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PETITIONER: A.P. STATE ELECTRICITY BOARD AND ORS.

       Vs.

RESPONDENT: SARADA FERRO ALLOYS LTD.

DATE OF JUDGMENT25/02/1993

BENCH: KULDIP SINGH (J) BENCH: KULDIP SINGH (J) KASLIWAL, N.M. (J)

CITATION:  1993 AIR 1521            1993 SCR  (2) 114  1993 SCC  (2) 425        JT 1993  Supl.     37  1993 SCALE  (1)712

ACT: Promissory  estoppel-Electricity  Board-Grant of  rebate  in demand  and energy charges-Subsequent withdrawal of  rebate- Industry  established during the period when concession  was not  operative--Held  not entitled  to  rebate--Doctrine  of promissory estoppel held inapplicable.

HEADNOTE: The Andhra Pradesh State Electricity Board granted rebate of 25  per cent in demand and energy charges for  High  Tension industries and asked the Director of Industries to  identify the  industries which would be eligible for the rebate.   By its order dated July 13, 1976 the State extended the  rebate to   certain  industries.   The  Board  also  issued   order extending  the concession to the notified industries  for  a period  of  three years from the date of  their  going  into regular production.  By an order dated August 23, 1985,  the concession already granted was extended for two more  years, i.e.  a  total of five year.  However, by  its  order  dated December  8,  1987 the Board withdrew the  concession.   The State  Government also issued similar order dated  July  27, 1989  withdrawing the rebate.  The respondent-company  which established a Ferro Chrome industry and commenced production on  regular basis on August 11, 1990 claimed concession  but the  same  was refused by the Board on the ground  that  the said  concession  had already been withdrawn.   ’Me  company filed  a writ petition before the Andhra Pradesh High  Court seeking  a  declaration that it was entitled  to  rebate  as declared by the State Government in its letter dated  August 23,  1985.   A Single Judge of the High  Court  allowed  the petition  on the ground that the  respondent-company  having acted  upon  the representation made by the  Board  and  the State  Government  the doctrine of promissory  estoppel  was attracted  and  as such the Board and the  State  Government were bound to grant rebate for a period of five years.   The writ  appeal  preferred  by the Board  was  dismissed  by  a Division  Bench  of the High Court.  The  Electricity  Board riled an appeal in this Court. Allowing  the appeal and setting aside the judgment  of  the High Court, this Court, 115

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HELD-  1. The High Court was not justified in  applying  the doctrine   of   promissory  estoppel  to   the   facts   and circumstances of this case. [117H,118A] 2.   Only  those industries were entitled to the benefit  of the  incentive  who fulfilled the  requirements  during  the period   the   incentive  was  operative  The   promise   or representation  made by the Board In Its letter  dated  July 13,  1976,  if  any, was directly linked with  the  date  of commencement  of  production  by the  company.   It  is  not disputed that the respondent-company commenced production on commercial  scale  on August 11, 1990.   The  incentive  was withdrawn  by  the  Board on December 8,  1987  and  by  the Government  on July 27, 1989.  Whichever date Is taken  into account the company was not entitled to the incentive as  it had  not commenced production tin or before either of  these two dates. [119A-B, D] 2.1. Even if it is assumed that a promise or  representation was made by the Board the doctrine of promissory estoppel is not attracted in this case as the company failed to act upon the   said   representation.   Therefore,   the   assumption entertained by the High Court that once the company  started the  process  or  setting up an industry  and  had  incurred expenditure, the Board was bound to keep its incentive  open for  the company till it started production is not  correct. [119B-C] Union  of  India v. Godfrey Phillips India  Ltd.,  119851  4 S.C.C. 369, relied on.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 766 of 1993. From  the  Judgment  and Order dated 7.2.92  of  the  Andhra Pradesh High Court in W.A. No. 1271 of 1991. Shanti  Bhushan, K.  Rajendra Chowdhary and R.K. Sharma  for the Appellants. G.L. Sanghi, Duba Mohan Rao, Y.P. Rao, Dhruv Mehta, T.V.S.N. Chari,  Ms. Suruchi Aggarwal and Ms. Bharati Reddy  for  the Respondent. The Judgment of the Court was delivered by 116 KULDIP SINGH, J. Special leave granted. The  Andhra Pradesh State Electricity Board (the Board),  in exercise  of its powers under Section 49 of the  Electricity Supply Act, 1948 (the Act) issued order dated September  17, 1975 granting rebate of 25% in demand and energy charges for High  Tension  Industries.  It  was  specifically  mentioned therein  that the rebate was to be allowed from the date  of going  into regular production on or after January 1,  1976. The  Board, thereafter, asked the Director of Industries  to identify the High Tension Industries which would be eligible for  the  25%  rebate  declared by  the  Board.   The  State Government  issued the order dated July 13,  1976  extending the  rebate to all the industries except 65 notified in  the Government order dated March 9, 1976.  Thereafter the  Board issued order dated August 10, 1976 extending the  concession to all the High Tension Industries except the 65 excluded by the State Government. The  State  Government issued order dated  August  23,  1985 specifying certain incentives available to the industries in the  three backwards districts of the Sate.  The  concession of 25% tariff already granted by the Board was extended  for two more years i.e. a total of five years. The Board withdrew the concession of 25% rebate to the  High

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Tension Industries by its order dated December 8, 1987.  The State  Government also issued similar order dated  July  27, 1989 withdrawing the rebate. The respondent M/s.  Sarada Ferro Alloys Ltd. (the  Company) decided  to establish an industry to produce  Ferro  Chrome. According to the company it obtained a small scale  industry certificate  on September 5, 1986.  It further obtained  ’no objection’  certificate from Andhra Pradesh Pollution  Board on  November 12, 1986.  The case of the company  further  is that  it  purchased  4.01 acres of land  during  the  period September  1986  to May, 1989.  The Board  called  upon  the campany by its letter dated December 9, 1987 to deposit  Rs. 8,  40, 200 towards service-lines. the company entered  into an agreement with the Board on August 21,1989 for the supply of  the electricity.  It is the case of the company that  it commenced production on regular basis on August 11, 1990. The company requested the Board by its letter dated June 29, 1991 117 to  extend  concession of 25% rebate for a  period  of  five years  from  the date it started  production.   The  company based its demand on the State Government order dated  August 23,  1985.  The  Board  by its letter  dated  July  9,  1991 declined to give the concession to the company on the ground that  the said concession had already been withdrawn by  the Board by its order dated December 8, 1987. The company challenged the communication of Board dated July 9, 1991 by way of a writ petition before the Andhra  Pradesh High  Court.  The company further sought a declaration  that it was entitled to 25% power rebate as declared by the State Government in its letter dated August 23, 1985.  The learned Single  Judge  of  the  High Court  by  its  judgment  dated November 8, 1991 allowed the writ petition.  The writ appeal preferred by the Board was dismissed by a Division beach  of the High Court by its judgment dated February 7, 1992.  This appeal  by way of special leave is against the  judgment  of the High Court. The  High Court allowed the writ petition of the company  on the  sole  ground that the respondent-company  having  acted upon  the  representation made by the Board  and  the  State Government,   the  doctrine  of  promissory   estoppel   was attracted  and  as such the Board and the  State  Government were  bound to grand 25% rebate for a period of five  years. The  Division Bench of the High Court based its  conclusions on the reasoning which is reproduced hereunder:-               "The material now before us clearly shows that               by   30.6.87  the  company  had  incurred   an               expenditure of Rs. 11,07,328 towards  purchase               of land and other expenditure including  civil               works.   Even  if  we  take  8.12.87  as   the               relevant  date it cannot be disputed  that  by               that date considerable expenditure was already               incurred by the petitioner for setting up  the               industry and this was done on the basis of the               promise held out by the Government in G.O. Ms.               No.  375 dated 23.8.85 and  the  consequential               B.P.  Ms. No. 689 dated 17.9.75, B.P. Ms.  No.               691  dated 10.8.76 and B.P. Ms. No. 152  dated               13.2.78.   Whichever  date  was   taken   into               account,  either 27.7.89 of 8.12.87, there  is               no  valid reason for the Electricity Board  to               withdraw the concessions earlier granted.   As               we   have  found  on  facts  that  the   first               respondent  had acted on the promise held  out               by  the Government and the Electricity  Board,

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             both of them arc bound by that promise." 118 We have given our thoughtful consideration to the  reasoning and  the conclusions reached by the High Court.  We  are  of the  view that the High Court was not justified in  applying the  doctrine  of  promissory  estoppel  to  the  facts  and circumstances of this case.  This Court in Union of India v. Godfrey Phillips India Ltd., [1985] 4 SCC 369 explained  the principles of promissory estoppel in the following words-               "The true principal of promissory estoppel  is               that  where  one  party has  by  his  word  or               conduct   made  to  the  other  a  clear   and               unequivocal promise or representation which is               intended to create legal relations or effect a               legal  relationship  to arise in  the  future,               knowing  or intending that it would  be  acted               upon by the other party to whom the promise or               representation  is made and it is in  fact  so               acted upon by the other party, the promise  or               representation  would be binding on the  party               making  it and he would not be entitled to  go               back  upon it, if it would be  inequitable  to               allow  him  to  do so, having  regard  to  the               dealings  which have taken place  between  the               parties." We  may  now examine the promise or representation  said  to have  been  made  by the appellant and  acted  upon  by  the company.   The  operative part of the order dated  July  13, 1976 issued by Board is as under               "The revised power tariff notified by the A.P.               State  Electricity  Board  with  effect   from               20.10.1975  offers a rebate of 25%  on  demand               and   energy   charges  for   specified   H.T.               consumers  as an incentive to  new  industries               for  the  first three years from the  date  of               their   going   into   production    (emphasis               supplied)." The  High Court has primarily based its conclusions  on  the Government letter dated August 23, 1985.  The relevant  part of the said order is as under:-               "Power :- At present the Andhra Pradesh  State               Electricity Board offers 25% tariff concession               for   the  first  three  years   for   certain               industries.  This concession would be extended               for two more years i.e. a total of five years.               Twenty-five               119               per  cent concession tariff would be  met  for               the  additional  2  years  from  out  of   the               Industries budget." It is clear from the Government order reproduced above  that the  Government extended the concession already  granted  by the Board for three years for a further period of two years. We  have,  therefore,  to see what is  the  promise  or  the representation  held out to the company in the order of  the Board dated July 13, 1976 reproduced above. We  are of the view that the promise or representation  made by the Board in its letter dated July 13, 1976, if any,  was directly linked with the date of commencement of  production by  the  company.  It is not disputed that  the  respondent- company  commenced production on commercial scale on  August 11,  1990.   The  incentive was withdrawn by  the  Board  on December  8,  1987 and by the Government on July  27,  1989. Whichever  date  is taken into account the company  was  not entitled to the incentive as it had not commenced production

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on  or  before  either of these two dates.  Even  if  it  is assumed  that  a promise or representation was made  by  the Board  in  its letter dated July 13, 1976, the  doctrine  of promissory  estoppel  is not attracted in this case  as  the company  failed to act upon the said representation.  We  do not agree with the assumption entertained by the High  Court that  once the company started the process of setting up  an industry  and had incurred expenditure, the Board was  bound to  keep its incentive open for the company till it  started production.   We are of the view that only those  industries were entitled to the benefit of the incentive who  fulfilled the  requirements  during  the  period  the  incentive   was operative. Mr.  Shanti Bhushan, learned counsel for the  appellant  has further  contended that the orders dated July 13,  1976  and December  8, 1987 were issued by the Board in its  statutory power  under Section 49 of the Act.  According to him  these orders  being statutory there can be no promissory  estoppel against the Board.  He further contended that there were  no directions by the State Government under Section 78A of  the Act.   The view we have taken on the question of  promissory estoppel  it  is not necessary to go into  these  additional grounds urged by Mr. Shanti Bhushan. We  allow  the  appeal  and set  aside  the  judgment  dated November 8, 120 1991 of the learned Single Judge and dated February 7,  1992 of the Division Bench of the High Court in writ appeal.  The writ  petition filed by the respondent-company in  the  High Court is dismissed.  We leave the parties to bear their  own costs. T.N.A. Appeal allowed. 121