REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.101 OF 2007

Kusumam Hotels (P) Ltd. … Appellant

Versus

Kerala State Electricity Board & Ors.          … Respondents

WITH

CIVIL APPEAL NOS.102, 103, 104, 105, 106 AND 3309 OF 2007

J U D G M E N T

S.B. Sinha, J.

1. These appeals involving similar questions of facts and law were

taken up for hearing together and are being disposed of by this common

judgment.

2. Appellants herein are owners of hotels situated at different parts of

the State of Kerala.  

By  reason  of  a  policy  decision  adopted  by  the  Central

Government, ‘tourism’ was declared to be an ‘industry’.  The State of

Kerala adopted the said policy of the Central Government.  Pursuant to

the said policy decision,  various incentives were to be granted.  It  was

declared  that  “Tourism”  will  be  treated  as  an  ‘Industry’ and  the

concessions available to the’ tourism industry’ were :

“(i) Subsidy  for  prepration  of feasibility/project report.

(ii) Investment subsidy limited to 10% thereof.

(iii) Incentive for training local manpower.

(iv) Augmenting availability of funds from State Financial Corporations.

(v) Concession in electricity and water charges.

(vi) Allocation of land at concessional rate.

(vii) Exemption from building tax levied by the Revenue Department.  (Action  to  amend the Kerala  Buildings Tax Act 1975 will be taken separately).”

3. Apart  from the  concession  in  electricity  and  water  charges  and

payment of building tax to be levied by the Revenue Department which

was open ended in nature, other concessions were to be granted on a one

time measure.   

4. A new policy for grant of investment subsidy was also floated.  

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Classified  hotels  (One  to  Five  Stars)  came  within  the  purview

thereof.  In terms of the said policy decision, the Kerala State Electricity

Board  (the  Board)  was  directed  to  grant  tariff  concessions  to  the

classified  hotels  and  motels  consequent  on  the  said  declaration  of

Government of Kerala and Government of India.  The concessions to be

granted thereby were :

“(1) The  electricity  tariff  applicable  to  the categories  listed  above  will  be  ht  i- industrial  tariff/l.t.  Iv  industrial  tariff depending  on  the  type  of  supply  from 1.4.1987

(2) The  tariff  as  indicated  above  will  be applied  to  the  institutions  either  on production of proper certificate from the Director  of  Tourism or based  on list  of institutions  eligible for the concessional tariff furnished by the director of tourism to  the  Secretary,  Kerala  Electricity Board.  The certificates/ communications should  be  given  by  the  Director  of Tourism himself.

(3) In the  case  of  institutions  in  the  above categories applying for power connection hereafter  tariff  as above will  be applied by the Kerala State Electricity Board on receipt  of necessary certificate  from the Director of Tourism.

(4) Regarding  the  admissibility  of  the concession  to  any  particular  unit  the matter will be referred to the Director of Tourism and the report on the matter will

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be  accepted  by  the  Kerala  State Electricity Board.”

5. Indisputably, the appellants had set up or upgraded their hotels and

motels.  The Government of Kerala classified the hotels in question in

several categories for which they became entitled to from the year 1990.   

The Board, allegedly, had been suffering losses.  The Government

of Kerala, however, issued a Government Order on or about 25.8.1997

adopting the mode of grant of subsidy, inter alia, to the industrial sector,

the relevant portions whereof read as under :

“In  the  Government  order  read  as  first  paper above  it  was  ordered  that  the  actual  cost  of electricity concessions allowed to Industries in the  State,  as  part  of  Industrial  policy  will  be reimbursed to Kerala State Electricity Board to the extent necessary to reach 3% Rate of Return (ROR) starting with the accounting year 1986- 87,  by  adjusting  the  amount  of  concession against  the  dues  payable  to  Government  by Kerala State Electricity Board.

2. The  Chairman,  Kerala  State  Electricity Board in his letters read above has reported that the  loss  sustained  by  the  Kerala  State Electricity Board due to concessional electricity tariff  allowed to Industries  during the last  ten years comes to Rs.60.3 crores and that the loss for the year 1995-96 alone is Rs.24 crores.

XXX XXX XXX

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4. Having  considered  the  entire  issue  in detail,  Government  are  pleased  to  issue  the following orders:

(i) The  Industries  and  the  Agricultural Departments in Government will find the funds  from  their  respective  Budget required for giving subsidy to Industries and  farmers  for  the  year  1997-1998  by re-appropriation.  The above departments will  also  provide  required  amounts  in their  department  budget  from  the financial year 1998-99 onwards.

(ii) The  subsidy  for  electricity  tariff admissible  to  Industrial  consumers  and farmers  will  be  disbursed  to  the beneficiaries  by  the  concerned Departments  from  the  financial  year 1998-99 onwards.”

6. By an order dated 11.10.1999, the industrial tariffs granted to the

hotels in the State stood cancelled w.e.f 15.10.1999.  It was ordered that

industrial  tariff  already granted by various  officers  of  the Board from

15.5.1999 would be suspended by an order dated 8.11.1999, stating :

“The Board hereby orders that the institutions which  were  already  enjoying  industrial  tariff prior  to  15.5.99  on  the  strength  of  certificate issued by Director of Tourism shall continue to be charged at the industrial  tariff  until  further orders.  This is subject to the final decision of the Government on payment of subsidy.  From 15.5.99 new applications for granting industrial tariff will not be sanctioned to such institutions. The field officers of the Board shall not grant

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industrial  tariff  from 15.5.99 to the institutors certified by Director of Tourism.”

7. The  hotels  of  the  appellants  were  reclassified  in  the  year  1999

keeping in view the investment made by them.

Appellants,  however,  were  served  with  demand-cum-

disconnection notices on the basis of bills raised on commercial tariffs on

or about 9.4.2000.

8. A writ petition was filed thereagainst.  In the meantime, the State

of Kerala issued a Government Order on or about 26.9.2000 stating that

the concession on electricity tariff shall be limited only to five years by

the Department of Tourism, Government of Kerala.  The concession was

not to be extended for any further period.   Clause (3) of the said GO

reads, thus :

“These orders will be operative from 15.5.1999, the  effective  date  from  which  Kerala  State Electricity  Board  has  withdrawn  the concessional  tariff  offered  to  tourism  units. The  tourism  units,  which  have  received certificate  of  eligibility  for  tariff  concession from Director, Department of Tourism, have to produce  a  certificate  from  the  Kerala  State Electricity Board regarding the total period for which  they  have  enjoyed  the  concessional tariff.   They will  be  eligible  for  concessional tariff only for a period of five years including the  period  for  which  already  enjoyed  the

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concession. i.e., if the tourism unit has already enjoyed tariff for a period of three years prior to 15.5.1999,  they  will  be  eligible  for concessional  tariff  for a further  period of  two years only.  This period will  be counted from the  effective  date  originally  certified  by  the Director of Tourism, Government of Kerala for granting concessional tariff for three years.  If any  tourism  unit  has  already  enjoyed concessional tariff for a period of five years or more prior to 15.5.1999, it will not be eligible for any extension of the period of concession.”

9. The writ  petition  filed by the  appellants  was disposed of  by an

order  dated  4.8.2004  directing  that  commercial  tariff  may be  charged

w.e.f. 15.5.1999 onwards. After the aforementioned Government Order

dated  26.9.2000  was  issued,  demand-cum-disconnection  notices  were

issued again.  Representations were made by the appellants which were

rejected.

10. They preferred an intra court appeal.   

Fresh writ petitions were filed, inter alia, praying for quashing of

the bill and the said Government Order as also for further classification

of the hotel, as industrial units.   

By reason of a judgment and order dated 16.2.2005, the said writ

petition  was  disposed  of  directing  that  18%  interest  instead  of  24%

would be charged, if the demanded amount is paid till 31.5.2005.  

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11. Intra court appeals  were preferred thereagainst  and by reason of

the impugned judgment, the same have been dismissed.

12. Mr.  Patwalia,  Mr.  Venkataramani  and  Mr.  Krishnamoorthy,

learned  senior  counsel  appearing  on  behalf  of  the  appellants,  would

submit :

(i) The concessions granted to the appellants  should not  have been

withdrawn from an anterior date.   

(ii) The Board could not have directed application of commercial tariff

despite  the  fact  that  the  hotels  are  still  considered  to  be  an

industry.   

(iii) In view of the provisions in sub-section (2) of Section 56 of the

Electricity Act, 2003, no bill could have been raised after a period

of two years.

13. Mr.  George,  learned  counsel  appearing  on  behalf  of  the  State

Electricity Board and Mr. Sathish, learned counsel appearing on behalf

of the State of Kerala, would submit :

(a) 2003 Act is not applicable in relation to the bills raised under the

Electricity (Supply) Act, 1948.   

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(b) The  impugned  order  dated  26.9.2000  is  not  retrospective  in

operation.  In any event, the State has the requisite jurisdiction to

stop grant of concession even with retrospective effect.   

(d) No  foundational  fact  having  been  laid  to  establish  the  plea  of

promissory estoppel,  the same is  not  available  to  the appellants

particularly when they had entered into a contract with the Board

for which the bills were to be raised on the basis of commercial

tariff.   

(e) Appellants  having  filed  writ  petitions  after  a  long  time,  the

impugned judgment should not be interfered with.

14. Indisputably, by reason of the impugned Government Order, the

benefit  of  one of  the  concessions  made available  to  the  appellants  by

reason of the Government Order dated 11.7.1996 had been taken away.

The core question which arises for our consideration is whether the said

Government  Order  dated  26.9.2000  is  reasonable  having  been  given

retrospective effect and retroactive operation.   

15. Tourism  was  declared  to  be  an  industry.   The  wide  range  of

concessions  as  noticed  hereinbefore,  inter  alia,  covered  electricity and

water charges.  It is not a case where some exemptions or concessions

were to be given for a specific period or as a one time measure. No time

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limit  was  fixed  for  applicability  in  respect  of  the  policy  decisions.

Pursuant thereto long term investments might have been made.  It is not

based on a principle of giving benefit with a view to facilitate the initial

growth of the industry.  It was not based on any formula or criteria to

evaluate the realization of the object of grant of such concession over a

period.  It was an open ended offer.  It must, therefore, be held that the

Government was satisfied that the need was to grant concession if not

permanently, at least for a long time.   

16. There cannot be any doubt whatsoever that a policy decision can

be  reviewed from time to  time.   It  is  also  beyond any doubt  that  the

concessions granted can be withdrawn in public interest.   

Indisputably,  the  State  is  also  entitled  to  change  or  alter  the

economic policies.  Appellants do not have any vested right to enjoy the

concessions  granted  to  them  forever,  particularly  when  the  Board  is

constituted and incorporated under the provisions of Electricity (Supply)

Act,  1948.   Any  policy  decision  adopted  by  the  State  would  not  be

binding on the  Board,  save  and except  provided for  in  the Act.   The

Board being an independent entity, the duties and functions of the Board

vis-à-vis  the  State  are  enumerated  in  the  Act.   The  Board,  however,

would  be bound by any direction  issued by the State  Government  on

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questions of policy.  A dispute which may arise as to whether a question

is  or  not  a  question  of  policy  involving  public  interest,  Central

Government is the final arbiter.  The policy decision adopted by the State

on  the  basis  whereof  the  Board  felt  obligated  to  grant  electrical

connection in favour of the  appellants  on the basis  of  industrial  tariff

must, therefore, be understood in the context of Section 78A of the 1948

Act.   What  is  binding  on  the  Board  is  the  policy  of  the  State.   The

direction of the State was to apply a particular category of tariff to the

appellants.   Such directions  could have been withdrawn while making

another  tariff.   The State  indisputably has  the power  to  grant  subsidy

from its own coffer instead of directing the Board to grant concession.   

17. It  is  now  a  well  settled  principle  of  law  that  the  doctrine  of

promissory estoppel applies to the State.  It is also not in dispute that all

administrative  orders  ordinarily  are  to  be  considered  prospective  in

nature.  When a policy decision is required to be given a retrospective

operation,  it  must  be  stated  so  expressly  or  by necessary  implication.

The authority issuing  such  direction  must  have power  to  do  so.   The

Board, having acted pursuant to the decision of the State, could not have

taken a decision which would be violative of such statutorydirections.   

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15.5.1999 was fixed as the cut off date by the Board.  It, by itself,

could  not  have  done  so.   But  the  State  for  issuing  the  GO  dated

26.9.2000 could have fixed the said cut off date on its own.  We although

do not agree that by granting retrospectivity to the said order, the entirety

of the Government Order should be set aside the same or per se would be

held to be unreasonable,  but  what we mean to say is  that  it  could be

given effect to only from the date of the order, i.e., prospectively and not

from an anterior date, i.e., retrospectively.   

18. It was held in  Lohia Machines Ltd. and Anr. v.  Union of India

(UOI) and Ors. [(1985) 2 SCR 686] :

“On the other hand it is quite clear that if the relief  granted  is  to  be  withdrawn  with retrospective operation from 1972 the assessees who have enjoyed the relief for all those years will  have  to  face  a  very grave  situation.  The effect  of  the  withdrawal  of  the  relief  with retrospective operation will be to impose on the assessee a  huge  accumulated  financial  burden for no fault of the assessee and this is bound to create  a  serious  financial  problem  for  the assessee. Apart from the heavy financial burden which  is  likely  to  upset  the  economy of  the undertaking,  the  assessee  will  have  to  face other  serious  problems.  On the  basis  that  the relief was legitimately and legally available to the assessee, the assessee had proceeded to act and to arrange its affairs. If the relief granted is now  permitted  to  be  withdrawn  with retrospective  operation,  the  assessee  may  be found guilty of violation of provisions of other

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statutes  and  may  be  visited  with  penal consequences…”

Yet again in  M/s. Indian Metals and Ferro Alloys Ltd. & Anr. v.

State of Orissa & Ors. [(1987) 3 SCC 189], it was opined :

“25…we hold that the High Court was not right in observing that the orders under Section 22-B of  the  Act  imposing  restrictions  on consumption  of  power  could  not  legally  and validly  be  passed  by  the  Government  “with retrospective  effect”  in  the  middle  of  a  water year.  But  the  position  regarding  disallowance of  clubbing  stands  on  an  entirely  different footing.  If  a  consumer  had  been  allowed  the benefit  of  clubbing  previously,  that  benefit cannot be taken away with retrospective effect thereby  saddling  him  with  heavy  financial burden in respect  of the past  period where he had drawn and consumed power on the faith of the  orders  extending  to  him  the  benefit  of clubbing…”

19. It is not necessary for us to notice a large number of decisions on

promissory estoppel as the principle thereof has recently been noticed by

this Court  in  Southern Petrochemical  Industries  Co. Ltd. v.  Electricity

Inspector & Etio & Ors. [(2007) 5 SCC 447] wherein it was stated :

“We  are  also  unable  to  agree  with  Mr. Andhyarujina that exemption from tax is a mere concession  defeasible  by the  Government and

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does  not  confer  any  accrued  right  to  the receipient.   Right  of  exemption  with  a  valid notification  issued  gives  rise  to  an  accrued right.  It is a vested right.  Such right had been granted  to  them permanently.   “Permanence” would  mean unless  altered  by statute.   Thus, when a right is accrued or vested, the same can be taken away only by reason of a statute and not otherwise.  Thus, a notification which was duly  issued  would  continue  to  govern  unless the same is repealed.”

It was further held :

“126. This  Court  distinguished  its  earlier decision  in  Kasinka  Trading v.  Union  of India55 whereupon  Mr  Andhyarujina  placed strong reliance, in the following terms:  

“40.  The  case  of  Kasinka  Trading v. Union of India cited by the appellant  is an authority for the proposition that the mere  issuance  of  an  exemption notification under a provision in a fiscal statute such as Section 25 of the Customs Act,  1962,  could  not  create  any promissory  estoppel  because  such  an exemption  by  its  very  nature  is susceptible to being revoked or modified or subjected to other conditions. In other words,  there  is  no  unequivocal representation. The seeds of equivocation are  inherent  in  the  power  to  grant exemption.  Therefore,  an  exemption notification  can  be  revoked  without falling foul of the principle of promissory estoppel.  It  would  not,  in  the circumstances,  be  necessary  for  the

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Government  to  establish  an  overriding equity  in  its  favour  to  defeat  the petitioner’s plea of promissory estoppel. The Court also held that the Government of India had justified the  withdrawal of exemption  notification  on  relevant reasons  in  the  public  interest. Incidentally,  the  Court  also  noticed  the lack  of  established  prejudice  to  the promises when it said :  

‘The burden of customs duty, etc. is  passed on to the consumer and therefore  the  question  of  the appellants being put to a huge loss is not understandable.’

(See  also  Shrijee  Sales  Corpn. v.  Union  of India56 and STO v. Shree Durga Oil Mills)   We do not see the relevance of this decision to the facts of this case. Here the representations are clear and unequivocal”.”

In LML Ltd. v. State of U.P. & Ors. [2007 (14) SCALE 469], this

Court opined :

“38. Those suppliers, who keeping in view of their capacity to supply uninterrupted electrical energy had made a representation and pursuant thereto  the  consumers  had  altered  their position, cannot be permitted to take a different stand  as  the  doctrine  of  promissory  estoppel would apply against them.  The said doctrine is premised  on  the  conduct  of  party  making  a representation to the other so as to enable him to arrange its affairs in such a manner as if the said  representation  would  be  acted  upon.   It

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provides  for  a  cause  of  action.   It  need  not necessarily be a defence.”

Yet again in  U.P. Power Corporation Ltd & Anr. v.  Sant Steel &

Alloys (P) Ltd. & Ors. [2007 (14) SCALE 36], it was held :

“In  this  background,  in  view  of  various decisions noticed above, it will appear that the Court’s approach in the matter of invoking the principle of promissory estoppel depends on the facts  of  each  case.   But  the general  principle that  emerges is  that  once a representation has been made by one party and the other party acts on  that  representation  and  makes  investment and thereafter  the other party resiles,  such act cannot stated to be fair and reasonable.  When the  State  Government  makes  a  representation and  invites  the  entrepreneurs  by  showing various  benefits  for  encouraging  to  make investment by way of industrial development of the  backward  areas  or  the  hill  areas,  and thereafter  the  entrepreneurs  on  the representations  so  made  bona  fidely  make investment  and  thereafter  if  the  State Government  resile  from such  benefits,  then  it certainly  is  an  act  of  unfairness  and arbitrariness.   Consideration  of public  interest and  the  fact  that  there  cannot  any  estoppel against a Statute are exceptions.”

In  State  of  Orissa  &  Ors. V.  Mangalam Timber  Products  Ltd.

[(2004) 1 SCC 139], a Three Judge Bench of this Court, held :

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“…  The  State  Government  having  persuaded the respondent to establish an industry and the respondent having acted on the solemn promise of  the  State  Government,  purchased  the  raw material  at  a  fixed  price  and  also  sold  its products  by  pricing  the  same  taking  into consideration the price of the raw material fixed by  the  State  Government  and  supplied;  the State Government cannot be permitted to revise the terms for supply of raw material adversely to  the interest  of the respondent  and effective from a back date and place the respondent in a situation  which it  will  not  be able  to resolve. The respondent could not have revised its price from  a  back  date  and  recovered  it  from innumerable  consumers  to  whom  its  finished products were supplied at a fixed price.”

20. Our attention, however, has been drawn to a decision of this Court

in Kasinka Trading & Anr. v. Union of India & Anr. [(1995) 1 SCC 274].

Therein the power of the State to change its  policy decision in public

interest was emphasized.  It was held that the power which can be used

for grant of concession, namely, Section 25(1) of the Customs Act itself

is the source to rescind the earlier notification, stating :

“Since, the notification had been issued under Section 25(1) of the Act, the very same power was available to the authority for rescinding or modifying that notification and appellant ought to  have  known  that  the  said  notification  was capable of or liable to be revoked, modified or rescinded at any time even before the expiry of 31.3.1981 if the ‘public interest’ so demanded. To hold that after the Government had issued

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the Notification No.66 of 1979 indicating that it was to remain operative till 31.3.1981, it could not be rescinded or modified before the expiry of  that  date  would  amount  to  prohibiting  the Government  from  discharging  its  statutory obligation under Section 25(1) of the Act, if it was satisfied that it was in the ‘public interest’ to  withdraw,  modify  or  rescind  the  earlier notification.  The plain language of Section 25 of the Act is indicative of the position that it is the  public  interest  and  public  interest  alone which is the dominant factor.  It is not the case of  the  appellants  that  the  withdrawal  of Notification  No.66  of  1979  by  the  impugned notification was not in ‘public interest’.  Their case, however, is that relying upon the earlier notifications  they  had  acted  and  the Government should not be permitted to go back on its assurance as otherwise they would be put to  huge loss.   The courts  have to balance the equities  between  the  parties  and  indeed  the courts  would  bind  the  Government  by  its promise  ‘to  prevent  manifest  injustice  or fraud’.”

It was further held :

“23. The  appellants  appear  to  be  under  the impression  that  even  if,  in  the  altered  market conditions  the  continuance  of  the  exemption may not  have been justified,  yet,  Government was bound to continue it to give extra profit to them.  That  certainly  was  not  the  object  with which  the  notification  had  been  issued.  The withdrawal of exemption “in public interest” is a matter of policy and the courts would not bind the Government to its  policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was

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necessary in  the  “public interest”.  The courts, do not interfere with the fiscal policy where the Government  acts  in  “public  interest”  and neither  any  fraud  or  lack  of  bona  fides  is alleged much less established. The Government has to be left free to determine the priorities in the matter of utilisation of finances and to act in the public interest  while issuing or modifying or withdrawing an exemption notification under Section 25(1) of the Act.”

21. We are not concerned with the exercise of a statutory power in this

case.  We are concerned with issuance of a direction by the State which

is  binding  on  the  Board  as  also  how  and  to  what  extent  it  can  be

rescinded.

22. We may, however, notice that in Motilal Padampat Sugar Mills v.

State of U.P. [(1979) 2 SCR 641, this Court held :

“Public  bodies  are  as  much  bound  as  private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice

* * *

If our nascent democracy is to thrive different standards  of  conduct  for  the  people  and  the public bodies cannot ordinarily be permitted.  A public  body  is,  in  our  judgment,  not  exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice.”

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23. Another Bench in Jit Ram v. State of Haryana [(1980) 3 SCR 689]

took  a  different  view.   Jit  Ram was  overruled  in  Union  of  India v.

Godfrey Philips India Ltd. Ltd. [(1985) 4 SCC 369].

24. If the doctrine of promissory estoppel applies for the purpose of

enforcing the concession  granted in favour of  entrepreneurs,  it  can be

withdrawn, inter alia, in public interest.  Despite absence of an overriding

public  interest,  however,  although  a  different  policy  decision  can  be

taken but therefor adequate notice should be given.  It  was so held in

Shrijee Sales Corporation & Anr. v. Union of India [(1997) 3 SCC 398]

in the following terms :

“Once  public  interest  is  accepted  as  the superior equity which can override individual equity,  the  principle  should  be  applicable even  in  cases  where  a  period  has  been indicated.   The Government is  competent  to resile  from  a  promise  even  if  there  is  no manifest public interest involved, provided, of course, no one is put in any adverse situation which cannot be rectified.  To adopt the line of  reasoning  in  Emmanuel  Ayodeji  Ajay  v. Briscoe quoted  in  M.P.  Sugar  Mills even where  there  is  no  such  overriding  public interest, it may still be within the competence of the Government to resile from the promise on giving reasonable notice which need not be a  formal  notice,  giving  the  promise  a reasonable  opportunity  of  resuming  his

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position, provided of course, it is possible for the promise to restore the status quo ante.  If, however,  the  promise  cannot  resume  his position, the promise would become final and irrevocable.”

The same principle was reiterated in  Sales Tax Officer & Anr. v.

Shree Durga Oil Mills & Anr. [(1998) 1 SCC 572].

25. In  Pawan  Alloys  &  Casting  Pvt.  Ltd. v.  U.P.  State  Electricity

Board & Ors. [(1997) 7 SCC 251], it was held :

“60.  So  far  as  Point  No.  3  is  concerned  the appellants  are  on  a  weaker  footing.  It  is  true that  by earlier  notifications dated 29-10-1982, 13-7-1984  and  28-1-1986  the  scheme  of incentives  by  way  of  development  rebate  of 10%  was  continued  to  be  offered  to  new industries  to  be  established  in  the  plains  of State of U.P. Identically worded Item 9 in the earlier  notifications  and  Item  8  in  the  last notification dated 28-1-1986 had continued the said  incentive  scheme.  By  virtue  of  the  last notification  of  28-1-1986  it  was  clearly  laid down  by  the  Board  that  all  new  industries which might be established on and after 28-1- 1986 will earn this development rebate for the three  years’  period  from  the  date  of commencement of supply of electricity. It was also  provided  that  all  the  existing  new industries  which  might  have  earlier  been established  before  28-1-1986  and  which  had still  some  part  of  unexpired  period  of  three years  of  development  rebate  available  with them also were given the continued benefit  of the  development  rebate  for  the  unexpired

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period  from  1-2-1986.  What  the  impugned notification of 31-7-1986 sought to do was to delete  this  first  para  of  Item  8  of  the notification of  28-1-1986. The result  was that from 1-8-1986  whatever  unexpired  period  for getting  development  rebate  of  10%  was available  with  the  new  industries  covered  by the  sweep  of  the  said  notification,  got withdrawn. It  could not  be said and it  is  also not the case of the respondent-Board that in the light of the notification of 31-7-1986 whatever development  rebate  was  granted  to  these  new industries  earlier  as  per  the  then  existing scheme would stand withdrawn or any recovery would  be  effected  against  them  for  the  said amount. The case of the Board is that despite any unexpired period for earning the incentive rebate of 10% was available to the existing new industries  on 31-7-1986, they would  lose  that benefit of development rebate for the rest of the unexpired  period  with  effect  from  1-8-1986 onwards. Hence it is not possible to agree with the  contention  of  learned  counsel  for  the appellants  that  the  said  notification  had  any retrospective  effect.  It  was  purely prospective and 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  1-8- 1986 could not get the benefit  of incentive of 10% development  rebate;  and (ii)  all  existing new  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  unexpired period  which  otherwise  would  have  been available  to  them from 1-8-1986  onwards  till the entire three years’ period which had already commenced would have been over. Both these

22

effects  of  the  notification  of  31-7-1986  were purely  prospective  in  character  and  had  no retrospective effect. Consequently it cannot be said that the said notification was liable to be struck down on the score of being retrospective in  nature.  The  third  point  for  consideration, therefore, is answered in the negative.”

Similar  view has  been taken  in  Bannari  Amman Sugars  Ltd.  v.

Commercial Tax Officer & Ors. [(2005) 1 SCC 625];  Kuldeep Singh v.

Govt. of NCT of Delhi [(2006) 5 SCC 702]; and M.P. Mathur & Ors. v.

DTC & Ors. [(2006) 13 SCC 706].

26. The  law  which  emerges  from  the  above  discussion  is  that  the

doctrine  of  promissory  estoppel  would  not  be  applicable  as  no

foundational fact therefor has been laid down in a case of this nature.

The  State,  however,  would  be  entitled  to  alter,  amend  or  rescind  its

policy  decision.   Such  a  policy  decision,  if  taken  in  public  interest,

should be given effect to.  In certain situations, it may have an impact

from a retrospective effect but the same by itself would not be sufficient

to be struck down on the ground of unreasonableness if the source of

power  is  referable  to  a  statute  or  statutory  provisions.   In  our

constitutional  scheme, however, the statute and/or any direction issued

thereunder must be presumed to be prospective unless the retrospectivity

is indicated either expressly or by necessary implication.  It is a principle

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of rule of law.  A presumption can be raised that a statute or statutory

rules has prospective operation only.

27. The State of Kerala in this case did not grant any concession by

itself.   The  Central  Government  took  a  larger  policy  of  treating  the

tourism as an industry.  A wide range of concessions were to be granted

by way of one time measure; some of them, however, had a recurring

effect.  So far as grant of benefits which were to be recurring in nature,

the State exercises its statutory power in the case of grant of exemption

from payment of building tax wherefor it amended the statute.  It issued

directions  which  were  binding  upon  the  Board  having  regard  to  the

provisions contained in Section 78A of the 1948 Act.  The Board was

bound thereby.   The Board,  having regard  to  its  financial  constraints,

could have brought its financial stringency to the notice of the State.  It

did so.  But the State could not have taken a unilateral decision to take

away the accrued or vested right.  The Board’s order dated 11.10.1999 in

law could not have been given effect to.  The Board itself kept the said

notification in abeyance by reason of order dated 8.11.1999.  

Appellants, indisputably, continued to derive the benefits in terms

of the original order.  They obtained certificates of classification.  It is on

the aforementioned context, the question as regards construction of the

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impugned notification dated 26.9.2000 arises.  Ex facie, the said policy

decision  could  not  be  given  a  retrospective  effect  or  retroactive

operation.  The State was not exercising the power under any statute to

grant or withdraw the concession.  It was exercising its statutory power

of issuing direction.  It is, therefore, a statutory authority.  The 1948 Act

does not authorize the State to issue a direction with retrospective effect.

The  Board,  therefore,  could  only  give  prospective  effect  to  such

directions  in  absence  of  any  clear  indication  contained  therein.   By

reason of withdrawal of concession with retrospective effect, the accrued

right of the appellants had been affected.  In Kuldeep Singh v. Govt. of

NCT of Delhi. [(2006) 5 SCC 702], this Court held :

“In a case of this nature, where the State has the exclusive  privilege  and  the  citizen  has  no fundamental  right  to  carry  on  business  in liquor, in our opinion, the policy which would be applicable is the one which is prevalent on the date of grant and not the one, on which the application had been filed.  If a policy decision had been taken on 16.9.2005 not to grant L-52 licence,  no  licence  could  have  been  granted after the said date.”

We, however, are not concerned with a similar situation.

28. However,  in  Ramchandra  Murarilal  Bhattad  &  Ors. v.  State  of

Maharashtra & Ors. [(2007) 2 SCC 588], it was held :

25

“64. It  is not  a case where the court is called upon  to  exercise  its  equity  jurisdiction.   It  is also  not  a  case  where  ex  facie  the  policy decision  can  be  held  to  be  contrary  to  any statute  or  against  a  public  policy.   A  policy decision may be subject to change from time to time.  Only because a change is effect, (sic) the same by itself does not render a policy decision to be illegal or otherwise vitiated in law.”

29. We,  therefore,  are  of  the  opinion  that  the  impugned  GO dated

26.9.2000  must  be  held  to  have  a  prospective  operation  and  not  a

retrospective operation.  That view would save it from being vulnerable

to the challenge of being hit by Article 14 of the Constitution of India.   

30. We, however, are not in a position to accept the contention that the

Bills  could  not  have  been  issued  having  regard  to  sub-section  (2)  of

Section 56 of the Act.  Appellants herein have incurred liabilities.   

Sub-section (5) of Section 185 of the Electricity Act, 2003 reads,

thus:

“(5) Save as otherwise provided in sub-section (2),  the  mention  of  particular  matters  in  that section, shall not be held to prejudice or affect the  general  application  of  section  6  of  the General Clauses Act, 1897 (10 of 1897), with regard to the effect of repeals.”

26

Whereas the bills are issued only in respect of the dues arising in

terms of the law as was applicable prior to the coming into force of 2003

Act.  Sub-section (2) of Section 56 shall apply after the said Act came

into force.  The Board could have even framed a tariff in terms of the

provisions  appended  to  Section  61  of  the  Act.   Appellants  incurred

liability  to  pay  the  bill.   The  liability  to  pay  electricity  charges  is  a

statutory  liability.   The  Act  provides  for  its  consequences.   Unless,

therefore, the 2003 Act specifically introduced, the bar of limitation as

regards the liability of the consumer incurred prior to coming into force

of the said Act.  In our opinion, having regard to Section 6 of the General

Clauses  Act,  the  liability  continues.   [See  Southern  Petrochemical

Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. and Ors. [(2007)

5 SCC 447].

31. We,  therefore,  are  of  the  opinion  that  the  High  Court  was  not

correct in its view to the aforementioned extent.  The judgment of the

High Court is, thus, set aside to the aforementioned extent.  The appeals

are allowed with costs.  Counsels fee assessed at 25,000/- (Rupees five

thousand only) in each appeal.

CIVIL APPEAL NO.106 OF 2005

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32. Board has preferred this appeal only against grant of instalments in

favour of the respondents.  The contention of Mr. George that the High

Court could not have waived the provisions of interest  on the delayed

payment under the tariff cannot be accepted.  In all other cases, the High

Court directed that 18% interest would be payable following the decision

of the Court in Kerala State Electricity Board through its Special Officer

(Revenue)  &  Anr. v.  M.R.F.  Ltd. [(1996)  1  SCC  597].   The  same

principle would apply in this case also but the bill  having been raised

only  in  2003,  the  question  of  charging  any interest  thereupon  from a

retrospective date would not arise.

33. This appeal is, thus, dismissed.  However, there shall be no order

as to costs.

………………………..J.

[ S.B. Sinha ]   

………………………..J. [Lokeshwar Singh Panta]

New Delhi; May16, 2008

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