Corporate Case Brief – State of UP v. Renusagar Power Co

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Facts:

Renusagar was a 100% subsidiary of Hindalco, wholly owned and controlled by Hindalco. The agreement between Renusagar and Hindalco indicated this was not a normal sale-purchase agreement between two independent persons at arm’s length. The price of electricity was determined according to the cash needs of Renusagar. It was thus contended that Renusagar must be treated as alter ego of Hindalco, i.e., own source of generation. ‘Own source of generation’ is an expression connected with the question of lifting or piercing the corporate veil.

Appellant’s Contention:

• The appellants contended that in this case there was no ground for lifting the corporate veil, urging that there was no warrant either in law or in fact to lift the corporate veil and treat Renusagar’s plant as Hindalco’s own source of generation.
• Appellants also contended that HC order was in violation of principles of natural justice.

Held:

• The person generating and consuming energy were the same and the corporate veil should be lifted.
• Hindalco and Renusagar were inextricably linked up together. Renusagar had in reality no separate and independent existence apart from and independent of Hindalco.
• Must be treated as one concern and the consumption of energy by Hindalco must be regarded as consumption by Hindalco from own source of generation.
• The Government did not act in violation either of the principles of natural justice or arbitrarily or in violation of the previous directions of the High Court.
• Appeal dismissed.

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