2014 (2) TMI 1277 - SC - Indian Laws

Problem with regard to supply of electricity - change in policy - Held that - As before laying down any policy which would give benefits to its subjects, the State must think about pros and cons of the policy and its capacity to give the benefits because it would be in violation of the principles of promissory estoppel, besides being unfair and immoral on the part of the State not to act as per its promise. In the instant case, the respondent State was conscious about the fact that there was a problem with regard to supply of electricity in the State of Kerala and possibly for that reason industries which depended much upon electricity as a source of power were not inclined to establish new industries in the State of Kerala. In view of the incentives and assurances given to the appellants along with others, who were desirous of setting up new industries, the appellants set up their new units which were much dependent upon continuous supply of electricity. One of the appellants is a Steel Re-rolling Mill. In steel industry, when the industry is concerned with making of steel or re-rolling of steel, it requires lot of power and energy, and electricity being one of the important sources of power, the appellant was much dependent on continuous supply of electricity, which had been assured to it by the respondent State. If an assurance was given to the appellants and similarly situated persons that they would be given 100% electricity supply for five years, the respondents can not riggle out of their liability by making a policy to the effect that the benefit by way of incentive would be extended only if the electricity supply was reduced to less than 50% on a particular day. For the aforestated reasons, in our opinion, the respondent-State was not wholly fair when it extended benefit to the appellants only for the period during which electricity supply was reduced to less than 50% on certain days. We, therefore, hold that the benefit extended by the respondent State is not sufficient. The respondent-State ought to have extended the period even for the days when supply of electricity was more than 50% but not 100% as assured under G.O. dated 21.5.1990 and 6.2.1992. We, therefore, direct the respondents to give the said benefit by extending the period of incentive. We, therefore, allow the appeals by quashing and setting aside the impugned order passed by the High Court and direct the respondents to calculate the period during which 100% electricity supply was not given to the appellants and extend the period of incentive accordingly.

Summary

Issues Involved:
1. Promissory Estoppel
2. Uninterrupted Electricity Supply
3. Extension of Incentive Period
4. Discriminatory Treatment
5. Application of Section 22B of the Indian Electricity Act, 1910

Detailed Analysis:

Promissory Estoppel:
The appellants argued that the respondent-State was bound by the principle of promissory estoppel to adhere to its promise of uninterrupted electricity supply for five years from the date of commercial production. The appellants had set up their manufacturing units based on this assurance. The respondent-State, however, contended that the principle of promissory estoppel was not applicable, citing judgments from State of Haryana & Ors. v. Mahabir Vegetable Oils Pvt. Ltd. and State of Rajasthan & Anr. v. M/s Mahaveer Oil Industries & Ors. The Court, after considering the arguments, held that the respondent-State was bound to give the benefits assured to the appellants, as no breach or non-entitlement was shown on the part of the appellants.

Uninterrupted Electricity Supply:
The appellants were promised uninterrupted electricity supply for five years, which was crucial for their manufacturing processes. However, due to certain difficulties, there were power cuts, adversely affecting their production. The Court acknowledged that the respondent-State was not generating enough electricity to meet all needs and recognized the practical difficulties in providing uninterrupted supply. Nevertheless, the Court emphasized that the respondent-State should have made necessary arrangements to fulfill its promise or compensate the appellants adequately.

Extension of Incentive Period:
The respondent-State had issued an order on 26th October 1999, extending the benefit period by the number of days during which power cuts exceeded 50%. The appellants argued that this extension was insufficient as even power cuts below 50% adversely affected their operations. The Court found the respondent-State's decision unreasonable and directed that the period of incentive should be extended for all days when 100% electricity supply was not provided, not just when the cut was 50% or more.

Discriminatory Treatment:
The appellants alleged discriminatory treatment, stating that other units like Malabar Cement and industries in the Export Processing Zone received uninterrupted electricity supply. The Court did not delve deeply into this issue but implied that the respondent-State should ensure fair treatment and fulfill its promises uniformly.

Application of Section 22B of the Indian Electricity Act, 1910:
The respondent-State invoked Section 22B of the Indian Electricity Act, 1910, which allows the State to regulate the supply, distribution, and consumption of electricity. The Court acknowledged this provision but emphasized that the respondent-State should have planned and regulated electricity supply to honor its commitments to the appellants. The Court held that the provision was not highly relevant in this case, as the primary issue was the assurance of uninterrupted supply given to the appellants.

Conclusion:
The Court concluded that the respondent-State was not wholly fair in extending benefits only for periods when power cuts were 50% or more. It directed the respondent-State to extend the incentive period for all days when 100% electricity supply was not provided. The impugned order of the High Court was quashed, and the appeals were allowed, with the respondent-State instructed to calculate the period of non-supply and extend the incentive period accordingly within two months. The appeals were allowed with no order as to costs.