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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said concession had already been withdrawn.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,

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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

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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.

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