TMI Blog2007 (12) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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. - Appeal (civil) 1215-1216 of 2001 - - - Dated:- 10-12-2007 - MATHUR, A.K. AND KATJU, MARKANDEY, JJ. JUDGMENT A.K.MATHUR, J. 1. These appeals are directed against the order dated 25.5.2000 passed by the Division Bench of the Allahabad High Court whereby the Division Bench has allowed the writ petitions and Clause 9(a) of the notification dated 25.1.1999 (Annexure-8 to the writ petition) and clause 8(a) of the notification dated 18.6.1998 (Annexure -7 to the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Above 132 KV 10%. Xx xx xx 8.Concessions: (a) In respect of connections as may be located in under mentioned areas of the hill districts in U.P., a development rebate of 33 1/3 percent on the 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 Bloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above development rebate shall not be available to the Department/ Corporations/ Undertaking of State/ Central Government and Local Bodies. DESCRIPTION OF AREA OF HILL DISTRICTS: 1.Almora district 2.Pithoragah district 3.Chamoli district 4.Pauri Garhwal district excluding Nagarpalika area of Kotdwara. 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/ Underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is bound on the principle of promissory estoppel and it cannot revoke the benefit. 5. Dr. A.M. Singhvi, learned senior counsel for the appellant has given nine reasons that this modification of the rebate is fully justified for the following reasons: (i) That the notifications have been issued in exercise of 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, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners has also submitted that the concession which has been given has a vested right and it can only be revoked by the same Statute. 7. Both the learned senior counsel appearing for the parties relied on number of decisions of this Court on the subject. Since the High Court has relied primarily on the decision of this Court in Pawan Alloys 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this incentive rebate, as seen earlier, the equity which had arisen in favour of the appellants remained untouched and undisturbed by any overwhelming and superior equity in favour of the Board entitling it to withdraw this development rebate in a premature manner leaving these promises high and dry before the requisite period of three years earlier guaranteed 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that Government being satisfied about the public interest in withdrawing the exemption no unequivocal representation or promise extended by merely specifying the period of operation of the exemption notification so as to attract the doctrine of promissory estoppel. It was pointed out that exemption under Section 25 was not in the nature of any incentive 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 representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved, provided, of course, no one is put in any adverse situation which cannot be rectified. Even where there is no such overriding public interest, it may still be within the competence of the Government to resile from the promise on giving reasonable notice which need not be a formal notice, giving the promise a reasonable opportunity of resuming his position, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t requires that the State be held bound by the promise held out by it in such a situation. But this does not preclude the State from withdrawing the benefit prospectively even during the period of the Scheme, if public interest so requires. Even in a case where a party has acted on the promise, if there is any supervening public interest which requires that the benefit be 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was regarded as sufficient justification for the Government to repudiate even its contractual obligations; but, let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies case and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim t be immune 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the statute. But their Lordships held that the principle of underlying legitimate expectation was based on Article 14 of the Constitution and any action taken by the State which went against the rule of fairness was liable to be struck down. Finally this Court after review of the cases on the subject, invoked the principle of promissory estoppel 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riJee Sales Corporation Anr. (supra) and submitted that it was not an inducement but a case of promissory estoppel when a promise is made and citizen is induced to act on those representation, then in that case, once the party has suffered on account of so called inducement, then in that case it cannot be revoked to the disadvantage of the other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cabinet. Similarly, our attention was invited to paragraph 16 of the judgment in Shree Durga Oil Mills Anr.(supra). Mr.Shanti Bhushan submitted that in the aforesaid case Section 6 of the Orissa Sales Tax Act clearly contemplated that the State Government can grant exemption from sales tax and likewise withdraw any such exemption. Learned senior counsel 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputably were made keeping in view the industrial policy of the State. Their Lordships held that the doctrine of promissory estoppel will operate even in the legislative field. Learned senior counsel submitted that such concession which has been granted cannot be revoked as the beneficiary acquired a vested right and the same can only be revoked by the Statute. 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot stand. Therefore, this distinction has to be borne in mind. In the present case, the U.P. Electricity Reforms Act, 1999 came into force with effect from 2000. Therefore, if such benefit has not been extended then a different stand will follow but so far as the delegated legislation is concerned, this kind of revocation cannot be sustained. It is highly against the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her party then the other party who has granted the said benefit cannot revoke the same under the garb of public interest. Therefore the grounds that the revocation notification was issued in public interest and that same has the flavour of the statute, cannot persuade us to uphold it. sustained. It is true that a detailed statement was given in various paragraphs of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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