2007 (12) TMI 443 - SC - Indian Laws

Whether the concession in the consumption of energy which has been given to the writ petitioners for establishing the industries in the hill areas can be revoked or modified by the appellant- Corporation or not? Held that - Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the shortsightedness of the governance. Therefore in order to keep the faith of the people the Government or its instrumentality should abide by their commitments. In this context the action taken by the appellant-Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act the Government should not be permitted to withdraw from that. This is a matter of faith. Therefore as a result view taken by the Allahabad High Court on revoking the principle of promissory estoppel is correct and the respondent- units will be entitled to such benefits till the U.P. Electricity Reforms Act 1999 came in to force. Since after coming into force the Act of 1999 no such concession has been granted therefore the concession shall survive till the Act of 1999 came into force. The appeals are accordingly disposed of with no order as to costs.

Issues Involved:
1. Validity of the reduction in hill development rebate from 33.33% to 17%.
2. Applicability of the principle of promissory estoppel against the reduction in rebate.
3. Public interest and statutory authority in modifying the rebate.
4. Impact of the U.P. Electricity Reforms Act, 1999 on the rebate.

Detailed Analysis:

1. Validity of the Reduction in Hill Development Rebate:
The appeals were filed against the order of the Allahabad High Court, which struck down Clause 9(a) of the notification dated 25.1.1999 and Clause 8(a) of the notification dated 18.6.1998, reducing the hill development rebate from 33.33% to 17%. The High Court directed the appellant-Corporation to continue providing the 33.33% rebate for the unexpired period of five years from the commencement of electricity supply.

2. Applicability of the Principle of Promissory Estoppel:
The High Court held that the appellant-Corporation was bound by the principle of promissory estoppel and could not revoke the benefit. The principle was invoked because the entrepreneurs had made significant investments based on the promise of a 33.33% rebate for five years. The Supreme Court examined whether promissory estoppel could prevent the appellant-Corporation from modifying the rebate.

3. Public Interest and Statutory Authority in Modifying the Rebate:
The appellant-Corporation argued that the modification was justified under Section 49 of the Electricity (Supply) Act, 1948, citing reasons such as public interest, large-scale theft of energy, and financial losses. The Corporation contended that the restructuring was necessary to avoid losses and was done in public interest. The Supreme Court reviewed whether these reasons constituted sufficient public interest to override the principle of promissory estoppel.

4. Impact of the U.P. Electricity Reforms Act, 1999:
The appellant-Corporation argued that the U.P. Electricity Reforms Act, 1999, which came into force in 2000, transferred the power to determine tariffs to a Commission, and thus, the principle of promissory estoppel could not be applied against the statute. The Supreme Court considered whether the benefits granted before the Act could be revoked after the Act came into force.

Judgment Summary:

Promissory Estoppel:
The Supreme Court upheld the High Court's view that the principle of promissory estoppel applied, preventing the appellant-Corporation from reducing the rebate. The Court emphasized that the entrepreneurs had made investments based on the promise of a 33.33% rebate, and revoking this benefit would be unfair and arbitrary.

Public Interest:
The Court found that the reasons provided by the appellant-Corporation, such as financial losses and energy theft, did not constitute sufficient public interest to justify revoking the rebate. The Court noted that public interest must be overwhelming and supported by evidence, which was not the case here.

Statutory Authority:
The Court distinguished between primary legislation and delegated legislation. It held that while the Corporation had the authority to modify the rebate under Section 49 of the Act of 1948, such modifications must be fair and reasonable. The Court ruled that the modification was not justified in this case.

U.P. Electricity Reforms Act, 1999:
The Supreme Court accepted that the benefits could not be extended beyond the date the U.P. Electricity Reforms Act, 1999, came into force. Therefore, the benefits of the rebate would be protected only until the Act came into effect.

Conclusion:
The Supreme Court concluded that the appellant-Corporation could not revoke the 33.33% rebate before the U.P. Electricity Reforms Act, 1999, came into force. The appeals were disposed of, and the respondent units were entitled to the benefits until the new Act was enacted. The judgment emphasized the importance of maintaining the credibility of government representations to ensure good governance and public faith.

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