TMI Blog2020 (12) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... entrepreneurship. The policy document held out a solemn representation. It contemplated the grant of a rebate/deduction from the payment of electricity duty not only to new units but to existing units as well who had or would set up captive power plants. The State, in the present case, held out inter alia a solemn representation in terms of Clauses 32.10 and 35.7(b) of the entitlement of the exemption for a period of five years from the date of production - The State government was evidently inclined to grant the exemption. This is not a case where due to an overarching requirement of public interest, the State government decided to override the representation which was contained in the Industrial Policy 2012. Building on Motilal Padampat [ 1978 (12) TMI 45 - Supreme Court ] - HELD THAT:- The policy contained a provision for monitoring and reviewing and envisaged that all departments and organizations would issue a follow-up notification to give effect to the policy within one month. This was similar to Clause 38(b) of the policy in the present case. No notification was issued by the State of Bihar to give effect to the industrial policy, which lapsed on 31 August 2000. The cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deprive industrial units within the State of their legitimate entitlement. The State government did as a matter of fact, issue a statutory notification Under Section 9 but by doing so prospectively with effect from 8 January 2015 it negated the nature of the representation which was held out in the Industrial Policy 2012. Absolutely no justification bearing on reasons of policy or public interest has been offered before the High Court or before this Court for the delay in issuing a notification - the State had made a representation to the Respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, it is held that such a course of action by the State is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be confirmed for FYs 2012-13 and 2013-14. Appeal disposed off. - Civil Appeal Nos. 3860-3862 of 2020 (Arising out of SLP (C) Nos. 14156-14158 of 2020) - - - Dated:- 1-12-2020 - JUDGMENT Dr. D.Y. Chandrachud, J. A The appeal B The issue C Captive power plant: assessment to electricity duty D Industrial Policy 2012 E Exemption from Electricity Duty F Before the High Court G Submissions of Counsel H Analysis H.1 A State in breach of policy commitments H.2 Building on Motilal Padampat H.3 Promissory estoppel - origins and evolution H.4 From estoppel to expectations H.5 Indian Law and the doctrine of legit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as granted to the Respondent on 22 November 2011 Under Rule 4 of the Bihar (Jharkhand) Electricity Duty Rules 1949 3 , according to which it was liable to pay duty for distribution and/or consumption of the energy from 1 October 2011. On the basis of the returns submitted by the Respondent in Form-III, read with Rule 9 of the Bihar Rules 1949, assessment orders were passed by the assessing officer for FY 2011-12 on 9 December 2014, for FY 2012-13 on 18 December 2015 and for FY 2013-14 on 16 December 2016. D Industrial Policy 2012 5. The Industrial Policy 2012 was notified by the State government on 16 June 2012. Some of the salient features of the Industrial Policy 2012 need to be visited: (i) Clause 32.10 provided an exemption from the payment of 50 per cent of the electricity duty for a period of five years, for captive power plants established for self-consumption or captive use: 32.10 Incentive for captive power plant New or existing industrial units setting up captive power plant shall be exempted from the payment of 50% of electricity duty for a period of five years for self-consumption or captive use (i.e. in respect of power being used by the plant) from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t new or existing industrial units setting up captive power plant for self-consumption or captive use (in respect of power being used by the plant) from the payment of 50% of Electricity Duty from the date of the commissioning of the power plant. This notification shall be effective from the date of issue and shall remain effective till the period mentioned in the relevant provisions of the Jharkhand Industrial Policy, 2012. 9. The Industrial Policy 2012 announced an incentive in the form of a rebate or deduction on electricity duty for a period of five years from the commencement of production. If a notification Under Section 9 had been issued by the State government within a month, in terms of the representation held out by the Industrial Policy 2012, the Respondent would have had the benefit of almost the entire period of exemption contemplated by the policy. But since the exemption notification dated 8 January 2015 was made prospective, the Respondent (and other similar units) would receive the benefit of the exemption from electricity duty for a much lesser period. Faced with this situation, the Respondent instituted writ proceedings before the High Court of Jharkhand in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Respondent and similarly placed units would receive the benefit for only one or two years instead of promised five years, as the Industrial Policy 2012 envisaged. In this backdrop, the conclusion of the High Court was that the failure of the State to issue an exemption notification within time should not stand in the way of the industrial units getting the benefit which was promised and its denial of such benefit for FYs 2011-12, 2012-13 and 2013-14 was contrary to the doctrine of promissory estoppel. The issuance of an exemption notification being a ministerial act, the High Court held that it should not stand in the way of industrial units obtaining relief under the doctrine as a result of the unconscionable delay caused by the State government. It was on this rationale that the High Court concluded that the notification dated 8 January 2015 issued by the Commercial Tax Department of the State government ought not to be construed with prospective effect and the Clause making it prospective would have to be struck down. The notification was deemed to be in effect from the date of the Industrial Policy 2012 (1 April 2011). The electricity duty deposited for FYs 2011-12, 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he general law and these have erroneously been allowed by the common judgment and order of the High Court; (x) The law laid down in the judgments of the Constitution Bench in State of Madhya Pradesh v. Bhailal Bhai AIR 1964 SC 1006 ( Bhailal Bhai ) and Suganmal v. State of Madhya Pradesh AIR 1965 SC 1740 ( Suganmal ) continues to hold the field; (xi) The above judgments hold that any claim for refund could be made only within the period of limitation prescribed under the general law for the filing of suits for the recovery of amounts due and the High Court ought not to entertain a petition Under Article 226 in the exercise of its extra-ordinary writ jurisdiction; (xii) In the absence of any pleading before the High Court, there is a presumption in law against the Respondent that the amount claimed as rebate/deduction from electricity duty has already been passed on to its customers. Hence, the adjustment which has been granted by the High Court would result in unjust enrichment to the Respondent. Reliance was placed on the decision of this Court in Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536 ( Mafatlal Industries ); (xiii) An alternative and efficacious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y hardship by reason of the delay in approaching the High Court; and (iv) The decisions in Bhailal Bhai (supra) and Suganmal (supra) are distinguishable as they relate to a writ petition seeking refund of illegally collected tax. 16. On the above grounds, it has been submitted that the Respondent is entitled to the benefit of a rebate for a period of five years as held out in Clause 32.10 of the Industrial Policy 2012. 17. The Respondent has submitted that the period of five years may commence from 17 August 2011 (the date of commercial production) or from FY 2012-13 (in accord with Clause 35.7(b) of Industrial Policy 2012) or from 8 January 2015 (the date of the notification). H Analysis 18. The rival submissions will now be considered. H.1 A State in breach of policy commitments 19. The Industrial Policy 2012 refers to the earlier Industrial Policy, which was formulated in 2001 after the formation of the State of Jharkhand. The policy notes that considerable progress in industrialization has been achieved during the policy period . Yet, according to Clause 1.8, there is a need to boost economic activities to sustain the current level of growth and achieve e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idual or entity cannot compel the State to issue a notification providing for an exemption or to insist upon the terms on which the government does so. Whether an exemption should be issued and if so, the terms for the exemption, have to be determined by the State. But this case does not rest on that principle nor did the claim of the Respondent require the High Court to make a departure from it. The Industrial Policy 2012 contained a representation that a rebate/deduction would be granted. It held out a representation that a notification would be issued in a month. These were solemn commitments made by the State of Jharkhand. What remained was their implementation by issuing a notification, which was to be done within one month. The State government evidently intended to implement and act in pursuance of its commitment. For, ultimately, it did issue a notification. But it did so on 8 January 2015 - after a period of a month envisaged under the Industrial Policy 2012 had dragged on for nearly three years. 22. It is time for the State government to take notice of the observations of the High Court in regard to administrative lethargy. If the object of formulating the industrial p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by the State of Bihar to give effect to the industrial policy, which lapsed on 31 August 2000. The claim to sales tax exemption by the unit was rejected by the State government on the ground that it had decided not to grant an incentive to a sick industrial unit. A follow-up notification was issued during the pendency of the case before this Court. In the backdrop of these facts, this Court speaking through Justice S S Nijjar, observed: 85. Even if we are to accept the submissions...that the provisions contained in Clause 24 were mandatory, the time of one month for issuing the notification could only have been extended for a reasonable period. It is inconceivable that it could have taken the Government three years to issue the follow-up notification. We are of the considered opinion that failure of the Appellants to issue the necessary notification within a reasonable period of the enforcement of the Industrial Policy, 1995 has rendered the decisions dated 6-1-2001 and 5-3-2001 wholly arbitrary. The Appellant cannot be permitted to rely on its own lapses in implementing its Policy to defeat the just and valid claim of the Company. For the same reason we are unable to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1-3-1993. This would make it clear that from 6-11-1990 to 1-3-1993, the power to grant exemption from building tax was statutorily conferred by Section 3-A on the Government. And we have seen that the Statement of Objects and Reasons for introducing Section 3-A expressly states that the said Section was introduced in order to fulfil one of the promises contained in the G.O. dated 11-7-1986. We find that the Appellants, having relied on the said G.O. dated 11-7-1986, had, in fact, constructed a hotel building by 1991. It is clear, therefore, that the non-issuance of a notification Under Section 3-A was an arbitrary act of the Government which must be remedied by application of the doctrine of promissory estoppel, as has been held by us hereinabove. The ministerial act of non-issue of the notification cannot possibly stand in the way of the Appellants getting relief under the said doctrine for it would be unconscionable on the part of the Government to get away without fulfilling its promise. H.3 Promissory estoppel - origins and evolution 26. Before the High Court, the State of Jharkhand sought to sustain its action on the ground that though the follow-up notification Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these requirements are satisfied, the operation of the doctrine may be excluded if it is, nevertheless, not inequitable for the first party to go back on his promise. The doctrine most commonly applies to promises not to enforce contractual rights, but it also extends to certain other relationships. 4.088.....The doctrine can also apply where the relationship giving rise to rights and correlative duties is non-contractual: e.g. to prevent the enforcement of a liability imposed by statute on a company director for signing a bill of exchange on which the company's name is not correctly given; or to prevent a man from ejecting a woman, with whom he has been cohabitating, from the family home. Chitty (supra) clarifies that the doctrine of promissory estoppel may be enforced even in the absence of a legal relationship. However, it is argued that this would be an incorrect application of the doctrine since it gives rise to new rights between the parties, when the intent of the doctrine is to restrict the enforcement of previously existing rights: 4.089. It has, indeed, been suggested that the doctrine can apply where, before the making of the promise or representation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 10 . By contrast, the law in the United States 11 and Australia 12 is less restrictive in this regard. 31. India, as we shall explore shortly, adopted a more expansive statement of the doctrine. Comparative law enables countries which apply a doctrine from across international frontiers to have the benefit of hindsight. This Court has given an expansive interpretation to the doctrine of promissory estoppel in order to remedy the injustice being done to a party who has relied on a promise. In Motilal Padampat (supra), this Court viewed promissory estoppel as a principle in equity, which was not hampered by the doctrine of consideration as was the case under English Law. This Court, speaking through Justice P N Bhagwati (as he was then), held thus: 12....having regard to the general opprobrium to which the doctrine of consideration has been subjected by eminent jurists, we need not be unduly anxious to project this doctrine against assault or erosion nor allow it to dwarf or stultify the full development of the equity of promissory estoppel or inhibit or curtail its operational efficacy as a justice device for preventing injustice...We do not see any valid reason w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exp Camacq Corp, (1990) 1 WLR 191 (CA)], it is not normally necessary for a person to have changed his position or to have acted to his detriment in order to qualify as the holder of a legitimate expectation [R v. Ministry for Agriculture, Fisheries and Foods Exp Hamble Fisheries (Offshore) Ltd., (1995) 2 All ER 714 (QB)]... Private law analogies from the field of estoppel are, we have seen, of limited relevance where a public law principle requires public officials to honour their undertakings and respect legal certainty, irrespective of whether the loss has been incurred by the individual concerned [Simon Atrill, 'The End of Estoppel in Public Law?' (2003) 62 Cambridge Law Journal 3]. (emphasis supplied) 34. Another difference between the doctrines of promissory estoppel and legitimate expectation under English Law is that the latter can constitute a cause of action 14 . The scope of the doctrine of legitimate expectation is wider than promissory estoppel because it not only takes into consideration a promise made by a public body but also official practice, as well. Further, under the doctrine of promissory estoppel, there may be a requirement to show a detrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on between the doctrines of promissory estoppel and legitimate expectation. This has been described in Jain and Jain's well known treatise, Principles of Administrative Law 17 : At times, the expressions 'legitimate expectation' and 'promissory estoppel' are used interchangeably, but that is not a correct usage because 'legitimate expectation' is a concept much broader in scope than 'promissory estoppel'. ... A reading of the relevant Indian cases, however, exhibit some confusion of ideas. It seems that the judicial thinking has not as yet crystallised as regards the nature and scope of the doctrine. At times, it has been referred to as merely a procedural doctrine; at times, it has been treated interchangeably as promissory estoppel. However both these ideas are incorrect. As stated above, legitimate expectation is a substantive doctrine as well and has much broader scope than promissory estoppel. ... In Punjab Communications Ltd. v. Union of India, the Supreme Court has observed in relation to the doctrine of legitimate expectation: the doctrine of legitimate expectation in the substantive sense has been accepted as part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, but, it would also be able to hold the administrative authorities to account on the footing of public law outside the zone of promises on a stronger and principled anvil. Presently, in the absence of a like doctrine to that of promissory estoppel outside the promissory zone, the administrative law adjudication of resilement of policies stands on a shaky public law foundation. 38. We shall therefore attempt to provide a cogent basis for the doctrine of legitimate expectation, which is not merely grounded on analogy with the doctrine of promissory estoppel. The need for this doctrine to have an independent existence was articulated by Justice Frankfurter of the United State Supreme Court in Vitarelli v. Seton 18 : An executive agency must be rigorously held to the standards by which it professes its action to be judged. Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed. This judicially evolved Rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the sword ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als on the ground that it would be unconscionable for them to deny what they have represented or agreed. But these concepts of private law should not be extended into the public law of planning control, which binds everyone . (See also Dyson J in R v. Leicester City Council, Exp Powergen UK Ltd. [2000] JPL 629, 637.) 34. There is of course an analogy between a private law estoppel and the public law concept of a legitimate expectation created by a public authority, the denial of which may amount to an abuse of power... But it is no more than an analogy because remedies against public authorities also have to take into account the interests of the general public which the authority exists to promote. Public law can also take into account the hierarchy of individual rights which exist under the Human Rights Act 1998, so that, for example, the individual's right to a home is accorded a high degree of protection (see Coughlan's case, at pp 254-255) while ordinary property rights are in general far more limited by considerations of public interest: see R (Alconbury Developments Ltd.) v. Secretary of State for the Environment, Transport and the Regions [2001] 2 WLR 1389. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court discussed the decision in Monnet Ispat (supra) and noted its reliance on the judgment in Attorney General for New South Wales v. Quinn (1990) 64 Aust LJR 327 : (1990) 170 CLR 1. It then observed: This Court went on to hold that if denial of legitimate expectation in a given case amounts to denial of a right that is guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or in violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 of the Constitution but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. Thus, the Court held that the doctrine of legitimate expectation cannot be claimed as a right in itself, but can be used only when the denial of a legitimate expectation leads to the violation of Article 14 of the Constitution. 42. As regards the relationship between Article 14 and the doctrine of legitimate expectation, a three judge Bench in Food Corporation of India v. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71, speaking through Justice J.S. Verma, held thus: 7. In contractual sphere as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gitimate expectation gets assimilated in the Rule of law and operates in our legal system in this manner and to this extent. (emphasis supplied) More recently, in NOIDA Entrepreneurs Assn. v. NOIDA (2011) 6 SCC 508, a two-judge bench of this Court, speaking through Justice B.S. Chauhan, elaborated on this relationship in the following terms: 39. State actions are required to be non-arbitrary and justified on the touchstone of Article 14 of the Constitution. Action of the State or its instrumentality must be in conformity with some principle which meets the test of reason and relevance. Functioning of a democratic form of Government demands equality and absence of arbitrariness and discrimination . The Rule of law prohibits arbitrary action and commands the authority concerned to act in accordance with law. Every action of the State or its instrumentalities should neither be suggestive of discrimination, nor even apparently give an impression of bias, favouritism and nepotism. If a decision is taken without any principle or without any rule, it is unpredictable and such a decision is antithesis to the decision taken in accordance with the Rule of law. ... 41. Power v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exemption prospective, contrary to the terms of the representation held out in the Industrial Policy 2012. 45. It is one thing for the State to assert that the writ Petitioner had no vested right but quite another for the State to assert that it is not duty bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of state power. The state must discard the colonial notion that it is a sovereign handing out doles at its will. Its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. This conception of state power has been reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to 8 January 2015. The only remedy which was available to the Respondent, was to challenge the terms of the exemption notification which it did by instituting writ proceedings before the High Court Under Article 226. (ii) The argument of delay 48. An earnest effort has been made on behalf of the Appellant to submit that the writ petitions before the High Court ought not to have been entertained since they were instituted in 2019. However, Mr. Devashish Bharuka, learned Counsel on behalf of the Respondents has, in the course of his submissions, correctly urged that the issue of delay has never been raised in the course of the proceedings before the High Court or raised as a ground in the Special Leave Petition before this Court. In High Court of Judicature of Patna v. Madan Mohan Prasad (2011) 9 SCC 65, a two judge Bench of this Court, speaking through Justice J M Panchal, held thus: 19. The contention advanced on behalf of the Appellant that the writ petition was filed by Respondent 1 on 10-11-1990 i.e. seven years after he had superannuated from service, and therefore, the writ petition should have been dismissed on the ground of delay and laches, cannot be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period certainly the Respondent could make a complaint that such exercise of option was not available to the Appellants and, therefore, the jurisdiction of the High Court could be invoked even at a later stage. Further, the Appellants are not put to undue hardship in any manner by reason of this delay in approaching the High Court for a relief. In this view of the matter, we are not inclined to interfere with the judgment of the High Court on the ground of delay alone when the judgment is based on legally sustainable principles. The delay of the Respondent in filing a writ petition by itself should not defeat the claim unless the position of the State has been so altered that it cannot be retracted on account of a lapse of time or the inaction of the writ Petitioner. The State has not in the present case either pleaded or argued any hardship if the Respondent were to be granted relief. Finally, the decisions in Bhailal Bhai (supra) and Suganmal (supra) related to a Petitioner seeking a refund of an illegally collected tax. In the present case, we are not concerned with such a situation. Rather, the Petitioner has come before this Court due to arbitrariness in State action which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in the majority opinion of Justice B P Jeevan Reddy, speaking for himself and four other learned judges, in the following terms: 108(iii). A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the Petitioner/Plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy 2012, the entitlement ensues from the financial year following the commencement of production. The Respondent commenced production on 17 August 2011. Hence, the order of the High Court would have to be confirmed for FYs 2012-13 and 2013-14. In conclusion, we are in agreement with the conclusion of the High Court that the Respondent was entitled to an exemption from electricity duty, although for the reasons indicated in this judgment. Further, the relief granted would stand confined to FYs 2012-13 and 2013-14. The appeals shall stand disposed of in the above terms. There shall be no order as to costs. 52. Pending application(s), if any, stand disposed of. --------------------------------- Notes :- 1 Industrial Policy 2012 2 the Bihar Act 1948 3 the Bihar Rules 1949 4 Section 9. Power of State Government to grant exemptions- The State Government shall have power to exempt any person or class of persons notified in this behalf from the duty payable under this Act and such exemptions, may be subject to such conditions and exemptions if any, as may be mentioned in the said notification. 5 Rule 6. Payment of duty. - Every Assessee shall pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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