# MEERUT ETC. ETC v. U.P. STATE ELECTRICITY BOARD AND ORS

- **Citation:** [1997] Supp. 3 S.C.R. 266
- **Court:** Supreme Court of India
- **Decided:** 1997
- **Case number:** Civil Appeal No. 1710 of 1991
- **Bench:** S.B. Majmudar, K.T. Thomas
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/meerut-etc-etc-v-u-p-state-electricity-board-and-ors-15746
- **Pages:** 56

## Headnote

Electricity (Supply) Act 1948 : Section 49--Notification by Board
promising 10% rebate on electricity consumption to new industries for a period
C of three years-Prematurely withdrawn by notification dated 31st July,
1986-High Court holding that though Board is estopped from withdrawing
the rebate on the principle of proinissory estoppel, appellalits ba"ed from
challenging the notification in view of the agreements ·entered into by them
with the Board for revised tariff rates-On appeal held the Board can be
D pinned down to its promise on the doctrine of promissory estoppel-Notification not withdrawn on the ground of general public interest but solely for
commercial interest of the Board-Agreement to revise general rates of charges
has nothing to do with· development rebate-Appellants not bamd from challenging the impugned notification-Notification is purely prospective in nature-Appellants who have already paid the development rebate charges are
E entitled to refund-Claim of interest rejected-Administrative law-Promissory
estoppel.
Constitution of lndia, 1950 .'
Article 142-Jurisdiction-Exercise of-Could be invoked in the
F peculiar facts and-circumstances of the given case.
Appellants were consumers of electricity supplied by the respondentBoard. The respondent-Board in exercise of its powers under Section 49
of the Electricity (Supply) Act; 1948 issued notifications promising new
industrialists seeking to establish industries in the State, that on the
G charges of electricity consumed by them they will be given 10% rebate for
a period of three years from the date of commencement of supply of
electricity to them for the first time. Subsequently the respondent-Board
by notification dated 31st July 1956 withdrew the above concession. On
challenge, the High Court, while dismissing the petition held that (i) the
H respondent-Board was estopped by virtue of doctrine of promissory estop266
PA WAN ALLOYS AND CASTING PVI'. LTD. v. U.P. STATEELECTRICITYBD.267
pel from withdrawing the development rebate before completion of the A
period of three years; (ii) the appellants were barred from challenging the
impugned notification in view of the agreement entered into by them with
the Board for revision of tariff rates at the time of taking electric supply
and thus the impugned notification was not illegal; and (iii) the impugned
notification is not retrospective in nature.
Being aggrieved by the decision of the High Court the appellants
have filed the present appeals.
The appellants conten.ded that the Board was bound by the principle
B
of promissory estoppel to continue development incentive for a period of C
three years and consequently the Board could not have withdrawn the said
rebate by impugned notification; the High Court erred in holding that they
were barred from challenging the impugned notification on the ground
that they have entered into an agreement with the Board while getting
electricity supply; the impugned notification was liable to be struck down
being retrospective in nature.
D
The respondent-Board contended that there was no promise held out
by them and they had only exercised statutory or quasi legislative powers
and thus there could not be any promissory estoppel against such an
exercise of power; it was open to the Board to withdraw the rebate on the E
ground of public policy and doctrine of promissory estoppel cannot be
pressed in service; the appellants were barred by the contractual obligation
flowing from the agreement entered into by them with the Board while
taking electric supply and were thus barred from challenging the impugned notification.
F
Allowing the appeals, this Court
HELD : 1.1. The respondent-Board can be pinned down to its
promise on the doctrine of promissory estoppel. The respondent-Board
must be treated to be estopped from prematurely withdrawing the incen- G
tive development rebate made available to the appellant industries by
Issuing the impugned notification dated 31st July, 1986. (301-F]

## Text

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A
M/S. PAWAN ALLOYS AND CASTING PVT. LTD.,
B
MEERUT ETC. ETC.
v.
U.P. STATE ELECTRICITY BOARD AND ORS.
AUGUST 5,. 1997
(S.B. MAJMUDAR AND K.T. THOMAS, JJ.)
Electricity (Supply) Act 1948 : Section 49--Notification by Board
promising 10% rebate on electricity consumption to new industries for a period
C of three years-Prematurely withdrawn by notification dated 31st July,
1986-High Court holding that though Board is estopped from withdrawing
the rebate on the principle of proinissory estoppel, appellalits ba"ed from
challenging the notification in view of the agreements ·entered into by them
with the Board for revised tariff rates-On appeal held the Board can be
D pinned down to its promise on the doctrine of promissory estoppel-Notification not withdrawn on the ground of general public interest but solely for
commercial interest of the Board-Agreement to revise general rates of charges
has nothing to do with· development rebate-Appellants not bamd from challenging the impugned notification-Notification is purely prospective in nature-Appellants who have already paid the development rebate charges are
E entitled to refund-Claim of interest rejected-Administrative law-Promissory
estoppel.
Constitution of lndia, 1950 .'
Article 142-Jurisdiction-Exercise of-Could be invoked in the
F peculiar facts and-circumstances of the given case.
Appellants were consumers of electricity supplied by the respondentBoard. The respondent-Board in exercise of its powers under Section 49
of the Electricity (Supply) Act; 1948 issued notifications promising new
industrialists seeking to establish industries in the State, that on the
G charges of electricity consumed by them they will be given 10% rebate for
a period of three years from the date of commencement of supply of
electricity to them for the first time. Subsequently the respondent-Board
by notification dated 31st July 1956 withdrew the above concession. On
challenge, the High Court, while dismissing the petition held that (i) the
H respondent-Board was estopped by virtue of doctrine of promissory estop266
PA WAN ALLOYS AND CASTING PVI'. LTD. v. U.P. STATEELECTRICITYBD.267
pel from withdrawing the development rebate before completion of the A
period of three years; (ii) the appellants were barred from challenging the
impugned notification in view of the agreement entered into by them with
the Board for revision of tariff rates at the time of taking electric supply
and thus the impugned notification was not illegal; and (iii) the impugned
notification is not retrospective in nature.
Being aggrieved by the decision of the High Court the appellants
have filed the present appeals.
The appellants conten.ded that the Board was bound by the principle
B
of promissory estoppel to continue development incentive for a period of C
three years and consequently the Board could not have withdrawn the said
rebate by impugned notification; the High Court erred in holding that they
were barred from challenging the impugned notification on the ground
that they have entered into an agreement with the Board while getting
electricity supply; the impugned notification was liable to be struck down
being retrospective in nature.
D
The respondent-Board contended that there was no promise held out
by them and they had only exercised statutory or quasi legislative powers
and thus there could not be any promissory estoppel against such an
exercise of power; it was open to the Board to withdraw the rebate on the E
ground of public policy and doctrine of promissory estoppel cannot be
pressed in service; the appellants were barred by the contractual obligation
flowing from the agreement entered into by them with the Board while
taking electric supply and were thus barred from challenging the impugned notification.
F
Allowing the appeals, this Court
HELD : 1.1. The respondent-Board can be pinned down to its
promise on the doctrine of promissory estoppel. The respondent-Board
must be treated to be estopped from prematurely withdrawing the incen- G
tive development rebate made available to the appellant industries by
Issuing the impugned notification dated 31st July, 1986. (301-F]
1.2. If a statutory authority or an executive authority of the State
functioning on behalf of the State in exercise of its legally permissible
powers, has held out any promise to a party who relying on the same has H
268
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A changed its position not necessarily to its detriment and if this promise
does not offend any provision of law or does not fetter any legislative or
quasi- legislative power inhering in the promisor, then on the principle of
promissory estoppel the promisor can be pinned down to the promise
offered by it by way of representation containing such promise for the
B benefit of the promisee. (279-B-C]
State of H.P. and Ors. v. Ganesh Wood Products and Ors., (1995] 6
sec 363, referred to.
1.3. The Board had held out a promise by way of representation to
C the new industrialists on the basis of the clear recitals in three notifications. The said notifications were issued by the Board in exercise of powers
under Section 49 of the Electricity (Supply) Act notifying revised rate
schedule appended to the notifications and they are to apply to all persons
in respect of supply of electricity throughout the State directly served by
the Board. These notifications clearly contained a representation by the
D Board to the consumers, who were to establish new industrial units in the
territories of the State in which the Board was to supply electricity; that
on the total bill of electricity consumed by them during the period of first
three years of their taking supply they will be getting a rebate of 10% on
the total amount of such bills for electricity consumption. This Court
E agrees with the finding of the High Court that by these notifications the
Board had clearly held out a promise to these new industries and as these
new industries had admittedly got established in the region where the
Board was operating, acting on such promise, the same in equity would
bind the Board. Such a prontise was not contrary to any statutory
provision but on the contrary was in compliance with the directions issued
F under Section 78A of the Act. (281-B; 282-F; 283-H; 284-A]
State of Madhya Pradesh & Ors. v. Orient Paper Mills Ltd., (1990] 1
SCC 176; Amrit Banaspati Co. Ltd. and Anr. v. State of Punjab and Anr.
(1992] 2 SCC 411; Bihar State Electricity Board and Anr. v. Usha Martin
G Jndust1ies and Anr., (1997] 5 sec 289, referred to.
Mis. Ashok Soap Fact01y and Anr. v. Municipal C01poration of Delhi
and Ors., [1993] 2 SCC 37, distinguished.
1.4. It is also obvious that when new industries are attracted in the
H region, the Board would be able to find more and more customers for the
PAW AN ALLOYS AND CASTING PVT. LTD. v. U.P. SfATE ELECTRICITY BD. 269
electricity sought to be sold by it to these consumers of electricity who A
would be taking high voltage electric power and, therefore, would be paying
higher tariff by way of HVl and HV2. Thus such an incentive scheme would
benefit not only tht! entire State but also the Board itself. It cannot be said
that these three notifications did not hold out any promise or any repre•
sentation to the general public enabling the new industries to get estabB
lished acting on the said representation. [285-B-C]
1.5. The impugned withdrawal of notification was not backed up by
any demands of public interest which would outweigh the individual inter·
ests of the appellant-promisee. It is not the case of the respondent-Board
that it sought to withdraw the incentive development rebate made available C
by it to the new industries on the ground of any public interest. The Board
felt it necessary to recall this development rebate as a high power Tariff
Realisation Committee advised the Board for maintaining its profits, to
withdraw this rebate and the Board had acted in the light of the said
Report. It, therefore, becomes clear that ·not on the ground of general D
public interest but solely on the ground of commercial interest the notifica·
tion has been withdrawn. Thus when no public interest was sought to be
pressed in service by the Board for withdrawal of this incentive rebate, 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 E
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. [296-D-H; 297-A-B; 298-F]
Kasinka Trading and Anr. v. Union of India and Anr., [1995] 1 SCC F
274; Shrijee Sales Corporation and Anr. v. Union of India, [1997] 3 SCC 398,
held inapplicable.
1.6. The respondent-Board has not given any reasonable opportunity
to the appellants to resume their earlier position. Nor is it shown by the G
Board that it is possible for the appellant-promisees to restore the status
quo ante. Once the new industries were lured into establishing their fac- •
tories in the region catered to by the Board on being assured three years
guaranteed incentive of development rebate of 10% on their total bills or
electricity charges and acting on the same once they had established their
industries and spent large amount for constructing the infrastructure and H
270
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A for employing necessary labour and for purchasing raw material etc., it
would be almost impossible for them to restore the status quo ante and to
walk out midstream if the development rebate incentive was withdrawn for
the unexpired period out of the three years' guaranteed period of currency
of development rebate incentive. [299-A-C]
B
2.1. The High Court erred in holding that the appellants were barred
from challenging the impugned notification on account of agreement
entered into by them with the Board while taking electricity supply. The new
industrial units while signing the written agreements and agreeing to
Clause 7(a), (b) and (c) found in the standard contract forms had only
C undergone a formality of signing such agreements before the electric supply
could commence at their new units and such clauses only re-affirm the
statutory power of the Board under Section 49(1) of the Act and had no
thing to do with the scheme of incentive development rebate. They had not
voluntarily or by even remotest chance agreed to give up the benefit given
to them by clear representation held out by the Board as per Item 8 of the
D rate schedule in the light of the earlier three notifications promulgated by
the Board in exercise of its powers under Section 49 read with Section 78A
of the Act. They have neither expressly nor impliedly agreed that the Board
will have absolute power and discretion to withdraw this incentive of
development rebate at any time prior to the expiry of three years for which
E it was guaranteed to them by the earlier representation held out by the
Board and which representation resulted into promissory estoppel against
the Board and in favour of the appellants. As per clause 7(c) the Board
could revise upwards the general rates of electricity charges at any time it
liked. This had nothing to do with the scheme of incentive rebate. This
authority was clearly available to the Board as per clause 7(c) of the
F agreement read with Section 49 of the Act. But this increase of general tariff
0
rate would not adversely affect incentive available to new and infant industries. [314-E-F; G-H; 315-A-B; CJ
D. C.M. Ltd. and Anr. v. Assistant Engineer HMT Sub-Division, RajasG than State Electricity Board, Kota andAnr., AIR (1988) Raj. 64, approved.
Chitty 011 Contracts 27th Ed. Vol. I 1994; Cheshire's Law of Contract,
12th Ed. 'Use of Standard f01m contracts' p. 21;Anson's Law of Contract 26th
Ed. page 136, referred to.
H
2.2. It would be totally absurd and incogruous to accept that the
PAW AN ALLOYS AND CASTING PVT. LTD. v. U.P. STATEELECTRICITYBD.271
Board on the one hand had given incentive to new industries by guaran· A
teeing development rebate of 10% on the total bill of consumption for a
period of three years and on the other hand the Board as per the agree·
ment with the appellant would be withdrawing immediately and simul·
taneously the said development rebate in exercise of its contractual powers
under clause 7(c) of the agreement. No businessman in his senses would B
ever agree voluntarily to such an absurd, incongruous and inconsistent
predicament. Consequently the provision of revision of general rates under
clause 7(c) of the agreement cannot be treated to be conferring any further
power on the Board to tinker with the development rebate provision within
the guaranteed period of three years. [313-E; G-H; 315-G·H]
3. The Notification dated 31st July 1986 was not retrospective in
nature. The said notification had resulted into two consequences; (i) any
new industry which entered into an agreement with the Board for supply
of electricity for the first time on and after 1st August, 1986 could not get
c
the benefit of incentive of 10% development rebate; and (ii) all existing new D
industries which were armed with the guarantee of 10% development
rebate under the earlier notifications and had unexpired period out of the
three years from the date of earlier commencement of supply of electricity
to their concerns lost the benefit for that une.xpired period which otherwise
would have beer. available to them from 1st August, 1986 onwards till the
entire three years' period would have been over. Both these effects of the
notification were purely prospective in character and had no retrospective E
effect. Consequently it cannot be said that the said notification was liable
to be struck down on the score of being retrospective in nature.
[316-H; 317-A-C]
4. The appellants who were not granted stay on recovery of develop· F
ment rebate charges and who have paid the disputed amount would be
entitled to the claim of refund from the Board. In case of applicants whose
industries are still running and continue to be consumers of electricity
from the Board, the amount of refund will be credited to their accounts
and their future bills of electricity may be adjusted by the Board from this G
credited account. But so far as those appellants who are no longer con·
somers of electricity from the Board, the Board will refund the disputed
development rebate charges collected from them within a period of three
,. months. However, on the peculiar facts and circumstances of the case the
claim of interest on the development rebate charges is rejected in exercise
of power under Article 142 of the Constitution of India. [319-E; 320-G]
H
272
SUPREME COURT REPORTS [1997] SUPP. 3S.C.R.
A
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1710 of
1991 Etc. Etc.
From the Judgment and Order dated 26.11.90 of the Allahabad High
Court in C.M.W.P. No. 15380 of 1986.
B
Rajiv Dhawan, Dushyant Dave, B. Sen, Rajiv Dutta, Vineet Maheshwari, Ms. Naina, Anil Kumar Sangal, (Sunil Kumar Jain, Jatindra Kumar
Bhatia) for M/s. Jain Hansaria & Co., R. Santhanam, P. Venugopal, K.J.
John, Ms. Sandhya Goswami, Sunil Kumar Gupta, H.K. Puri, M.G.
Ramachandran, Sashi Bhushan, Anand Padmanabhan, Pramod Dayal,
C V.N. Koura, Paramjeet Binipal, (A. Mariarputham, Ms. Aruna Mathur) for
M/s. Aruna, Arputham & Co., T. Mahipal and Pradeep Misra for the
appearing parties.
The Judgment of the Court was delivered by
D
S.B. MAJMUDAR, J. Leave granted in S.L.P. (C) No. 5355 of 1991.
In this group of appeals identical grievance is made by the appellants
who are consumers of electricity supplied by the respondent U.P. State
Electricity Board ('the Board' in short). Their grievance is that though by
notifications dated 29th October 1982, 13th July 1984 and 28th January
E
1986 the respondent-Board in exercise of its powers under Section 49 of
the Electricity (Supply) Act, 1948 (hereinafter referred to as 'the Act') had
held out a promise to new industrialists seeking to establish industries in
different parts of the State of Uttar Pradesh, that on the charges of
electricity consumed by them they will be given 10% rebate for a period
F
of three years from the date of commencement of supply of electricity to
them for the first time, the respondent-Board had arbitrarily and prematurely withdrawn concession of the said rebate by a latter notification dated
31st July 1986 which is impugned in these proceedings. Various writ
petitions were filed in the High Court of Judicature at Allahabad challenging the said impugned notification. They were heard together by a Division
G Bench consisting of B.P. Jeevan Reddy, CJ (as he then was) and V.N.
Mehrotra, J. Diverse contentions were canvassed in support of the writ
petitions. In the forefront it was submitted that Board was bound on the
principle of promissory estoppel to continue the development rebate to
these new industries for a period of three years as indicated in the earlier
H notifications and consequently the Board could not have arbitrarily
PA WAN ALLOYS AND CASTING PVT. LTD. " U.P. STAIB ELECTRICITY BD. [S.B. MAJMUDAR. J.] 273
withdrawn the said development rebate prior to the expiry of three years' A
period available to the industries concerned under these earlier notifications. It was also contended .that in any case the impugned notification
applied prospectively and could not have any retrospective effect on earlier
existing new industries.
The respondent-Board on the other hand· opposed these contentions B
and submitted that all the writ petitioners-consumers had entered into
contracts by way of written agreements with the Board before taking
electricity supply at their premises and as per the terms of the said
agreements they had already subjected themselves to all future actions of
the Board by which the electricity tariff could be revised by the Board at C
any time and that would include even the development rebate which could
be withdrawn at any time at the Board's discretion as agreed to by all of
them. The Division Bench of the High Court in the impugned judgment
speaking through B.P. Jeevan Reddy, CJ., framed three common issues
covering these controversies between the parties as under :
"(a) Whether the Board i~ estopped from withdrawing the said
rebate before the completion of the 3/5 year period, by virtue of
the doctrine of promissory estoppel?
D
(b) Whether the agreement executed by the petitioners bars them E
from questioning the impugned notification?
( c) Whether the impugned notification has no application to existing consumers and does it apply to only those consumers who
receive the supply on or after 1.8.1986?"
After hearing the contesting parties through their advocates the High
Court on the first point came to the conclusion that the respondent-Board
was estopped by virtue of the doctrine of promissory estoppel from
withdrawing the development rebate before the completion of the period
F
of three years, however on the second point the Court came to the
conclusion that the writ petitioners were barred from questioning the G
impugned notification on the express terminology found in the agreements
entered into by them with the Board for supply of electricity and under
those agreements the Board was given full play to revise the tariff rates
which included development rebate also from time to time and consequently the impugned notification was not illegal. On the third issue it was held H
274
SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.
A that the notification dated 31st July 1986 could not be said to be retrospective. In the result the High Court by the impugned common judgment
dismissed all the writ petitions with the result that interim reliefs granted
earlier stood vacated.
While issuing notices in the Special Leave Petitions by an order dated
B 6th February 1991 a Bench of two learned Judges of this Court court
consisting of K.N. Singh and P.B. Sawant, JJ., stayed the recovery of late
payment surcharge dues but declined stay of recovery of development
rebate charges. Subsequently after hearing the contesting parties special
leave to appeal was granted in these matters and the stay of recovery of
C late payment surcharge was made absolute. We are informed that most of
the appellants have already, therefore, paid up disputed development
rebate charges to the respondent-Board. But the late payment surcharge
demand has remained stayed. It is also brought to our notice that in some
of the matters stay of recovery of development rebate charges has also
enured for their benefit as this Court granted stay of disconnection of
D electric supply due to non-payment of these charges.
At the final hearing of this group of appeals we heard Dr. Rajiv
Dhawan, learned senior counsel for the appellants and other counsel for
the appellants as well as Shri Dushyant Dave, learned· senior counsel for
E
the respundent-Board in common as the question involved are identical in
all these matters. Accordingly all these appeals are being disposed of by
this common judgment.
Rival Contentions
F
Dr. Dhawan, learned senior counsel appearing in Civil Appeal No.
1710 of 1991 for the appellant, learned counsel Shri Sunil Gupta appearing
in Civil Appeal Nos. 10186 and 10187 of 1995, learned counsel Shri R.
Santhanam appearing in Civil Appeal No. 2183 of 1991 and other learned
counsel appearing for remaining appellants who supported the contentions
G of the aforesaid counsel in support of the appeals before us submitted as
under:
That even though the High Court rightly held that the Board was
bound by principle of promissory estoppel in the light of the
diverse notifications issued by it from time to time granting incenH
tive development rebate to the riew industries covered by these
~·
-
•
. PAWAN ALLOYS AND CASTING PYr. LTD.'· U.P. STATEELEC!RJCITYBD. [S.B.MAJMUDAR,J.] 275
notifications and consequently the impugned notification was hit A
by the principle of promissory estoppel, High Court erred on Issue
No. 2 when it took the view that the appellants could not derive
·any benefit from the decision on Issue No. 1 on the ground of
promissory estoppel as by the contractual obligations flowing from
the agreements entered into by them with the Board while getting B
electric supply for their industries, their challenge to the impugned
notification got barred. They also contended that the High Court
had also erred in taking the view that the impugned notification
was only prospective in nature and was not trying to withdraw the
development rebate in a retrospective manner.
Shri Dave, learned senior counsel appearing for the Board on the
other hand tried to support the final decision rendered by the High Court
dismissing the writ petitions, on the additional ground that the High Court
c
had erred in deciding Issue No. 1 against the Board. It was contended by
Shri Dave that there was no promise held out by the Board to any of the D
new industrialists by issuing earlier notification under Section 49 of the Act.
That the Board had exercised its statutory and quasi-legislative powers and
there could not be any promissory estoppel against such an exercise of
power and consequently nothing further survived in these proceedings. It
was alternatively contended by Shri Dave that in any case the High Court
was right when it took the view that the impugned notification could not E
be challenged by the appellants as they were bound by the contractual
obligations flowing from the agreements entered into by them with the
Board while taking electric supply for their industries and consequently
these appeals were liable to be dismissed also on that score. He further
submitted that whatever benefits might have accrued to the appellants prior F
to 1st August 1986, those benefits were prospectively withdrawn by the
Board by issuing the impugned notification and to that extent decision of
the High Court on Issued No. 3 could not be faulted. Shri Dave also
submitted that so far as the question of surcharge on late payment of
impugned development rebate is concerned it is not germane to the present G
controversy as the demand for late payment was raised by the Board after
the decision of the High Court and, therefore, strictly speaking the said
question would not arise from the judgment of the High Court and,
therefore, if the appellants have no case on merits regarding development
rebate, the question regarding payment of surcharge may be kept open.
Alternatively he contended that on the principle of restitution once the H
276
SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.
A appellants fail on merits, if his contentions on behalf of the Board on the
issue of promissory estoppel and contractual obligations of the appellants
are accepted, then the demand for surcharge should be permitted to be
effectuated with appropriate rate of interest as the Board could not recover
the same pending these appeals because of the interim relief granted by
B this Court. His argument on this aspect also covered the question of
restitution regarding payment of development rebate the recovery of which
had remained stayed in some of these appeals by an interim order of this
Court.
Learned counsel for the respective parties in support of their conC tentions pressed in service a series of decisions of this Court. Learned
counsel for the appellants Shri Gupta also relied upon observations found
in standard text books pertaining to Law of Contracts and also on a
decision of Rajasthan High Court in the case of D.C.M. Ltd. and Another
v.Assistant Engineer (HMT Sub-Division), Rajasthan State Electricity Board,
Kota and Another, AIR (1988) Rajasthan 64. We shall refer to these
D judgments and the relevant observations found in standard. text books on
Law of Contracts at an appropriate stage in latter part of this judgment.
Points For Consideration
In the light of the aforesaid rival contentions the following points
E arise for our consideration :
F
1.
Whether the respondent-Board on the doctrine of promissory
estoppel was liable to be restrained from enforcing the impugned notification dated 31st July 1986 against the appellants so far as the unexpired period of three years available
to them under earlier notifications granting development
rebate was concerned.
2.
Whether the appellants on account of agreements entered
into by them with the Board while taking supply of electricity
G
for their industries were barred from challenging the impugned notification of 31st July 1986.
3.
Whether the impugned notification was having any retrospec~
tive effect.
H
4.
If the appellants fail on merits, whether this Court in exercise
PAWAN ALLOYS AND CASTING PVT. LTD.,. U.P. STATEELECTR!Cf!YBD. [S.S. MAJMUDAR,J.] 277
of its powers under Article 142 of the Constitution of India A
on the peculiar facts and circumstances of these cases would
relieve the appellants of their obligation to pay the late
payment surcharge dues to the Board.
We shall deal with these points seriatim.
B
Point No. 1
It is now well settled by a series of decisions of this Court that the
State authorities as well as its limbs like. the Board covered by the sweep
of Article 12 of the Constitution of India being treated as 'State' within the C
meaning of the said Article, can be made subject to the equitable doctrine
of promissory estoppel in cases where because of their representation the
party claiming estoppel has changed the position and if such an estoppel
does not fly in the face of any statutory prohibition, absence of power and
authority of the promisor, is otherwise not opposed to public interest, and
also when equity in favour of the promisee does not outweigh equity in D
favour of the promisor entitling the latter to legally get out of the promise.
In this connection we may usefully refer to a decision of this Court
rendered in the case of State of H.P. and Others v. Ganesh Wood Products
and Others, (1995] 6 SCC 363. B.P. Jeevan Reddy, J. speaking for a Bench E
of two learned Judges of this Court made the following pertinent observations in this connection in paragraphs 54 and 55 of the Report :
"The doctrine of promissory estoppel is by now well recognised
in this country. Even so it should be noticed that it is an evolving
doctrine, the contours of which are not yet fully and finally demarF
cated. It would be instructive to bear in mind what Viscount
Hailsham said in Woodhouse Ltd. v. Nigerian Produce Ltd., (1972)
AC 741 : (1972) 2 All ER 271 : (1972) 2 WLR 1090 -
'I desire to add that the time may soon come when the whole G
sequence of cases based upon promissory estoppel since the
war, beginning with Central London PropeTty Trust Ltd. v.
High Trees House Ltd. (1947) KB 130 : 62 TLR 557 : (1947)
UR 77 may need to be reviewed and reduced to a coherent
body of doctrine by the courts. I do not mean to say that they
are to be regarded with suspicion. But as is common with an H
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expanding doctrine, they do raise problems of coherent exposition which have never been systematically explored."
Though the above view was expressed as far back as 1972, it is
no less valid today. The dissonance in the views expressed by this
Court in some of its decisions on the subject emphasises such a
need. The views expounded in Motila/ Padampat Sugar Mills Co.
Ltd. v. State of U.P., [1979] 2 SCC 409 : [1979] SCC (Tax) 144 was
departed from in certain respects in lit Ram Shiv Kumar v. State
of Haryana, [1981] l SCC 11 which was in turn criticised in Union
of India v. Godfrey Philips Indian Ltd.,[1985] 4 SCC 369 : [1986]
SCC (Tax) 11. The divergence in approach adopted in Shri Baku/
Oil Industries v. State of Gujarat, [1987] 1 SCC 31 : [1987] SCC
(Tax) 74 and Poumami Oil Mills v. State of Kera/a, [1986] Supp.
SCC 728: [1987] SCC(Tax) 134 is another instance. The fact that
the recent decision in Kasinka Trading v. Union of India [1995] 1
SCC 274 is being reconsidered by larger Bench is yet another
affirmation of the need stressed by lord Hailsham for enunciating
'a coherent body of doctrine by the courts'. An aspect needing a
clear exposition - and which is of immediate relevance herein - is
what is the precise meaning of the words 'the promisee ... alters
his position', in the statement of the doctrine. The doctrine has
been formulated in the following words in Motilal padampat sugar
mills co. ltd. [1979] 2 sec 409 :
'The law may, therefore, now be taken to be settled as a
result of this decision, that where the Government makes a
promise knowing or intending th.at it would be acted on by
the promisee and, in fact, the promisee, acting in reliance on
it, alters· his position, the Government would be held bound
by the promise and the promise would be enforceable against
the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise
and the promise is not recorded in the form of a formal
contract as required by Article 299 of the Constitution."
We may say at this ·stage that at the time the aforesaid decision was
H rendered, judgment of this Court in the case of Kasinka Trading and
PAWANALLOYSANDCASTING Pvr. LTD. v. U.P. STATEELECTRICITYBD. (S.B. MAJMUDAR,J.j 279
Another v. Union of India and Another, [1995] 1 SCC 274 was pending A
scrutiny before a larger Bench. Subsequently, the said decision came to be
confirmed by the decision of a Bench of three learned Judges of this Court
speaking through A.M. Ahmadi, CJ. in the case of Shrijee Sales Corporation
and Another v. Union of India, [1997] 3 SCC 398. We will refer to these
decisions in the latter part of this judgpient. Suffice it to say at this stage B
that if a statutory authority or an executive authority of the State functioning on behalf of the State in exercise of its legally permissible powers, has
held out any promise to a party who relying on th~ same bas changed its
position not necessarily to its detriment and if this promise does not offend
any provision of law or does not fetter any legislative or quasi-legislative
power inhering in the promisor then on the principle of promissory estopC
pel the promisor can be pinned down to the promise offered by it by way
of representation containing such promise for the benefit of the promisee.
In order to decide whether the High Court in the impugned
judgment had rightly decided Issue No. 1 about promissory estoppel D
against the Board it is necessary to keep in view the nature of the claim
put forward by the learned counsel for the petitioners before the High
Court in support of their writ petitions. The same is noted in the impugned
common judgment. It will be profitable to extract the summary of the
contentions of the petitioners' counsel on their behalf before the High
Court as found from the judgement as under :
E
"(1) That the three notifications dated 29.10.1982, 13.7.84 and
28.1.1986 amounted to representations by the Electricity Board to
the public at large, including the intending entrepreneurs. The
representation by the said notifications was meant to be acted F
upon. It held out a concession and an inducement. Believing and
acting upon the said representation, the petitioners established
new industries and obtained connections from the Electricity
Board. They were availing of the concession in terms of the said
notifications. The sudden withdrawal of the said concession under G
the impugned notification even before the completion of the three
year period (or the appropriate period, as the case may be) caused
grave prejudice to the petitioners. It increases the cost of production and to that extent their products become less competitive. This
is a case where the doctrine of promissory estoppel is attracted H
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and precludes the respondent Board from withdrawing the said
concession."
Shri Dave, learned senior counsel for the respondent- Board was, therefore, justified in saying that the representation alleged to have been held
B out by the Board to the new industries was sought to be culled out only
from the three notifications of 29th October 1982, 13th July 1984 and 28th
January 1986 and that it was not the case of the petitioners before the High
Court that any other representations by way of correspondence or
brochure or any handbills were held out by the Board to attract new
industries to establish themselves in the State of U .P. and to get electric
C power from the Board at concessional rates earning rebates as mentioned
in these notifications. It is, therefore, obvious that the appellants' case of
promissory estoppel must stand or fall on the basis of these notifications.
Learned senior counsel for the appellants joined issued on this point
D and submitted that in the writ petitions it was clearly averred by them that
the State of U.P. had taken a decision to attract new industries in the State
and, therefore, the State saw to it that appropriate incentives were being
offered as a package to these new industries. That consequently the State
Government in exercise of its statutory powers under Section 78A of the
Act had issued appropriate instructions to the Board and that is how the
E Board had come out with the scheme of rebates on the electricity bills
pertaining to electricity consumed by the new industries. In this connection
our attention was invited to a package of incentives and concessions offered
by the State to new industries, a copy of which was found annexed to S.L.P.
(C) No. 13827 of 1991 out of which Civil Appeal No. 3203 of 1991 arises.
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Shri Dave, learned senior counsel for the Board in this connection
submitted that whatever might have been alleged by the writ petitioners in
their writ petitions before the High Court their clear case at the stage of
arguments before the High Court was confined to the ground of promissory
estoppel only against t.he Board and not against the State Government and
G that too based on the recitals in the three notifications mentioned earlier
and not dehors them. Therefore it is too late for the appellants to contend
as aforesaid before us in these appeals and they cannot be permitted to
make out such a new case which would require fresh investigation of facts
especially when the State is not a party to these proceedings in large
H number of appeals.
PAWANALWYSANDCASrlNGPVf.LTD.v. U.P.SfATEELECTRIClIYBD.(S.B.MAJMUDAR,J.] 281
Prima f acie we find some' force i~ the aforesaid objection put forward A
by Shri Dave, learned senior counsel for the Board. However on a closer
scrutiny this objection falls through. It is of course true that whatever might
have been the wide canvass tried to be spread by the appellants before the
High Court in their pleadings at the stage of arguments as noted by the
High Court in the impugned judgment they confined their challenge to the B
impugned notification only on the solitary ground that the Board had held
out promise by way of representation to the new industrialists on the basis
of the clear recitals in the three notifications of 29th October 1982, 13th
July 1984 and 28th January 1986. They did not think it fit to support their
cases of promissory estoppel against the Board on any other material.
However it cannot be forgotten that the Board .is a supplier of electricity C
to consumers on charging appropriate sale price. It is thus a commercial
entity. It is not concerned with development of industries in the State. That
task is entrusted to the State concerned. If the latter with a view to giving
a fillip to new industries puts forward a scheme of incentives to new
industries, as a part of this package it can issue appropriate directions to D
the Board, its limb, under Section 78A of the Act to make this incentive
available to new industries to be established in the region covered by
Board's supply network of electric power. It is precisely what is done by
the Board at the behest of State Government. No estoppel is required to
be pleaded against the State as the latter has· not issued any notification
holding out such a promise. Nor ~as the State gone back upon it. We must, E
therefore, examine the challenge of the appellants on the question of
promissory estoppel against the Board only from this aspect. We will now,
therefore, address ourselves to this moot question.
It is true that all the three notifications dated 29tn October 1982, 13th F
July 1984 and 28th January 1986 were issued by the Board in exercise of
its statutory power under Section 49 of the Act. The said Section reads as
under:
"49. Provision for the sale for electricity by the Board to persons other G
than licencees. - (1) Subject to the provisions of this Act and of
regulations, if any, made in this behalf, the Board may supply
electricity to any person not being a licensee upon such terms and
conditions as the Board thinks fit and may for the purposes of such
supply frame uniform tariffs.
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