Bihar Electricity Duty Act, 1948 – s.9 – Jharkhand Industrial Policy, 2012 – The Industrial Policy 2012 was notified by the State government on 16.06.2012 providing an exemption from payment of 50 per cent of the electricity duty for a period of five years – The policy envisaged that the industrial units will be entitled for reimbursement/payment of subsidy etc. under the different categories only from the next financial year of the date of production – It was also stipulated in the policy that notifications enforcing the terms of the industrial policy would be issued within a period of one month by the Departments of the State government – The Departments of the State government failed to comply with the one month time schedule – Eventually, the State government issued an exemption notification on 08.01.2015 but made it effective from the date on which it was issued – Writ petition by the respondent – Before the High Court, the respondent claimed that the clause in the notification making it prospective should be effaced since it was contrary to the representation that was held out by the Industrial Policy 2012 – Alternately, the respondent sought a direction that it would be entitled to an exemption from electricity duty for a period of five years from the date of the issuance of the notification – High Court held that there was no specific reason for delay and that ‘but for the lethargic approach of the state authorities’ the exemption should have been issued within a month of the issuance of the Industrial Policy 2012 – The High Court concluded that the notification dated 08.01.2015 issued by the Commercial Tax Department of the State government ought not to be construed with prospective effect and the clause making it prospective would have to be struck down – The notification was deemed to be in effect from the date of the Industrial Policy 2012 (1 April 2011) – The electricity duty deposited for FYs 2011-12, 2012-13 and 2013-14 was directed to be adjusted against the future liability of the respondent towards electricity duty – On appeal, held: The State government issued a statutory notification u/s. 9, but by doing so prospectively with effect from 08.01.2015 it negated the nature of the representation which was held out in the Industrial Policy 2012 – Absolutely no justification bearing on reasons of policy or public interest has been offered before the High Court or before the Supreme Court for the delay in issuing a notification – Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, such a course of action by the State is arbitrary and is violative of Art.14 – In the instant case, the respondent is entitled to a rebate/deduction from electricity duty – However, the respondent would not be entitled to a rebate/deduction for FY 201112 – In terms of the Industrial Policy 2012, the entitlement ensues from the financial year following the commencement of production – The respondent commenced production on 17.08.2011 – Therefore, the order of the High Court for the FYs 2012-13 and 2013-14 is confirmed.
Principles/Doctrines – Promissory estoppel – Origins and evolution – discussed.
Principles/Doctrines – Promissory estoppel and legitimate expectation – Difference between – discussed. Disposing of the appeals, the Court
HELD: Expectations breached by the State of Jharkhand
1. In the present case, this Court is unable to perceive any substance in the submission of the State which was urged in defense before the High Court. Not only did the State in the present case hold out a solemn representation, this representation was founded on its stated desire to encourage industrialization in the State. The policy document spelt out: (i)
The nature of the incentives;
(ii)
The period during which the incentives would be available; and
(iii)
The time limit within which follow-up action would be taken by the State government through its
departments for implementing the Industrial Policy 2012. [Para 43][78-F-H]
2. The State having held out a solemn representation in the above terms, it would be manifestly unfair and arbitrary to deprive industrial units within the State of their legitimate entitlement. The State government did as a matter of fact, issue a statutory notification under Section 9 of the Bihar Electricity Duty Act, 1948 but by doing so prospectively with effect from 8 January 2015 it negated the nature of the representation which was held out in the Industrial Policy 2012. Absolutely no justification bearing on reasons of policy or public interest has been offered before the High Court or before this Court for the delay in issuing a notification. The pleadings are completely silent on the reasons for the delay on the part of the government and offer no justification for making the exemption prospective, contrary to the terms of the representation held out in the Industrial Policy 2012. [Para 44][79-A-C]
3. It is one thing for the State to assert that the writ petitioner had no vested right but quite another for the State to assert that it is not duty bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of state power. The state must discard the colonial notion that it is a sovereign handing out doles at its will. Its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. This conception of state power has been recognized by this Court in a consistent line of decisions. [Para 45][79-C-F]
4. Therefore, it is clear that the State had made a representation to the respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, such a course of action by the State is arbitrary and is violative of Article 14. [Para 46][80-A-C]
5. The narrow issue is whether the respondent is entitled to a rebate/deduction from electricity duty which is answered in the affirmative. It is necessary, however, to clarify that the respondent would not be entitled to a rebate/deduction for FY 2011-12. In terms of Clause 35.7(b) of the Industrial Policy 2012, the entitlement ensues from the financial year following the commencement of production. The respondent commenced production on 17 August 2011. Hence, the order of the High Court would have to be confirmed for FYs 2012-13 and 2013-14. In conclusion, this Court in agreement with the conclusion of the High Court that the respondent was entitled to an exemption from electricity duty, although for the reasons indicated in this judgment. Further, the relief granted would stand confined to FYs 2012-13 and 2013-14. [Para 51][85-B-D]
National Buildings Construction Corporation vs S. Raghunathan (1998) 7 SCC 66 : [1998] 1 Suppl. SCR 156; Monnet Ispat and Energy Ltd. vs Union of India (2012) 11 SCC 1 : [2012] 7 SCR 644; Union of India vs Lt. Col. P.K. Choudhary (2016) 4 SCC 236 : [2016]
2 SCR 426; Food Corporation of India vs Kamdhenu Cattle Feed Industries (1993) 1 SCC 71 : [1992]
2 Suppl. SCR 322; NOIDA Entrepreneurs Assn. vs NOIDA (2011) 6 SCC 508 : [2011] 8 SCR 25; Indian Council for Enviro-Legal Action vs Union of India (2011)
8 SCC 161: [2011] 9 SCR 146 – relied on.
State of Bihar v. Kalyanpur Cement Limited (2010) 3 SCC 274 : [2010] 1 SCR 928 Manuelsons Hotels Private Limited vs State of Kerala (2016) 6 SCC 766 : [2016] 3 SCR 718; Motilal Padampat Sagar Mills Co. Ltd. v. State of UP (1979) 2 SCC 409: [1979] 2 SCR
641 ; State of Madhya Pradesh v. Bhailal Bhai AIR 1964 SC 1006 : [1964] SCR 261; Suganmal v. State of Madhya Pradesh AIR 1965 SC 1740; Mafatlal
Industries Ltd. v. Union of India (1997) 5 SCC 536:[1996] 10 Suppl. SCR 585; Amarjit Singh
Ahluwalia (Dr) vs State of Punjab, (1975) 3 SCC 503 : [1975] 3 SCR 82; Sukhdev Singh vs Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421 : [1975] 3 SCR
619 (concurring opinion of Justice K K Mathew) and Ramana Dayaram Shetty vs International Airport Authority of India, (1979) 3 SCC 489 : [1979]
3 SCR 1014; High Court of Judicature of Patna vs Madan Mohan Prasad (2011) 9 SCC 65 :[2011]
13 SCR 972; Dayal Singh vs Union of India (2003) 2 SCC 593 : [2003] 1 SCR 714; Hindustan Petroleum Corporation Ltd. vs Dolly Das (1999) 4 SCC 450 – referred to.
Crabb v. Arun DC [1976] 1 Ch 179 27;Combe v. Combe [1951] 2 K.B. 21529; Wyvern Development, Re, [1974]
1 W.L.R. 1097 Tungsten Electric Co Ltd. vs Tool Metal Manufacturing Co. Ltd., [1955] 1 W.L.R. 761,Baird Textiles Holdings Ltd. vs Marks and Spencer Plc., [2002] 1 All ER (Comm) 737, Waltons Stores
(Interstate) Ltd vs Maher, (1988) 164 CLR 387. 30; R vs North and East Devon Health Authority, ex p Coughlan [2001] QB 213; Regina (Bibi) vs Newham London Borough Council [2002] 1 W.L.R. 23734; Vitarelli vs Seton 359 US 535 (1959); East Sussex County Council [2003] 1 WLR 348; Attorney General for New South Wales vs. Quinn (1990) 64 Aust LJR 327 : (1990)
170 CLR 1; Regina (Reprotech (Pebsham) Ltd) vs East Sussex County Council [2003] 1 WLR 348 – referred to.
Hugh Beale, Chitty on Contracts (32nd edn., Sweet & Maxwell 2017). Harry Woolf and others, De Smith’s Judicial Review (8th edn, Thomson Reuters 2018). M.P. Jain and S.N. Jain, Principles of Administrative Law (7th edn., EBC 2013) – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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