2008 (5) TMI 723 - SC - Indian Laws

Doctrine of promissory Estoppel - discontinuation of old concessations - Investment subsidy - Tourism' was declared to be an Industry' - concession on electricity tariff limited to five years - whether the said Government Order dated 26.9.2000 is reasonable having been given retrospective effect and retroactive operation? HELD THAT - The wide range of concessions as noticed hereinbefore, inter alia, covered electricity and water charges. It is not a case where some exemptions or concessions were to be given for a specific period or as a one time measure. No time limit was fixed for applicability in respect of the policy decisions. It was not based on any formula or criteria to evaluate the realization of the object of grant of such concession over a period. It was an open ended offer. It must, therefore, be held that the Government was satisfied that the need was to grant concession if not permanently, at least for a long time. It is now a well settled principle of law that the Doctrine of promissory estoppel applies to the State. It is also not in dispute that all administrative orders ordinarily are to be considered prospective in nature. When a policy decision is required to be given a retrospective operation, it must be stated so expressly or by necessary implication. The law which emerges from the discussion is that the doctrine of promissory estoppel would not be applicable as no foundational fact therefore has been laid down in a case of this nature. The State, however, would be entitled to alter, amend or rescind its policy decision. Such a policy decision, if taken in public interest, should be given effect to. In our constitutional scheme, however, the statute and/or any direction issued thereunder must be presumed to be prospective unless the retrospectivity is indicated either expressly or by necessary implication. It is a principle of rule of law. A presumption can be raised that a statute or statutory rules has prospective operation only. The State of Kerala in this case did not grant any concession by itself. The Central Government took a larger policy of treating the tourism as an industry. A wide range of concessions were to be granted by way of one time measure; some of them, however, had a recurring effect. So far as grant of benefits which were to be recurring in nature, the State exercises its statutory power in the case of grant of exemption from payment of building tax wherefor it amended the statute. It issued directions which were binding upon the Board having regard to the provisions contained in Section 78A of the 1948 Act. The Board was bound thereby. The Board, having regard to its financial constraints, could have brought its financial stringency to the notice of the State. It did so. But the State could not have taken a unilateral decision to take away the accrued or vested right. The Board's order dated 11.10.1999 in law could not have been given effect to. The Board itself kept the said notification in abeyance by reason of order dated 8.11.1999. Appellants, indisputably, continued to derive the benefits in terms of the original order. They obtained certificates of classification. It is on the aforementioned context, the question as regards construction of the impugned notification dated 26.9.2000 arises. Ex facie, the said policy decision could not be given a retrospective effect or retroactive operation. The State was not exercising the power under any statute to grant or withdraw the concession. It was exercising its statutory power of issuing direction. It is, therefore, a statutory authority. The 1948 Act does not authorize the State to issue a direction with retrospective effect. The Board, therefore, could only give prospective effect to such directions in absence of any clear indication contained therein. By reason of withdrawal of concession with retrospective effect, the accrued right of the appellants had been affected. Thus, the impugned GO dated 26.9.2000 must be held to have a prospective operation and not a retrospective operation. That view would save it from being vulnerable to the challenge of being hit by Article 14 of the Constitution of India - We, however, are not in a position to accept the contention that the Bills could not have been issued having regard to Sub-section (2) of Section 56 of the Act. Appellants herein have incurred liabilities. The liability to pay electricity charges is a statutory liability. The Act provides for its consequences. Unless, therefore, the 2003 Act specifically introduced, the bar of limitation as regards the liability of the consumer incurred prior to coming into force of the said Act. In our opinion, having regard to Section 6 of the General Clauses Act, the liability continues. We, therefore, are of the opinion that the High Court was not correct in its view to the aforementioned extent. The judgment of the High Court is, thus, set aside to the aforementioned extent. The appeals are allowed with costs. Grant of installments - interest on the delayed payment under the tariff - In all other cases, the High Court directed that 18% interest would be payable following the decision of the Court in Kerala State Electricity Board through its Special Officer (Revenue) and Anr. v. M.R.F. Ltd. 1995 (12) TMI 381 - SUPREME COURT . The same principle would apply in this case also but the bill having been raised only in 2003, the question of charging any interest thereupon from a retrospective date would not arise. This appeal is, thus, dismissed. However, there shall be no order as to costs.

Summary

Issues Involved:
1. Withdrawal of electricity tariff concessions from an anterior date.
2. Application of commercial tariff despite hotels being considered an industry.
3. Legality of raising bills after a period of two years under Section 56(2) of the Electricity Act, 2003.

Detailed Analysis:

Withdrawal of Electricity Tariff Concessions from an Anterior Date:
The appellants, owners of hotels in Kerala, were initially granted various concessions, including electricity tariff concessions, under a policy treating tourism as an industry. These concessions were later withdrawn by a Government Order dated 26.9.2000, effective retrospectively from 15.5.1999. The appellants argued that the concessions should not have been withdrawn from an anterior date. The court held that while the State has the power to review and alter policy decisions, such changes should generally be prospective unless explicitly stated otherwise. The retrospective withdrawal of concessions without adequate notice was deemed unreasonable and violative of the principle of promissory estoppel. The court emphasized that any policy decision with retrospective effect must be explicitly stated and justified by overriding public interest, which was not adequately demonstrated in this case.

Application of Commercial Tariff Despite Hotels Being Considered an Industry:
The appellants contended that the Kerala State Electricity Board (the Board) could not apply commercial tariffs as the hotels were classified as an industry. The court noted that the Board is bound by the State's policy decisions under Section 78A of the Electricity (Supply) Act, 1948, which directed the application of industrial tariffs to the hotels. The Board's unilateral decision to apply commercial tariffs was deemed invalid as the State's policy was binding on the Board. The court held that the State could grant subsidies from its own funds instead of directing the Board to provide concessions, but any such change must be prospective.

Legality of Raising Bills After a Period of Two Years:
The appellants argued that under Section 56(2) of the Electricity Act, 2003, no bills could be raised after two years. The court clarified that the 2003 Act does not apply to bills raised under the Electricity (Supply) Act, 1948. The liabilities incurred under the previous Act continue to be valid, and the limitation period under Section 56(2) of the 2003 Act does not apply retrospectively. The court upheld the Board's right to recover dues incurred before the enactment of the 2003 Act, emphasizing that statutory liabilities and their consequences persist unless explicitly repealed.

Conclusion:
The Supreme Court held that the Government Order dated 26.9.2000, which withdrew electricity tariff concessions retrospectively, should only be applied prospectively from the date of the order. The Board's application of commercial tariffs was invalid as it contravened the State's binding policy decision. The court also upheld the Board's right to raise bills for dues incurred under the previous legal framework, dismissing the argument based on Section 56(2) of the 2003 Act. The High Court's judgment was modified to reflect these findings, and the appeals were allowed with costs.