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TMI Blog2007 (12) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... aith 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... te the controversy involved in the matter, it will be appropriate to refer to the relevant tariff notification issued from time to time by the appellant- Corporation. The first in point of time is the tariff vide notification dated 18.1.1992. Relevant provisions of clauses read as under : "4. Rate of Charge ( Energy Charges) : All KWH consumed in the month 200 paise per KWH. 5. Extra Charge or Rebate: (i) In case of supply given at 400 volts, the consumer shall be required to pay an extra charge of 10 per cent on the amount calculated at the rate of charge under item (4). (ii) If supply is given at voltage more than 11KV, rebate mentioned below will be admissible on the amount calculated at the rate of charge under item (4). (a) Above 11 KV upto 66 KV 5% (b) Above 66 KV upto 132 KV) 7.5% Above 132 KV 10%. Xx xx xx 8. Concessions: In respect of connections as may be located in any of the eight hill districts in U.P. whose names are given below but excluding those existing at a height of less than 610 mts ,(2,000feet) above M.S.L. in Dehradun and National districts a development rebate of 33 1/3% on the amount of the bill as computed under item 4 & 5 above will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of the bill as computed under item 4 & 5 above will be given to new connections for a period of five years from the date of commencement of supply. This rebate will also be admissible for the unexpired period of five years to those existing connections which have not completed five years from the date of commencement of supply. Provided that the above development rebate shall not be admissible to the Departments/ Corporations/ Undertakings of State/ Central Government and local bodies. Description of Area of Hill Districts: 1. Almora district 2. Pithoragah district 3. Chamoli district 4. Uttarkashi district 5. Pauri Garhwal district excluding Nagarpalika area of Kotdwara. 6. Tehri Garhwal district excluding Muni Ki Reti and Dhalwala Blocks. 7. Nainital district excluding Haldwani, Rudrapur, Gadarpur, Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj Block. 8. Dehradun district excluding Doiwala, Rampur, Sahaspur and Vikas Nagar Blocks. (b) In respect of connections as may be located in Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda districts a development rebate of 50% on the amount of the bill as computed under items 4 & 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Undertakings of State/ Central Government and local bodies. Description of Area of Hill Districts: 1.Almora district 2.Pithoragah district 3.Chamoli district 4.Uttarkashi district 5.Pauri Garhwal district excluding Nagarpalika area of Kotdwara. 6.Tehri Garhwal district excluding Muni Ki Reti town area and Dhalwala villae under Narendra Nagar Block. 7.Nainital district excluding Haldwani, Rudrapur, Gadarpur, Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj Blocks. 8.Dehradun district excluding Doiwala, Rampur, Sahaspur and Vikas Nagar Blocks. (b) In respect of connections as may be located in Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda districts a development rebate of 50% on the amount of the bill as computed under items 4 & 5 above will be given to new Industrial units for a period of five years from the date of commencement of supply. This rebate will also be admissible for the unexpired period of five years to those existing Industrial units of the above districts of Bundelkhand region who have not completed five years from the date of commencement of supply. This development rebate of 50% in Bundelkhand region shall, however, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tdwara. 5.Uttarkashi district 6.Tehri Garhwal district excluding Muni Ki Reti town area and Dhalwala villae under Narendra Nagar Block. 7.Nainital district excluding Haldwan, Rudrapur, Gadarpur, Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj Blocks. 8.Dehradun district excluding Doiwala, Rampur, Sahaspur and Vikas Nagar Blocks. (b) In respect of connections as may be located in Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda districts a development rebate of 25% on the demand charges only as computed under item 4 above will be given during the unexpired period of five years to those existing industrial units of the above districts of Bundelkhand region who have not completed five years from the date of commencement of supply. This development rebate shall however not be allowed to the Departments/ Corporations/ Undertakings of the State/ Central Government and Local Bodies.." Similar is the notification dated 25.1.1999which is identical to the notification dated 18.6.1998. But in this notification dated 25.1.1999 the concession was not in clause 8 but the concession has been re-numbered from clause 8 to clause 9 which is identical a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory provisions under section 49 of the Act of 1948, therefore, it has statutory flavour. (ii) That there is complete change of tariff i.e. it has two parts, (a) demand charge and (b) energy charge. (iii) That there has been reduction in the energy consumption charges i.e. from 308 paise to 100 paise per unit. (iv) That there was large scale theft of energy in the State of U.P. (v) That units were closing on account of these concessions. (vi) That there is no total withdrawal of the rebate but by restructuring concession at the rate of 17% continues in the demand charges. (vii) That the High Court has failed to consider the public interest which was specifically pleaded by filing a detailed affidavit. (viii) That no malafide is attributed. (ix) That actual cost of energy production has shoot up to Rs.2.50. Therefore, learned senior counsel for the appellant submitted that the appellant- Corporation is fully within its right to modify the rebate and the principle of promissory estoppel cannot estop. Dr.Singhvi also submitted that the Division Bench of the High Court has relied on a decision in Pawan Alloys & Casting Pvt. Ltd. (supra) in which no affidavit was file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Casting Pvt. Ltd. (supra), therefore, it would be profitable to first examine the said decision. In this case, the U.P.State Electricity Board by notifications issued in exercise of powers under Section 49 of the Act of 1948 held out promises to the industrial units established in different parts of the State of U.P. and they were given concession in the electricity charges to the extent of 10 per cent of rebate for a period of three years for the first time and the same was prematurely withdrawn by subsequent notification which gave rise to number of writ petitions being filed in the High Court and the principle of promissory estoppel was invoked. In the writ petitions it was contended that when rebate was given to the new industrial units for a period of three years, the Board could not have arbitrarily withdrawn the same prior to the expiry of a period of three years. It was contended that such withdrawal of concession is applicable prospectively and cannot have retrospective effect to the earlier existing industrial units. The Board contested the matter. The Allahabad High Court framed the following three questions. (i) Whether the Board is estopped from withdrawing the said re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teed to them by way of development rebate had got exhausted. This takes us to the consideration of the second aspect of the matter." 8. Dr.Singhvi, learned senior counsel for the appellant- Corporation emphasized that in fact the whole case turned on the question that no public interest was sought to be pressed into service by the Board on the incentive rebate. But, in the present case, specific affidavit was filed and all the detailed facts were disclosed pertaining to the public interest but that was not dealt with by the High Court. Therefore, Pawan Alloys & Casting Pvt. Ltd. (supra) case stands distinguished. Learned senior counsel submitted that if proper public interest had been pleaded in Pawan Alloys & Casting Pvt. Ltd.(supra) then perhaps the situation would have been different. In this connection, learned senior counsel for the appellant- Corporation invited our attention to the question of public interest which was pleaded before the High Court and which was not considered by the High Court. Learned senior counsel for the appellant- Corporation submitted that all the nine points which have been mentioned above were mentioned in the counter affidavit filed by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centive and has the effect of only suspending levy and collection of customs duty and can be revoked or withdrawn in public interest. It was further observed that when exemption is granted in exercise of statutory powers, it is implicit that it can also be rescinded or modified at any time in exercise of the same power and it was observed that withdrawal of exemption is a matter of Government policy with which the Court would not in the absence of any manifest injustice, mala fides or fraud interfere. It was observed as follows : " The doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority " to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make". To invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine. Bald expressions, without any supporting material, to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, provided, of course, it is possible for the promise to restore the status quo ante. If, however, the promise cannot resume his position, the promise would become final and irrevocable. " This case in turn followed Kasinka Trading (supra). 11. Our attention was invited to a decision of this Court in Sales Tax Officer & Anr. V. Shree Durga Oil Mills & Anr. [ (1998) 1 SCC 572]. In this case it was held that the Government was competent to change its policy in public interest on the basis of resource crunch and that would be sufficient for non- applicability of the rule of promissory estoppel. Their Lordships held that public interest can override consideration of private loss or gain. Any Industrial Policy Resolution (IPR) can be changed by the State looking to its severe economic crunch and in this case the respondent sought to invoke this IPR which was issued on 18.7.1979 and was effective for the period 1979-83. The respondent established its industry on 28.11.1979. Therefore, on factual aspect also this Court found that within four months of establishment of industry, the respondent was not likely to suffer any loss. But at the same time, their Lordships observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawn or the Scheme be modified, that supervening pubic interest would prevail over any promissory estoppel." 13. As against this, Mr.Shanti Bhushan, learned senior counsel appearing for the respondents has submitted that in view of Section 78-A of the Act of 1948 a direction was issued by the State Government for giving this development concession and the State was competent to give such direction and in pursuance of that the hill development rebate was given. Mr.Shanti Bhushan submitted that it will be arbitrary and unfair if those entrepreneurs who have established their industries on the representation made by the State that they will be given certain concessions and in pursuance of that they have made huge investments and now that the concession has been withdrawn it will ruin those entrepreneurs and therefore, the appellant- Corporation is estopped from going back from their representation. In this connection, he principally relied on a decision of this Court in M/s. Motilal Padampat Sugar Mills Co.Ltd. v. State of Uttar Pradesh & Ors. [(1979) 2 SCC 409] and specially invited our attention to paragraph 24 of the judgment. In paragraph 24, their Lordships have summed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promise and the promise would after his position relying upon it. But if the Government makes such a promise and the promise acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislature most, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppel and also the legitimate expectation and found that the revocation of the exemption granted for a period of seven years by the State Government was arbitrary, unjust and unreasonable and was liable to be quashed. It was observed as follows : " This Court in E.P.Royappa v. State of T.N.[(1974) 4 SCC 3] observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of " justice and fair play". The attempt to take away the said benefit of exemption with effect from 15-1-1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. .. .." 14. Mr.Shanti Bhushan, learned senior counsel invited our attention to paragraph 33 of the judgment in Pawan Alloys & Casting Pvt. Ltd.(supra) and submitted that in fact an argument was made at the Bar that the high-powered Tariff Realisation Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party. Learned senior counsel submitted that in Shrijee Sales Corporation & Anr. (supra) and Shree Durga Oil Mills & Anr.(supr) certain tax exemption was given and subsequently it was revoked and learned senior counsel submitted that those cases are distinguishable, that there were not the cases in which inducement was made, and the party acted on that inducement. Those were the cases where exemption was given on customs and sales tax but it was not in the nature of inducement or any representation or promise on the part of the other party to encourage the entrepreneurs to come and make their investments. 15. Learned senior counsel invited our attention to a decision of this Court in State of Punjab V. Nestle India Ltd. & Anr. [ (2004) 6 SCC 465] in which a representation was made by the Government in the manner de hors the Rules but a statement was made by the Finance Minister in his Budget speech for 1996- 97 making representation to the effect that the State Government had abolished purchase tax on milk. The manufacturers of milk products, therefore, were not paying the purchase tax on milk for the assessment year 1996-97 and mentioned this fact in their returns. The taxing au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el submitted that so far as Section 49 of the Act of 1948 is concerned, there is no such contemplation that it can also revoke the same. It is only because of the provisions of the General Clauses Act it can be revoked but not once granted under Section 49(3) of the Act of 1948, there is no provision for any revocation of the exemption granted to certain class of persons having regard to the geographical condition of the area, the nature of supply and the purpose for which supply is required and other relevant factors. Mr.Shanti Bhushan also submitted that there is no allegation of theft in the hill area by the persons to whom the power had been granted at a concessional rate. and all the circumstances which have been taken into consideration for revocation of the exemption notification show that there was no overwhelming consideration for revoking such exemption in public interest. 16. Mr.S.Ganesh, learned senior counsel appearing for some of the respondents invited our attention to a decision of this Court in Mahabir Vegetable Oils (P) Ltd. & Anr. V. State of Haryana & Ors. [ (2006) 3 SCC 620]. In this case, the appellants were the owner of solvent extraction plants. Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute. 17. in this background, in view of various decisions noticed above, it will appear that the Court's approach in the matter of invoking the principle of promissory estoppel depends on the facts of each case. But the general principle that emerges is that once a representation has been made by one party and the other party acts on that representation and makes investment and thereafter the other party resiles, such act cannot stated to be fair and reasonable. When the State Government makes a representation and invites the entrepreneurs by showing various benefits for encouraging to make investment by way of industrial development of the backward areas or the hill areas, and thereafter the entrepreneurs on the representations so made bona fidely make investment and thereafter if the State Government resile from such benefits, then it certainly is an act of unfairness and arbitrariness. Consideration of public interest and the fact that there cannot any estoppel against a Statute are exceptions. 18. Learned senior counsel for the appellant has cited nine instances which can be loosely categorised into two i.e. (i) that there cannot be any estoppel against the statute and (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e public morality that the incumbent who have felt persuaded on account of the representation made by the State Government that they will be given certain benefits and they acted on that representation, it does not behove on the part of the appellant- Corporation to withdraw the said benefit before expiry of the stipulated period by issuing the notification revoking the same which the respondents were legitimately entitled to avail. We fail to understand why the appellant- Corporation which made a representation and allowed the other party to act upon such representation could resile and leave the citizens in a lurch. In such a situation the principle of promissory estoppel which has been evolved by the Courts which is based on public morality cannot permit the State to act in such an arbitrary fashion. Other grounds for the purpose of public interest which have been pleaded; namely that there are two methods of tariff provided by the amendment and the actual consumption has been reduced based on the calculation of energy charges per KV from 308 paise to 100 paise and there was large scale theft or that units were closing down and there was no mala fide intention in the matter of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written statement filed by the appellant- Corporation before the Allahabad High Court and unfortunately, the High Court did not advert to these details but we have examined all these details and found that all the nine points raised by Dr.Singhvi does not persuade us to take a contrary view from the view taken by the High Court. There is no gain saying that the public interest is paramount and the private interest has to be sacrificed for the larger interest. But, after survey of all these cases on the subject, the judicial consensus that emerges is that whenever the State has made a representation to the public and the public has acted on that representation and suffered economically or otherwise, then in that case the State should be estopped from withdrawing such benefit to the detriment of the such people except in public interest or against the Statute. So far as the public interest as involved in the present case is concerned, we have found that there was no overwhelming evidence to revoke the benefit granted to the industrial units in the hill areas. So far as the Statute is concerned, the notification was issued under Section 49 of the Act of 1948 and the same was revo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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