/s.Perot Systems Private Limited”.

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The officers, however, noticed that the name of M/s.Dell International Services India Private Limited was found as against M/s.Perot Systems, and M/s.Dell Systems did not possess the required IT-BT Certificate as contemplated in the Circular dated 10.11.2006.

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The officers, therefore, proceeded to issue a provisional bill on 25.05.2011 for a sum of Rs.3,76,58,646/. Thereafter, BESCOM proceeded to issue a back-billing demand notice dated 02.06.2011 calling upon the petitioner herein to pay the back-billing charges to an extent of Rs.3,77,97,015/-.

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The petitioner being aggrieved approached the Consumer Grievance Redressal Forum (“ the CGRF ” or “ the Forum ”) by lodging a complaint and the Forum, in the first instance, directed the Assistant Executive Engineer to reconsider the matter and issued a fresh notice as per law, as against which the petitioner preferred an appeal before the Ombudsman, who proceeded to remit the case to the CGRF and directed the matter to be heard afresh.

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The CGRF thereafter proceeded to pass an order dated 10.11.2014 rejecting the complaint raised by the petitioner and directed the petitioner to prefer an appeal under Clause 44 of the Supply Conditions Regulations, against which the petitioner preferred an appeal to the Ombudsman, but the Ombudsman rejected the appeal and upheld the order passed by the CGRF.

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The petitioner thereafter approached this Court in W.P. No.4819 of 2015 [GM-KEB] and this Court allowed

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said writ petition and directed the sub-divisional officer to pass orders afresh.

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Pursuant to this order, the impugned order dated 28.04.2017 has been passed holding that the petitioner was liable to pay a sum of Rs.3,77,97,015/-, based on the MT report dated 25.05.2011, as back-billing charges.

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The petitioner being aggrieved by this order is before this Court.

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During the pendency of this writ petition, this Court passed an interim order on 28.09.2018 observing that the impugned order was prima facie unsustainable and directed the Authority to re-consider the matter after giving an opportunity to the petitioner. In fact, this Court took the view that an opportunity ought to be granted to the BESCOM to correct its own mistake and had accordingly directed the BESCOM to pass a fresh order in the matter.

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Pursuant to said order, a further order has been passed on 11.10.2018 as per Annexure-W wherein the earlier demand made has been re-iterated. The petitioner, being aggrieved by the re-iteration of the original impugned order, has amended the petition to challenge the order passed during the pendency of this writ petition.

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The learned counsel for the petitioner contended that the BESCOM had no jurisdiction to pass an order holding that the petitioner was required to obtain a certificate in order to avail the HT-2(a) tariff, since the Company started operations prior to the requirement of obtaining a certificate as stipulated on 10.01.2002.

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The learned counsel further submitted that the concessional tariff under the HT-2(a) category was made applicable by the erstwhile KEB on its own volition by applying the Millennium IT Policy and a subsequent policy requirement could not be made applicable to the petitioner; and that, consequently, a demand for backbilling could not be raised.

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He also submitted that the original registered

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consumer—M/s. Perot Systems was taken over by the present petitioner and pursuant to the same, an application was made for change of name, which was also approved by the Ministry of Corporate Affairs (“ the MoCA ”), Government of India, which issued a fresh certificate of incorporation consequent upon the change of name on 21.10.2011.

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He submitted that since the name of the Company was changed in accordance with the procedure prescribed under the Companies Act, the BESCOM could not have taken the view that an unauthorized entity was using the power granted to M/s.Perot Systems. He, therefore, submitted that the impugned orders could not be sustained.

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The learned counsel appearing for the BESCOM, per contra , contended that the petitioner had an alternative remedy of filing an appeal against the impugned orders and, hence, there was no justification for entertaining the

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present writ petition. This argument cannot be entertained having regard to the fact that this Court issued rule nisi and the matter has been pending for the past seven years.

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The learned counsel also submitted that the question of applicability of the HT-2(a) tariff in respect of IT companies was the subject matter of an appeal in W.A. Nos.4 & 5 of 2018 and connected cases, wherein an order passed by a co-ordinate bench of this Court on a similar issue has been stayed and, therefore, there is no justification for entertaining the present petition.

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On merits, the learned counsel contended that, admittedly, the registered company was M/s.Perot Systems, whereas the company during the course of inspection was found to be the petitioner-Company, which did not have the authority to utilize the power which was contracted to be supplied to M/s.Perot Systems. He further submitted that the demand made by BESCOM was just and proper.

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The learned counsel also submitted that it was the requirement of the Circular that the certificate be obtained in order to avail any incentive, including that of a power tariff and since there is admittedly no certificate obtained by the petitioner as required under the Circular dated 10.01.2002, the petitioner would not be entitled for any incentive including the concessional HT-2(a) tariff.

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30. Having heard the learned counsel for the parties, the

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only question that would arise for consideration in this petition is as follows:

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“Whether the BESCOM is justified in demanding Rs.3.77,97,015/- as back-billing charges by applying the HT-2(b) tariff, as opposed to the tariff under HT-2(a), on the ground that the subject Company had changed its name?”

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As already noticed above, M/s.HCL Perot Systems

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had sought and was granted the power supply on 04.05.2001 and the terms of supply categorically indicated

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that the power tariff applicable for installation was HT2(a).

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In other words, the KEB itself applied the HT-2(a) tariff, taking into consideration that M/s.HCL Perot systems was a software company. It is obvious that the KEB applied the Millennium IT Policy in order to apply the concessional tariff, which the software companies were entitled to under Clause 9.13 of the Policy.

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If the KEB itself applied a concessional tariff to M/s. HCL Perot Systems, it cannot thereafter contend that M/s.HCL Perot systems or its successors would be liable to pay for electricity under any other tariff.

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In view of the above, it is obvious that as regards the companies in respect of which concessional tariff was already granted on the premise that they were software companies by the KEB itself, the question of seeking a certification would also not arise.

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In other words, when the KEB itself had construed

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the applicant as a software company and had applied a concessional tariff, i.e., the HT-2(a), the question of that very company seeking fresh certification would obviously not arise.

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It was the intent of the State while formulating the Millennium IT Policy that every software company would be treated as an industrial consumer and the electricity tariff applicable to the industrial consumer would be applied.

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If that was the intent of the State to treat every software company as an industrial consumer, the BESCOM cannot be permitted to contend that it is entitled to apply any tariff other than the HT-2(a). In fact, the KEB, while according power supply to M/s.HCL Perot Systems, has acted in accordance with the Policy and applied the HT2(a) tariff.

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The contention of BESCOM that during a spot inspection conducted on 02.06.2011 it was noticed that the present petitioner was running the Company and that they were therefore misusing the concessional tariff that was extended to M/s. HCL Perot Systems also cannot be accepted for the simple reason that the earlier registered consumer i.e., M/s. HCL Perot systems sought change of name by making the requisite application as contemplated under the Companies Act and the MoCA, after being satisfied that the company was entitled to change of name, granted said request and consequently issued a fresh certificate of incorporation.

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Merely because a company changes its name, the KEB cannot contend that it is a new consumer/entity which is using the electricity that was contracted to be supplied to another entity. The effect of permitting the change of name of a company would only be for the purposes of branding of such company and it would not change the character of registration for the purpose of enforcing the

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agreement existing between the KEB and the originally contracted entity.

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Since the Central Government accepted the change of name, it would not be permissible for the KEB to contend that the petitioner was a different entity and was misusing the tariff.

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As far as the argument that certification was required as per the Circular dated 10.01.2002 is concerned, it is to be stated here that the power supply was granted to the petitioner prior to that particular date and, therefore, adopting the requirements of a subsequent Circular cannot be accepted.

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As already observed above, the Circular dated 10.01.2002 can only be made applicable in respect of those IT-BT companies which desire to commence their operations after 01.10.2003, as stipulated in this Circular.

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As also observed above, since the predecessor-ininterest of the petitioner—Company was granted the HT-

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2(a) tariff by virtue of the provisions of the Millennium IT Policy, the demand made by the KEB for payment under the HT-2(b) category cannot be sustained.

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As far as the argument that similar matters are pending consideration in W.A. Nos.4-5 of 2018 [GM-KEB] & connected cases, and in that particular set of cases, as could be seen from the order passed by the learned Single Judge, it was not a case where the KEB itself had applied the HT-2(a) tariff, but was a case where the petitioner therein had obtained a certificate from the District Industries Centre on 28.11.2001 certifying that the industry was engaged in the activity of development computer software. In fact, in that case, this Court has also taken the view that it was incumbent upon the BESCOM to establish that the entity was not running a software company and was using the power for some other purposes.

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In the instant case, since admittedly, the KEB itself considered the Millennium IT Policy and applied the HT-

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2(a) tariff, reliance placed on the interim order granted in the writ appeals by a co-ordinate Bench of this Court can also be of no avail.

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As a consequence, the impugned orders making a demand for back-billing charges as per Annexures “B” and

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“W” shall stand quashed .

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Any amounts paid pursuant to the interim orders granted shall be refunded to the petitioner within a period of four weeks from the date of receipt of a copy of this order.

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The writ petition is allowed accordingly.

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Sd/JUDGE

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RK CT: SN List No.: 1 Sl No.: 68

Dell Interntional Services India Private Limited v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

Dell Interntional Services India Private Limited v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

Parties & counsel

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