Electricity Act - Promissory estoppel - Kerala state Govt. Policy to supply uninterrupted electricity for new industry units if established in Kerala, for 5 years and along other benefits - failure to supply of electricity due to reason beyond control - another policy to extend the benefits for further 5 years but not implemented - High court dismissed the writ petition - Apex court held that Govt. is liable to compensate the Industry units established under policy as the units are established on sheer promise and policy of the Govt. - now the Govt. can not go back from it's promise - Apex court set aside the orders of High court =
State Government had laid down a policy whereby it declared to give
continuous electricity supply at a particular rate to certain new
manufacturing units.
3. So as to put the aforestated policy in practice, the respondent-State
had issued a Government Order dated 21st May, 1990 which read as
under:
“Government have been considering the question of giving some
incentives to new industries in the matter of power connection.
Taking into consideration the announcements made by the Minister
(Finance) in the current year’s budget speech and after
discussions with all concerned, Government are now pleased to
issue the following orders in this context which will have
effect from 1-4-1990.
1. Power connection will be given on completion of any
project irrespective of whether a general power cut is in
force or not.
2. New units commencing industrial production will be
exempted from power cut for a period of 5 years from the date
of commercial production.
3. Exemption from payment of electricity duty for a period of
5 years from the date of commencement of commercial
production will be given to the new units.
4. In future the electricity duty will not be collected from
the industries if they are eligible for exemption.
5. Service connection charges will not be levied if no
extension is required or if the additional line to be
provided is less than 500 meters in length.”
The aforestated State Government Order had been adopted by the
Board by its Order dated 19th June, 1990.
= .It is not in dispute that in pursuance of the aforestated policy the
appellants had established their manufacturing units (hereinafter
referred to as ‘the new units’) in the respondent-State. It is
also not in dispute that the requisite conditions, which had been
imposed upon such new units, had been fully complied with by the
appellants and therefore, the appellants were entitled to an
uninterrupted electricity supply for a period of 5 years from the
date on which they had commenced their commercial production.
= but govt. failed to supply and passed G.O. it was decided and declared to extend the
benefit which had been given under G.O. dated 25th May, 1990 and
6th February, 1992 to the new units by number of days during which
supply of electricity to them had been cut to the extent of 50% or
more.
The respondent-State also decided to reimburse the Board with
the amount of benefit which was given to the new units on account
of power cut beyond 50%. =
but for the reasons beyond control of the State as well
as the Board, the benefits assured to the new units could not be
given and therefore, along with other industrial units, the present
appellants had filed writ petitions before the High Court of Kerala
praying that the benefits which had been assured to them should be
given and they should not be constrained to pay tariff at the
enhanced rate.
All these grievances were ventilated before the High Court by
filing different petitions which were ultimately rejected by the
High Court by virtue of the impugned order.
=The question, thus, arises as to how the adversely affected
persons who had been assured by a promise with regard to continuous
supply of electricity for five years can be fairly compensated.
Framing such policies and doing the needful for its implementation
are administrative functions of the respondent-State and therefore,
normally this Court would not like to interfere with its policies
but looking at the peculiar facts of the case, where an assurance
had been given for uninterrupted supply of electricity, one would
presume that the respondent-State must have made necessary
arrangements to provide 100% uninterrupted supply of electricity for
5 years to the new units. If for any reason it was not possible to
supply electricity as assured, the respondent-State ought to have
extended the period of 5 years by the period during which assured
electricity was not supplied. By doing so, the respondent-State
could have made an effort to fulfill its promise and satisfied the
persons who had acted on an assurance given by the State and set up
their manufacturing units in the State of Kerala.
Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and
its capacity to give the benefits. Without proper appreciation of
all the relevant factors, the State should not give any assurance,
not only because that would be in violation of the principles of
promissory estoppel but it would be unfair and immoral on the part
of the State not to act as per its promise.
For the aforestated reasons, in our opinion, the respondent-State
was not wholly fair when it extended benefit to the appellants only
for the period during which electricity supply was reduced to less
than 50% on certain days.
38. We, therefore, hold that the benefit extended by the respondent
State is not sufficient. The respondent-State ought to have
extended the period even for the days when supply of electricity was
more than 50% but not 100% as assured under G.O. dated 21.5.1990 and
6.2.1992. We, therefore, direct the respondents to give the said
benefit by extending the period of incentive.
39. We, therefore, allow the appeals by quashing and setting aside the
impugned order passed by the High Court and direct the respondents
to calculate the period during which 100% electricity supply was not
given to the appellants and extend the period of incentive
accordingly. The calculation shall be made and consequential orders
shall be passed within two months from today. The appeals are
allowed with no order as to costs.
2014 (Feb. Part) judis.nic.in/supremecourt/filename=41204
ANIL R. DAVE, A.K. SIKRI
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 10103-10106 OF 2010
M/s S.V.A. Steel Re-rolling Mills Ltd.
etc. etc. .....Appellants.
Versus
State of Kerala & Ors. etc. etc. …..Respondents.
WITH
C.A.NOS.10107-10108, 10110-10114, 10116-10121, 10123 OF 2010 AND
C.A.NO.4035 OF 2007.
J U D G M E N T
1 ANIL R. DAVE, J.
1. Being aggrieved by the common Judgment dated 24th February, 2005
delivered by the High Court of Kerala at Ernakulam in W.P.(C)
No.5795/2004, W.P.(C) No.5877/2004, W.P.(C) No.5984/2004 and O.P.
No.9816/2001, the appellants, original petitioners before the High
Court have approached this Court by way of these appeals.
2. The facts giving rise to the present appeals, in a nut-shell, are
as under:
The appellants are businessmen having their manufacturing units in
the State of Kerala and
they are manufacturing different articles
with the help of electricity, which is generated/supplied by the
Kerala State Electricity Board (hereinafter referred to as ‘the
Board’).
The respondent-Government was desirous of having
industrial development in the State of Kerala and therefore, it had
framed certain policies so as to encourage and invite businessmen
for setting up their manufacturing units in the State of Kerala.
Due to shortage of electricity supply in the State of Kerala,
interested entrepreneurs were not inclined to set up their units in
the State of Kerala.
In view of the aforestated circumstances, the
State Government had laid down a policy whereby it declared to give
continuous electricity supply at a particular rate to certain new
manufacturing units.
3. So as to put the aforestated policy in practice, the respondent-State
had issued a Government Order dated 21st May, 1990 which read as
under:
“Government have been considering the question of giving some
incentives to new industries in the matter of power connection.
Taking into consideration the announcements made by the Minister
(Finance) in the current year’s budget speech and after
discussions with all concerned, Government are now pleased to
issue the following orders in this context which will have
effect from 1-4-1990.
1. Power connection will be given on completion of any
project irrespective of whether a general power cut is in
force or not.
2. New units commencing industrial production will be
exempted from power cut for a period of 5 years from the date
of commercial production.
3. Exemption from payment of electricity duty for a period of
5 years from the date of commencement of commercial
production will be given to the new units.
4. In future the electricity duty will not be collected from
the industries if they are eligible for exemption.
5. Service connection charges will not be levied if no
extension is required or if the additional line to be
provided is less than 500 meters in length.”
The aforestated State Government Order had been adopted by the
Board by its Order dated 19th June, 1990.
4. By virtue of the aforestated policy declared under the order dated
21st May, 1990, the respondent-State had assured the manufacturing
units to be set up in the State of Kerala that electricity
connection would be given to the projects which might be set up and
they would be exempted from power cut for a period of 5 years from
the date of commencement of commercial production. Such new units
were also given certain exemption in relation to payment of
electricity duty for a period of five years.
5. It is not in dispute that in pursuance of the aforestated policy the
appellants had established their manufacturing units (hereinafter
referred to as ‘the new units’) in the respondent-State. It is
also not in dispute that the requisite conditions, which had been
imposed upon such new units, had been fully complied with by the
appellants and therefore, the appellants were entitled to an
uninterrupted electricity supply for a period of 5 years from the
date on which they had commenced their commercial production.
6. The respondent-State had thereafter passed a further order on 6th
February, 1992, whereby the new units were exempted for 5 years
from the payment of enhanced power tariff on certain conditions.
According to the appellants, they were also entitled to benefit
under the aforestated G.O. dated 6th February, 1992.
7. In spite of the assurance given by the respondent-State to the new
units that they would not suffer any power cut, because of certain
difficulties faced by the Board with regard to supply of
electricity to new units, there used to be power cuts which
adversely affected the new units.
In view of the said fact, to
alleviate the difficulties of the units set up under the
aforestated policy, the respondent-State passed further order on
26th October, 1999, whereby it granted extension of period of
assured power supply to the new units, who were adversely affected
because of the power cut in certain circumstances. Under the
aforestated order, it was decided and declared to extend the
benefit which had been given under G.O. dated 25th May, 1990 and
6th February, 1992 to the new units by number of days during which
supply of electricity to them had been cut to the extent of 50% or
more. The respondent-State also decided to reimburse the Board with
the amount of benefit which was given to the new units on account
of power cut beyond 50%.
8. In the aforestated admitted facts and circumstances, the respondent-
State should have given the benefits which had been assured to the
new units but for the reasons beyond control of the State as well
as the Board, the benefits assured to the new units could not be
given and therefore, along with other industrial units, the present
appellants had filed writ petitions before the High Court of Kerala
praying that the benefits which had been assured to them should be
given and they should not be constrained to pay tariff at the
enhanced rate.
9. Thus, according to the appellants, in fact, they did not get real
benefit of the policy because their production was adversely
affected whenever there was power cut and the five years’ period of
exemption from power cut was not extended by the Government which
was in violation of the promise given to the appellants and other
similarly situated new units.
10. All these grievances were ventilated before the High Court by
filing different petitions which were ultimately rejected by the
High Court by virtue of the impugned order.
11. The learned counsel appearing for the appellants had vehemently
submitted that it was unfair on the part of the respondent -State
not to adhere to the promise given to the appellants with regard to
uninterrupted 100% electricity supply. The appellants had set up
their industries in the State of Kerala because of the promise
given by the respondent-State that at least for a period of first 5
years from the date of commencement of the commercial production,
there would be uninterrupted power supply and there would not be
any increase in the tariff and therefore, the respondent-State was
bound by the said policy. The principle of promissory estoppel was
also invoked by the appellants.
12. The learned counsel had further submitted that if for some
reason it was not possible for the respondent- State to give
uninterrupted 100% electricity supply to the appellants on a
particular day, the said period or the said day should have been
added to the period of 5 years for which the respondent-State had
promised uninterrupted 100% electricity supply to the new units.
According to the learned counsel, though, the period had been
extended, but not in a fair and reasonable manner because the days
during which there was cut of electricity supply to the extent of
50% or more, were added to the period of 5 years. According to the
learned counsel, whenever there was any reduction in power supply,
even if the reduction or cut was 50% or less, the said period
should have been added to the period of 5 years, for the reason
that in case of continuing process industries, for proper
functioning of the manufacturing units, uninterrupted 100% supply
of electricity is a sine qua non.
13. The learned counsel had shown us some material whereby it was
shown that out of first 5 years during which the appellants were to
be given benefit, there was electricity cut for 921 days and out of
those 921 days there were 214 days when the cut in electricity
supply was for more than 50%. It had been further submitted that
the period during which even the electricity cut was less than 50%,
the new units could not work at its optimum level, which had
resulted into several problems for the appellants.
14. He had further added that the respondent Board had accepted the
policy of the State with regard to giving benefit to the new units
for uninterrupted power supply on same tariff and therefore, the
Board could not have asked for additional tariff during the period
of 5 years, as extended by the period during which there was power
cut.
15. The learned counsel had also alleged that the respondent- State
had given discriminatory treatment to the appellants by not giving
uninterrupted 100% electricity supply because the State had given
uninterrupted 100% electricity supply to certain other
manufacturing units like Malabar Cement and the industries set up
within the Export Processing Zone. It had been asserted that if
the above stated manufacturing units could be given 100%
uninterrupted electricity supply, there was no reason for denying
the same benefit to the appellants.
16. So as to substantiate the submission with regard to promissory
estoppel, the learned counsel had relied upon certain judgments
delivered by this Court.
17. On the other hand, the learned counsel appearing for the
respondent -State had submitted that the prayers made by the
appellants before the High Court were unjust and therefore, their
petitions and other petitions, praying for similar relief had
rightly been rejected by the impugned order of the High Court.
18. It had been also submitted that Section 22 B of the Indian
Electricity Act, 1910 (hereinafter referred to as ‘the Act’)
enables the respondent-State to impose control on distribution and
consumption of energy. Section 22 B of the Act reads as under:
“Sector 22B. (1) Power to control the distribution and
consumption of energy:- If the State Government is of opinion that
it is necessary or expedient so to do, for maintaining the supply
and securing the equitable distribution of energy, it may by order
provide for regulating the supply, distribution, consumption or use
thereof.”
19. The aforestated provision, according to the learned counsel,
enables the respondent-State to regulate the supply, distribution
or consumption of electricity and as there was shortage of
electricity supply, the respondent-State had to impose some
electricity cut, so as to see that least problems were created to
the residents and industrial units set up in the respondent-State.
The Government authorities had to use their discretion in the
matter of supply of electricity. The discretion which the
respondent-State used was quite reasonable as it was not possible
to give 100% electricity supply to all the consumers of electricity
in the State. In the aforestated circumstances, the respondent-
State had to regulate the supply by imposing some power cut, and
unfortunately it resulted into some difficulties to the appellants.
20. It had been further submitted by the learned counsel that, so as
to reduce the difficulties of the appellants, the Government had
issued an order whereby the days, during which electricity supply
was cut beyond 50%, had been added to the period of 5 years during
which the appellants were entitled to the concession declared by
the State of Kerala. Thus, sufficient efforts were made to see
that the benefits assured to the appellants were provided.
21. It had been further submitted that the appellants cannot expect
benefit of extension of period simply because there was negligible
cut in the supply for very less period. Therefore, the respondent-
State had decided that as and when the cut was 50% or more, the
period for which such the cut had been effected would be added to
the period of 5 years and the said decision was just and fair.
22. The learned counsel had also submitted that all consumers of
electricity, including the appellants were informed well in advance
about the stoppage of electricity supply and thus, all possible
efforts were made to see that the appellants and other similarly
situated consumers were not put to much hardship.
23. The learned counsel had further submitted that looking at the
facts of the case, there would not be any promissory estoppel as
submitted by the learned counsel appearing for the appellants. The
learned counsel had relied upon the judgments delivered in the case
of State of Haryana & Ors. v. Mahabir Vegetable Oils Pvt. Ltd.,
[2011 (3) SCC 778] and State of Rajasthan & Anr. v. M/s Mahaveer
Oil Industries & Ors., [1999(4) SCC 357] to substantiate their case
to the effect that there could not be any promissory estoppel in
such cases.
24. We had heard the learned counsel at length and perused the
impugned judgment and the judgments referred to in the course of
hearing and the relevant material placed on record of this Court.
It is not in dispute that the appellants had set up their new units
in the State of Kerala only upon knowing the policy with regard to
uninterrupted power supply and that too at the same tariff for a
period of 5 years from the date of commercial production.
25. In the instant case, no case had been made out by the respondent-
State that the appellants had committed any breach or were not
entitled to any of the benefits or concessions which had been
offered to them by the respondent-State. In the circumstances, the
respondent-State was bound to give the benefits which had been
assured to the appellants.
26. Though the respondent-State was bound to supply uninterrupted 100%
electricity required by the appellants, one cannot lose sight of
the fact that at times there would be circumstances which would put
the respondent-State and the Board into such a difficulty that they
would not be in a position to fulfill the assurance given to the
new units. It is not in dispute that the State of Kerala is not
generating enough electricity to cater the needs of all its
consumers in the State of Kerala. The respondent-State is not
having a magic wand which would enable the State to generate more
electricity. There might be several factors which might be
adversely affecting the respondents and as a result thereof, the
respondents might not be generating sufficient electricity so as to
fulfill the needs of the appellants and other residents of the
State.
27. The question, thus, arises as to how the adversely affected
persons who had been assured by a promise with regard to continuous
supply of electricity for five years can be fairly compensated.
28. It is true that the respondent-State came out with Government
Order dated 26th October, 1999, whereby it had decided that the period
when there would be reduction or cut in supply of power to the extent
of 50% or more, such period of power cut would be added to the period
of 5 years, during which the appellants and other similarly situated
persons were to be given continuous power supply.
29. The learned counsel appearing for the respondents could not show us
any justifiable reason for deciding as to why the respondent-State
decided to give the benefit of extended period only when the power
cut was 50% or more. It is pertinent to know that the cases where
the consumer is having a continuous process industry, even power cut
below 50% would adversely affect the manufacturing unit. It is a
matter of common knowledge that in several industries, the
manufacturing process can not be stopped abruptly. Many a times,
restarting of the machines or boilers take lot of time and energy,
which results into loss to the manufacturer. The said fact ought to
have been considered by the State while taking the aforestated
decision. The decision with regard to giving extension of time to
such a limited extent is not reasonable and in our opinion, that
would have surely affected the new units adversely.
30. It is true that Section 22B of the Act enables the State Government
to regulate the supply, distribution and consumption of electricity
for the purpose of maintenance and supply of equitable distribution
of energy but in our opinion, provisions of the said section are not
much relevant for the reason that in the instant case, the
respondent State had given an assurance with regard to uninterrupted
supply of electricity and therefore, the respondents ought to have
made provision for uninterrupted supply of electricity to the
appellants and other similarly situated persons by regulating
electricity supply in a proper manner.
31. Framing such policies and doing the needful for its implementation
are administrative functions of the respondent-State and therefore,
normally this Court would not like to interfere with its policies
but looking at the peculiar facts of the case, where an assurance
had been given for uninterrupted supply of electricity, one would
presume that the respondent-State must have made necessary
arrangements to provide 100% uninterrupted supply of electricity for
5 years to the new units. If for any reason it was not possible to
supply electricity as assured, the respondent-State ought to have
extended the period of 5 years by the period during which assured
electricity was not supplied. By doing so, the respondent-State
could have made an effort to fulfill its promise and satisfied the
persons who had acted on an assurance given by the State and set up
their manufacturing units in the State of Kerala.
32. Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and
its capacity to give the benefits. Without proper appreciation of
all the relevant factors, the State should not give any assurance,
not only because that would be in violation of the principles of
promissory estoppel but it would be unfair and immoral on the part
of the State not to act as per its promise.
33. In the instant case, the respondent-State was conscious about the
fact that there was a problem with regard to supply of electricity
in the State of Kerala and possibly for that reason industries which
depended much upon electricity as a source of power were not
inclined to establish new industries in the State of Kerala. Before
setting up an industry, the entrepreneur or the industrialist
considers several factors and thereupon takes several decisions like
place of business, capacity at which production should be made, type
of raw-material, etc. After considering all these factors, a final
decision is taken with regard to setting up of an industry. For a
new entrepreneur, such a decision is of vital importance because if
he fails in his estimates or in consideration of all the relevant
factors, there are all chances that he would fail not only in his
business but he would completely ruin himself. Thus, one can very
well appreciate that the appellants must have thought about all
relevant factors, including the incentives offered by the respondent-
State and might have decided to set up their industries in the
respondent-State. While deciding this case, this Court would
invariably keep in mind the circumstances in which the appellants
had set up their industries in the State of Kerala.
34. In view of the incentives and assurances given to the appellants
along with others, who were desirous of setting up new industries,
the appellants set up their new units which were much dependant upon
continuous supply of electricity. One of the appellants is a Steel
Re-rolling Mill. In Steel industry, when the industry is concerned
with making of steel or re-rolling of steel, it requires lot of
power and energy, and electricity being one of the important sources
of power, the appellant was much dependent on continuous supply of
electricity, which had been assured to it by the respondent-State.
35. If an assurance was given to the appellants and similarly situated
persons that they would be given 100% electricity supply for five
years, the respondents can not riggle out of their liability by
making a policy to the effect that the benefit by way of incentive
would be extended only if the electricity supply was reduced to less
than 50% on a particular day.
A steel industry, for example, which
cannot function without electricity or power in any other form,
would be put to enormous inconvenience and loss if the power supply
is not continuous.
So as to reactivate or to restart the machines
or to start the process afresh, the industry has to spend something
more then what it would have spent if the supply or power namely,
electricity was uninterrupted.
Stoppage of manufacturing process
would mean losses under several heads.
The labour employed has to
be paid even when the employer does not get work from the labour
force.
Very often, so as to bring a required temperature for the
purpose of carrying on certain processes, more fuel is to be
injected so as to attain the condition which was prevailing prior to
electricity supply being disconnected.
Moreover, there would be
several overhead expenses which one has to incur even if there is no
production or stoppage of manufacturing process.
36. The judgments cited by the counsel appearing for the respondents
would not help them for the reason that in the cases referred to,
the Government had to change the policy in public interest. In the
instant case, by compensating the aggrieved appellants, no harm
would be caused to the State of Kerala except that it will have to
compensate the appellants by supplying assured electricity for some
extended period at a specified tariff.
37. For the aforestated reasons, in our opinion, the respondent-State
was not wholly fair when it extended benefit to the appellants only
for the period during which electricity supply was reduced to less
than 50% on certain days.
38. We, therefore, hold that the benefit extended by the respondent
State is not sufficient. The respondent-State ought to have
extended the period even for the days when supply of electricity was
more than 50% but not 100% as assured under G.O. dated 21.5.1990 and
6.2.1992. We, therefore, direct the respondents to give the said
benefit by extending the period of incentive.
39. We, therefore, allow the appeals by quashing and setting aside the
impugned order passed by the High Court and direct the respondents
to calculate the period during which 100% electricity supply was not
given to the appellants and extend the period of incentive
accordingly. The calculation shall be made and consequential orders
shall be passed within two months from today. The appeals are
allowed with no order as to costs.
……………………….J.
(ANIL R. DAVE)
……………………….J.
(A.K. SIKRI)
New Delhi
February 6, 2014.
-----------------------
21
State Government had laid down a policy whereby it declared to give
continuous electricity supply at a particular rate to certain new
manufacturing units.
3. So as to put the aforestated policy in practice, the respondent-State
had issued a Government Order dated 21st May, 1990 which read as
under:
“Government have been considering the question of giving some
incentives to new industries in the matter of power connection.
Taking into consideration the announcements made by the Minister
(Finance) in the current year’s budget speech and after
discussions with all concerned, Government are now pleased to
issue the following orders in this context which will have
effect from 1-4-1990.
1. Power connection will be given on completion of any
project irrespective of whether a general power cut is in
force or not.
2. New units commencing industrial production will be
exempted from power cut for a period of 5 years from the date
of commercial production.
3. Exemption from payment of electricity duty for a period of
5 years from the date of commencement of commercial
production will be given to the new units.
4. In future the electricity duty will not be collected from
the industries if they are eligible for exemption.
5. Service connection charges will not be levied if no
extension is required or if the additional line to be
provided is less than 500 meters in length.”
The aforestated State Government Order had been adopted by the
Board by its Order dated 19th June, 1990.
= .It is not in dispute that in pursuance of the aforestated policy the
appellants had established their manufacturing units (hereinafter
referred to as ‘the new units’) in the respondent-State. It is
also not in dispute that the requisite conditions, which had been
imposed upon such new units, had been fully complied with by the
appellants and therefore, the appellants were entitled to an
uninterrupted electricity supply for a period of 5 years from the
date on which they had commenced their commercial production.
= but govt. failed to supply and passed G.O. it was decided and declared to extend the
benefit which had been given under G.O. dated 25th May, 1990 and
6th February, 1992 to the new units by number of days during which
supply of electricity to them had been cut to the extent of 50% or
more.
The respondent-State also decided to reimburse the Board with
the amount of benefit which was given to the new units on account
of power cut beyond 50%. =
but for the reasons beyond control of the State as well
as the Board, the benefits assured to the new units could not be
given and therefore, along with other industrial units, the present
appellants had filed writ petitions before the High Court of Kerala
praying that the benefits which had been assured to them should be
given and they should not be constrained to pay tariff at the
enhanced rate.
All these grievances were ventilated before the High Court by
filing different petitions which were ultimately rejected by the
High Court by virtue of the impugned order.
=The question, thus, arises as to how the adversely affected
persons who had been assured by a promise with regard to continuous
supply of electricity for five years can be fairly compensated.
Framing such policies and doing the needful for its implementation
are administrative functions of the respondent-State and therefore,
normally this Court would not like to interfere with its policies
but looking at the peculiar facts of the case, where an assurance
had been given for uninterrupted supply of electricity, one would
presume that the respondent-State must have made necessary
arrangements to provide 100% uninterrupted supply of electricity for
5 years to the new units. If for any reason it was not possible to
supply electricity as assured, the respondent-State ought to have
extended the period of 5 years by the period during which assured
electricity was not supplied. By doing so, the respondent-State
could have made an effort to fulfill its promise and satisfied the
persons who had acted on an assurance given by the State and set up
their manufacturing units in the State of Kerala.
Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and
its capacity to give the benefits. Without proper appreciation of
all the relevant factors, the State should not give any assurance,
not only because that would be in violation of the principles of
promissory estoppel but it would be unfair and immoral on the part
of the State not to act as per its promise.
A steel industry, for example, which
cannot function without electricity or power in any other form,
would be put to enormous inconvenience and loss if the power supply
is not continuous.
So as to reactivate or to restart the machines
or to start the process afresh, the industry has to spend something
more then what it would have spent if the supply or power namely,
electricity was uninterrupted.
Stoppage of manufacturing process
would mean losses under several heads.
The labour employed has to
be paid even when the employer does not get work from the labour
force.
Very often, so as to bring a required temperature for the
purpose of carrying on certain processes, more fuel is to be
injected so as to attain the condition which was prevailing prior to
electricity supply being disconnected.
Moreover, there would be
several overhead expenses which one has to incur even if there is no
production or stoppage of manufacturing process.
cannot function without electricity or power in any other form,
would be put to enormous inconvenience and loss if the power supply
is not continuous.
So as to reactivate or to restart the machines
or to start the process afresh, the industry has to spend something
more then what it would have spent if the supply or power namely,
electricity was uninterrupted.
Stoppage of manufacturing process
would mean losses under several heads.
The labour employed has to
be paid even when the employer does not get work from the labour
force.
Very often, so as to bring a required temperature for the
purpose of carrying on certain processes, more fuel is to be
injected so as to attain the condition which was prevailing prior to
electricity supply being disconnected.
Moreover, there would be
several overhead expenses which one has to incur even if there is no
production or stoppage of manufacturing process.
was not wholly fair when it extended benefit to the appellants only
for the period during which electricity supply was reduced to less
than 50% on certain days.
38. We, therefore, hold that the benefit extended by the respondent
State is not sufficient. The respondent-State ought to have
extended the period even for the days when supply of electricity was
more than 50% but not 100% as assured under G.O. dated 21.5.1990 and
6.2.1992. We, therefore, direct the respondents to give the said
benefit by extending the period of incentive.
39. We, therefore, allow the appeals by quashing and setting aside the
impugned order passed by the High Court and direct the respondents
to calculate the period during which 100% electricity supply was not
given to the appellants and extend the period of incentive
accordingly. The calculation shall be made and consequential orders
shall be passed within two months from today. The appeals are
allowed with no order as to costs.
2014 (Feb. Part) judis.nic.in/supremecourt/filename=41204
ANIL R. DAVE, A.K. SIKRI
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 10103-10106 OF 2010
M/s S.V.A. Steel Re-rolling Mills Ltd.
etc. etc. .....Appellants.
Versus
State of Kerala & Ors. etc. etc. …..Respondents.
WITH
C.A.NOS.10107-10108, 10110-10114, 10116-10121, 10123 OF 2010 AND
C.A.NO.4035 OF 2007.
J U D G M E N T
1 ANIL R. DAVE, J.
1. Being aggrieved by the common Judgment dated 24th February, 2005
delivered by the High Court of Kerala at Ernakulam in W.P.(C)
No.5795/2004, W.P.(C) No.5877/2004, W.P.(C) No.5984/2004 and O.P.
No.9816/2001, the appellants, original petitioners before the High
Court have approached this Court by way of these appeals.
2. The facts giving rise to the present appeals, in a nut-shell, are
as under:
The appellants are businessmen having their manufacturing units in
the State of Kerala and
they are manufacturing different articles
with the help of electricity, which is generated/supplied by the
Kerala State Electricity Board (hereinafter referred to as ‘the
Board’).
The respondent-Government was desirous of having
industrial development in the State of Kerala and therefore, it had
framed certain policies so as to encourage and invite businessmen
for setting up their manufacturing units in the State of Kerala.
Due to shortage of electricity supply in the State of Kerala,
interested entrepreneurs were not inclined to set up their units in
the State of Kerala.
In view of the aforestated circumstances, the
State Government had laid down a policy whereby it declared to give
continuous electricity supply at a particular rate to certain new
manufacturing units.
3. So as to put the aforestated policy in practice, the respondent-State
had issued a Government Order dated 21st May, 1990 which read as
under:
“Government have been considering the question of giving some
incentives to new industries in the matter of power connection.
Taking into consideration the announcements made by the Minister
(Finance) in the current year’s budget speech and after
discussions with all concerned, Government are now pleased to
issue the following orders in this context which will have
effect from 1-4-1990.
1. Power connection will be given on completion of any
project irrespective of whether a general power cut is in
force or not.
2. New units commencing industrial production will be
exempted from power cut for a period of 5 years from the date
of commercial production.
3. Exemption from payment of electricity duty for a period of
5 years from the date of commencement of commercial
production will be given to the new units.
4. In future the electricity duty will not be collected from
the industries if they are eligible for exemption.
5. Service connection charges will not be levied if no
extension is required or if the additional line to be
provided is less than 500 meters in length.”
The aforestated State Government Order had been adopted by the
Board by its Order dated 19th June, 1990.
4. By virtue of the aforestated policy declared under the order dated
21st May, 1990, the respondent-State had assured the manufacturing
units to be set up in the State of Kerala that electricity
connection would be given to the projects which might be set up and
they would be exempted from power cut for a period of 5 years from
the date of commencement of commercial production. Such new units
were also given certain exemption in relation to payment of
electricity duty for a period of five years.
5. It is not in dispute that in pursuance of the aforestated policy the
appellants had established their manufacturing units (hereinafter
referred to as ‘the new units’) in the respondent-State. It is
also not in dispute that the requisite conditions, which had been
imposed upon such new units, had been fully complied with by the
appellants and therefore, the appellants were entitled to an
uninterrupted electricity supply for a period of 5 years from the
date on which they had commenced their commercial production.
6. The respondent-State had thereafter passed a further order on 6th
February, 1992, whereby the new units were exempted for 5 years
from the payment of enhanced power tariff on certain conditions.
According to the appellants, they were also entitled to benefit
under the aforestated G.O. dated 6th February, 1992.
7. In spite of the assurance given by the respondent-State to the new
units that they would not suffer any power cut, because of certain
difficulties faced by the Board with regard to supply of
electricity to new units, there used to be power cuts which
adversely affected the new units.
In view of the said fact, to
alleviate the difficulties of the units set up under the
aforestated policy, the respondent-State passed further order on
26th October, 1999, whereby it granted extension of period of
assured power supply to the new units, who were adversely affected
because of the power cut in certain circumstances. Under the
aforestated order, it was decided and declared to extend the
benefit which had been given under G.O. dated 25th May, 1990 and
6th February, 1992 to the new units by number of days during which
supply of electricity to them had been cut to the extent of 50% or
more. The respondent-State also decided to reimburse the Board with
the amount of benefit which was given to the new units on account
of power cut beyond 50%.
8. In the aforestated admitted facts and circumstances, the respondent-
State should have given the benefits which had been assured to the
new units but for the reasons beyond control of the State as well
as the Board, the benefits assured to the new units could not be
given and therefore, along with other industrial units, the present
appellants had filed writ petitions before the High Court of Kerala
praying that the benefits which had been assured to them should be
given and they should not be constrained to pay tariff at the
enhanced rate.
9. Thus, according to the appellants, in fact, they did not get real
benefit of the policy because their production was adversely
affected whenever there was power cut and the five years’ period of
exemption from power cut was not extended by the Government which
was in violation of the promise given to the appellants and other
similarly situated new units.
10. All these grievances were ventilated before the High Court by
filing different petitions which were ultimately rejected by the
High Court by virtue of the impugned order.
11. The learned counsel appearing for the appellants had vehemently
submitted that it was unfair on the part of the respondent -State
not to adhere to the promise given to the appellants with regard to
uninterrupted 100% electricity supply. The appellants had set up
their industries in the State of Kerala because of the promise
given by the respondent-State that at least for a period of first 5
years from the date of commencement of the commercial production,
there would be uninterrupted power supply and there would not be
any increase in the tariff and therefore, the respondent-State was
bound by the said policy. The principle of promissory estoppel was
also invoked by the appellants.
12. The learned counsel had further submitted that if for some
reason it was not possible for the respondent- State to give
uninterrupted 100% electricity supply to the appellants on a
particular day, the said period or the said day should have been
added to the period of 5 years for which the respondent-State had
promised uninterrupted 100% electricity supply to the new units.
According to the learned counsel, though, the period had been
extended, but not in a fair and reasonable manner because the days
during which there was cut of electricity supply to the extent of
50% or more, were added to the period of 5 years. According to the
learned counsel, whenever there was any reduction in power supply,
even if the reduction or cut was 50% or less, the said period
should have been added to the period of 5 years, for the reason
that in case of continuing process industries, for proper
functioning of the manufacturing units, uninterrupted 100% supply
of electricity is a sine qua non.
13. The learned counsel had shown us some material whereby it was
shown that out of first 5 years during which the appellants were to
be given benefit, there was electricity cut for 921 days and out of
those 921 days there were 214 days when the cut in electricity
supply was for more than 50%. It had been further submitted that
the period during which even the electricity cut was less than 50%,
the new units could not work at its optimum level, which had
resulted into several problems for the appellants.
14. He had further added that the respondent Board had accepted the
policy of the State with regard to giving benefit to the new units
for uninterrupted power supply on same tariff and therefore, the
Board could not have asked for additional tariff during the period
of 5 years, as extended by the period during which there was power
cut.
15. The learned counsel had also alleged that the respondent- State
had given discriminatory treatment to the appellants by not giving
uninterrupted 100% electricity supply because the State had given
uninterrupted 100% electricity supply to certain other
manufacturing units like Malabar Cement and the industries set up
within the Export Processing Zone. It had been asserted that if
the above stated manufacturing units could be given 100%
uninterrupted electricity supply, there was no reason for denying
the same benefit to the appellants.
16. So as to substantiate the submission with regard to promissory
estoppel, the learned counsel had relied upon certain judgments
delivered by this Court.
17. On the other hand, the learned counsel appearing for the
respondent -State had submitted that the prayers made by the
appellants before the High Court were unjust and therefore, their
petitions and other petitions, praying for similar relief had
rightly been rejected by the impugned order of the High Court.
18. It had been also submitted that Section 22 B of the Indian
Electricity Act, 1910 (hereinafter referred to as ‘the Act’)
enables the respondent-State to impose control on distribution and
consumption of energy. Section 22 B of the Act reads as under:
“Sector 22B. (1) Power to control the distribution and
consumption of energy:- If the State Government is of opinion that
it is necessary or expedient so to do, for maintaining the supply
and securing the equitable distribution of energy, it may by order
provide for regulating the supply, distribution, consumption or use
thereof.”
19. The aforestated provision, according to the learned counsel,
enables the respondent-State to regulate the supply, distribution
or consumption of electricity and as there was shortage of
electricity supply, the respondent-State had to impose some
electricity cut, so as to see that least problems were created to
the residents and industrial units set up in the respondent-State.
The Government authorities had to use their discretion in the
matter of supply of electricity. The discretion which the
respondent-State used was quite reasonable as it was not possible
to give 100% electricity supply to all the consumers of electricity
in the State. In the aforestated circumstances, the respondent-
State had to regulate the supply by imposing some power cut, and
unfortunately it resulted into some difficulties to the appellants.
20. It had been further submitted by the learned counsel that, so as
to reduce the difficulties of the appellants, the Government had
issued an order whereby the days, during which electricity supply
was cut beyond 50%, had been added to the period of 5 years during
which the appellants were entitled to the concession declared by
the State of Kerala. Thus, sufficient efforts were made to see
that the benefits assured to the appellants were provided.
21. It had been further submitted that the appellants cannot expect
benefit of extension of period simply because there was negligible
cut in the supply for very less period. Therefore, the respondent-
State had decided that as and when the cut was 50% or more, the
period for which such the cut had been effected would be added to
the period of 5 years and the said decision was just and fair.
22. The learned counsel had also submitted that all consumers of
electricity, including the appellants were informed well in advance
about the stoppage of electricity supply and thus, all possible
efforts were made to see that the appellants and other similarly
situated consumers were not put to much hardship.
23. The learned counsel had further submitted that looking at the
facts of the case, there would not be any promissory estoppel as
submitted by the learned counsel appearing for the appellants. The
learned counsel had relied upon the judgments delivered in the case
of State of Haryana & Ors. v. Mahabir Vegetable Oils Pvt. Ltd.,
[2011 (3) SCC 778] and State of Rajasthan & Anr. v. M/s Mahaveer
Oil Industries & Ors., [1999(4) SCC 357] to substantiate their case
to the effect that there could not be any promissory estoppel in
such cases.
24. We had heard the learned counsel at length and perused the
impugned judgment and the judgments referred to in the course of
hearing and the relevant material placed on record of this Court.
It is not in dispute that the appellants had set up their new units
in the State of Kerala only upon knowing the policy with regard to
uninterrupted power supply and that too at the same tariff for a
period of 5 years from the date of commercial production.
25. In the instant case, no case had been made out by the respondent-
State that the appellants had committed any breach or were not
entitled to any of the benefits or concessions which had been
offered to them by the respondent-State. In the circumstances, the
respondent-State was bound to give the benefits which had been
assured to the appellants.
26. Though the respondent-State was bound to supply uninterrupted 100%
electricity required by the appellants, one cannot lose sight of
the fact that at times there would be circumstances which would put
the respondent-State and the Board into such a difficulty that they
would not be in a position to fulfill the assurance given to the
new units. It is not in dispute that the State of Kerala is not
generating enough electricity to cater the needs of all its
consumers in the State of Kerala. The respondent-State is not
having a magic wand which would enable the State to generate more
electricity. There might be several factors which might be
adversely affecting the respondents and as a result thereof, the
respondents might not be generating sufficient electricity so as to
fulfill the needs of the appellants and other residents of the
State.
27. The question, thus, arises as to how the adversely affected
persons who had been assured by a promise with regard to continuous
supply of electricity for five years can be fairly compensated.
28. It is true that the respondent-State came out with Government
Order dated 26th October, 1999, whereby it had decided that the period
when there would be reduction or cut in supply of power to the extent
of 50% or more, such period of power cut would be added to the period
of 5 years, during which the appellants and other similarly situated
persons were to be given continuous power supply.
29. The learned counsel appearing for the respondents could not show us
any justifiable reason for deciding as to why the respondent-State
decided to give the benefit of extended period only when the power
cut was 50% or more. It is pertinent to know that the cases where
the consumer is having a continuous process industry, even power cut
below 50% would adversely affect the manufacturing unit. It is a
matter of common knowledge that in several industries, the
manufacturing process can not be stopped abruptly. Many a times,
restarting of the machines or boilers take lot of time and energy,
which results into loss to the manufacturer. The said fact ought to
have been considered by the State while taking the aforestated
decision. The decision with regard to giving extension of time to
such a limited extent is not reasonable and in our opinion, that
would have surely affected the new units adversely.
30. It is true that Section 22B of the Act enables the State Government
to regulate the supply, distribution and consumption of electricity
for the purpose of maintenance and supply of equitable distribution
of energy but in our opinion, provisions of the said section are not
much relevant for the reason that in the instant case, the
respondent State had given an assurance with regard to uninterrupted
supply of electricity and therefore, the respondents ought to have
made provision for uninterrupted supply of electricity to the
appellants and other similarly situated persons by regulating
electricity supply in a proper manner.
31. Framing such policies and doing the needful for its implementation
are administrative functions of the respondent-State and therefore,
normally this Court would not like to interfere with its policies
but looking at the peculiar facts of the case, where an assurance
had been given for uninterrupted supply of electricity, one would
presume that the respondent-State must have made necessary
arrangements to provide 100% uninterrupted supply of electricity for
5 years to the new units. If for any reason it was not possible to
supply electricity as assured, the respondent-State ought to have
extended the period of 5 years by the period during which assured
electricity was not supplied. By doing so, the respondent-State
could have made an effort to fulfill its promise and satisfied the
persons who had acted on an assurance given by the State and set up
their manufacturing units in the State of Kerala.
32. Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and
its capacity to give the benefits. Without proper appreciation of
all the relevant factors, the State should not give any assurance,
not only because that would be in violation of the principles of
promissory estoppel but it would be unfair and immoral on the part
of the State not to act as per its promise.
33. In the instant case, the respondent-State was conscious about the
fact that there was a problem with regard to supply of electricity
in the State of Kerala and possibly for that reason industries which
depended much upon electricity as a source of power were not
inclined to establish new industries in the State of Kerala. Before
setting up an industry, the entrepreneur or the industrialist
considers several factors and thereupon takes several decisions like
place of business, capacity at which production should be made, type
of raw-material, etc. After considering all these factors, a final
decision is taken with regard to setting up of an industry. For a
new entrepreneur, such a decision is of vital importance because if
he fails in his estimates or in consideration of all the relevant
factors, there are all chances that he would fail not only in his
business but he would completely ruin himself. Thus, one can very
well appreciate that the appellants must have thought about all
relevant factors, including the incentives offered by the respondent-
State and might have decided to set up their industries in the
respondent-State. While deciding this case, this Court would
invariably keep in mind the circumstances in which the appellants
had set up their industries in the State of Kerala.
34. In view of the incentives and assurances given to the appellants
along with others, who were desirous of setting up new industries,
the appellants set up their new units which were much dependant upon
continuous supply of electricity. One of the appellants is a Steel
Re-rolling Mill. In Steel industry, when the industry is concerned
with making of steel or re-rolling of steel, it requires lot of
power and energy, and electricity being one of the important sources
of power, the appellant was much dependent on continuous supply of
electricity, which had been assured to it by the respondent-State.
35. If an assurance was given to the appellants and similarly situated
persons that they would be given 100% electricity supply for five
years, the respondents can not riggle out of their liability by
making a policy to the effect that the benefit by way of incentive
would be extended only if the electricity supply was reduced to less
than 50% on a particular day.
A steel industry, for example, which
cannot function without electricity or power in any other form,
would be put to enormous inconvenience and loss if the power supply
is not continuous.
So as to reactivate or to restart the machines
or to start the process afresh, the industry has to spend something
more then what it would have spent if the supply or power namely,
electricity was uninterrupted.
Stoppage of manufacturing process
would mean losses under several heads.
The labour employed has to
be paid even when the employer does not get work from the labour
force.
Very often, so as to bring a required temperature for the
purpose of carrying on certain processes, more fuel is to be
injected so as to attain the condition which was prevailing prior to
electricity supply being disconnected.
Moreover, there would be
several overhead expenses which one has to incur even if there is no
production or stoppage of manufacturing process.
36. The judgments cited by the counsel appearing for the respondents
would not help them for the reason that in the cases referred to,
the Government had to change the policy in public interest. In the
instant case, by compensating the aggrieved appellants, no harm
would be caused to the State of Kerala except that it will have to
compensate the appellants by supplying assured electricity for some
extended period at a specified tariff.
37. For the aforestated reasons, in our opinion, the respondent-State
was not wholly fair when it extended benefit to the appellants only
for the period during which electricity supply was reduced to less
than 50% on certain days.
38. We, therefore, hold that the benefit extended by the respondent
State is not sufficient. The respondent-State ought to have
extended the period even for the days when supply of electricity was
more than 50% but not 100% as assured under G.O. dated 21.5.1990 and
6.2.1992. We, therefore, direct the respondents to give the said
benefit by extending the period of incentive.
39. We, therefore, allow the appeals by quashing and setting aside the
impugned order passed by the High Court and direct the respondents
to calculate the period during which 100% electricity supply was not
given to the appellants and extend the period of incentive
accordingly. The calculation shall be made and consequential orders
shall be passed within two months from today. The appeals are
allowed with no order as to costs.
……………………….J.
(ANIL R. DAVE)
……………………….J.
(A.K. SIKRI)
New Delhi
February 6, 2014.
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