WA.No.1257 of 2005 (A) v. O.P.No.6838/1998 and connected cases, High Court of Kerala

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI** **THURSDAY, THE 1ST DAY OF AUGUST 2013/10TH SRAVANA, 1935** ## **WA.No. 1257 of 2005 (A)** **-----------------------AGAINST THE ORDER/JUDGMENT IN OP. NO. 6838/1998 DATED 26-11-2004.** **...........** ## **APPELLANTS/RESPONDENTS 2 & 4 IN O.P::** **-----------------------------------------------------------------** **1. PRINCIPAL SECRETARY TO GOVERNMENT, POWER DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM.** **2. STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM.** ## ***3. THE ELECTRICAL INSPECTOR,** - **K.S.E.B., PALAKKAD.** - **RESPONDENT NO.2 IS SUBSTITUTED AS APPELLANT NO.3.** **BY SPL. GOVT. PLEADER MR.TOM K.THOMAS.** ## **RESPONDENT/PETITIONER & RESPONDENTS 1 & 3 IN O.P::** **---------------------------------------------------------------------------------------** **1. SUEERA ALLOYS (P) LTD., NALLEPPILLY VILLAGE, NATTUKKAL-678 504, CHITTUR, PALAKKAD, REPRESENTED BY ITS DIRECTOR R.ELENGOVAN.** - ***2. THE ELECTRICAL INSPECTOR,** - **K.S.E.B., PALAKKAD.** - **R2 IS DELETED FROM RESPONDENT ARRAY AND SUBSTITUTED AS APPELLANT NO.3.** **3. SPECIAL OFFICER (REVENUE), K.S.E.B., PATTOM, THIRUVANANTHAPURAM.** *** DELETION AND SUBSTITUTION IS MADE AS PER ORDER DATED 01/08/2013 IN I.A. NO.3293/2005.** **R1 BY ADV. SRI.K.SRIKUMAR. R3 BY SRI.P.SANTHALINGAM, SENIOR SC, KSEB. ADV. SRI.S.SHARAN, SC, K.S.E.B.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 21/06/2013, ALONG WITH W.A. NO.1872 OF 2006 AND CONNECTED CASES, THE COURT ON 01/08/2013 DELIVERED THE FOLLOWING:** **rs.** **WA.No. 1257 of 2005 (A)** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:-** **ANNEXURE I COPY OF THE G.O.(MS) 4/92/PD DATED 06/02/1992. ANNEXURE II COPY OF THE GO(MS) 34/93/PD DATED 17/09/1993.** ## **RESPONDENT'S ANNEXURES:-** **NIL.** **//TRUE COPY//** **P.S. TO JUDGE.** **rs.** ## **T.R.RAMACHANDRAN NAIR & A.V. RAMAKRISHNA PILLAI, JJ.** **- - - - - - - - - - - - - - - - - - - - - - - - - -** W.A.No.1257/2005 in O.P.No.6838/1998 W.A.No.642/2006 in O.P.No.17409/1998 W.A.No.915/2006 in O.P.No.3506/1999 W.A.No.1145/2006 in O.P.No.3114/2000 W.A.No.1158/2006 in O.P.No.26018/2000 W.A.No.1164/2006 in O.P.No.13383/2000 W.A.No.1180/2006 in O.P.No.8245/1998 W.A.No.1393/2006 in O.P.No.17866/2001 W.A.No.1428/2006 in O.P.No.22693/2000 W.A.No.1511/2006 in O.P.No.23606/2000 W.A.No.1674/2006 in O.P.No.18635/2001 W.A.No.1685/2006 in O.P.No.7762/1998 W.A.No.1872/2006 in O.P.No.23259/2000 W.A.No.2047/2006 in O.P.No.16701/1998 W.A.No.2222/2006 in O.P.No.6968/1998 W.A.No.1206/2007 in O.P.No.3281/1999 W.A.No.1184/2009 in O.P.No.14326/2000 W.A.No.1633/2009 in O.P.No.12353/1998 W.A.No.1834/2009 in O.P.No.21148/1998 **- - - - - - - - - - - - - - - - - - - - - - - - - - DATED THIS THE 1ST DAY OF AUGUST, 2013** ## **JUDGMENT** ## Ramachandran Nair, J. These writ appeals have been filed by the State and others, aggrieved by the judgments by which the writ petitions have been allowed. W.A.No1257/2005 is treated as the leading case wherein the judgment in O.P.No.6838/1998 is under challenge. In the other writ appeals the impugned judgments have been rendered following the judgment in WA 1257/2005, etc. -2- O.P.No.6838/1998. 2. We heard Shri. Tom K. Thomas, learned Special Government Pleader appearing for the appellants, Shri M. Pathrose Mathai and Shri K. Sreekumar, learned Senior Counsel appearing for some of the party respondents, Shri Julian Xavier, Shri P.R. Venketesh, Shri M. Sreekumar, Shri Firoz K. Robin and Shri C.P. Mohammed Nias, appearing for other party respondents, Shri P. Santhalingam, learned Senior Counsel and Shri S. Sharan and Shri Pulikool Aboobacker for the Kerala State Electricity Board and the other learned counsel appearing for the other party respondents. 3. We will now consider the background with reference to O.P.No.6838/1998. The short facts leading to the dispute are the following. The petitioner in the writ petition is a public limited company incorporated under the Companies Act and engaged in the manufacture of M.S. ingots after melting steel scrap. It is located at Nalleppilly Village, Nattukkal, Palakkad District and it is registered as a small scale industrial unit with the District Industries Centre, Palakkad. It is the case of the petitioner that by Ext.P1 Government Order dated 21.5.1990 electricity duty exemption for a period of five years from the date of commercial production to the new WA 1257/2005, etc. -3- industries was ordered. The said order is effective from 1.4.1990. It was modified by Ext.P2 order later stating that the five year period of exemption from payment of electricity duty will commence from the date of giving permanent power connection to the new unit. Ext.P3 is the order passed by the Electricity Board adopting Ext.P1. Ext.P4 is the clearance granted by the Green Channel Committee whereby application for installation permission was cleared. It will show that the petitioner obtained SSI registration on 31.8.1994. Pursuant to the application submitted by the petitioner power allocation was granted by the Chief Engineer by letter dated 24.8.1994 and allocated power to the extent of 1500 KVA at 11 KV with contract demand of 1500 KVA to the petitioner's factory at Nattukkal. The said order has been produced as Ext.P5 and power allocation was also made to the petitioner's factory on 20.3.1995. It is thereafter the petitioner placed orders for machineries, purchased land and commenced the factory for the manufacture of M.S. Ingots from steel. 4. The impugned order passed by the Government is Ext.P6. Therein, the Government fixed 30.9.1995 as the cut of date for applying electricity duty concession sanctioned as per Ext.P1 order and later orders. WA 1257/2005, etc. -4- Certain other clauses have also been incorporated. The same has been challenged as illegal and arbitrary. Based on Ext.P6, the petitioner's application for electricity duty exemption was declined. 5. Para 10 of the judgment rendered by the learned Single Judge (Thottathil B. Radhakrishnan, J.) reads as follows: “"10. Having heard counsel on both sides, I am called upon to consider the legality of the said Government Order put in defence to the relief sought for. As noticed above, Ext.P1 Government Order made on 21/05/1990 held out an offer that the incentives enumerated therein would be available with effect from 01/04/1990. It is stated therein that such a decision was being taken, considering the question of giving some incentives to new industries in the matter of power connection. The said Government Order has been issued taking into consideration the announcements made by the Minister (Finance) in that year's Budget Speech and after discussion with all concerned. Admittedly, that Government Order did not fix a cut off date for making of the application for claiming the incentives. There is also no intention in Ext.P1 Government Order that the concession extended thereby is limited to any specific period. It is quite obvious that the writ petitioner had proceeded even to install the machineries in November 1994 as is evidenced by WA 1257/2005, etc. -5- Ext.P4, I am inclined to take the view that the writ petitioner would obviously have acted, also taking into account the offer extended by the Government as per Ext.P1 Government Order. The decision contained in Ext.P6 to treat 30/09/1995 as a cut off date for applying electricity duty concession as per the Government Orders including Ext.P1 has been made on the basis of the decision of the Government that it does not propose to keep the benefit of the said concessions open ended indefinitely. Having noticed that the Government Orders including Ext.P1 were made granting concessions without specifying any last date for applying the said benefit, the prescription of cut off date as 30/09/1995 by an order dated 21/08/1995 appears to be patently arbitrary. I say so because there is no demonstrable nexus for such decision to any object sought to be achieved, which in turn is relatable to the intention of issuing Ext.P1 Government Order. This situation can be easily demonstrated even with reference to the facts of this case. As already noticed, the petitioner had obtained S.S.I registration on 31/08/1994 to set up the unit and the Green Channel Clearance Committee had cleared his project on 23/11/1994. Ext.P7 further evidences that after the completion of the necessary structures and installation of the equipments of the factory, the unit was given service connection on 29/12/1995 and commercial production commenced on WA 1257/2005, etc. -6- 24/04/1996 as is evidenced by Ext.P9 certificate of the District Industries Centre. It is also apparent from Ext.P7 that the sanction order for energisation of the unit was issued on 27/03/1996. This obviously shows that the petitioner could not have applied for any concession before 24/04/1996, the date of commencement of commercial production since clause 2 of Ext.P1 Government Order dated 21/05/1990 provides for concessions only for a period of five years from the date of commencement of commercial production. Having been accorded an offer in the nature of the contents of Ext.P1 and the petitioner having shown that it had acted and had installed the machinery for the unit, pursuant to the sanction of the Green Channel Clearance Committee even before the cut off date of 30/09/1995 fixed by Ext.P6, if its application was to be rejected on that count only, the fixation of cut off date as per Ext.P6 can be treated only as a reckless exercise of executive power without duly adverting to and considering all facts and factors relevant for a decision in that regard even assuming that a time limit could be fixed. This is more so because a benefit extended by the Government in the form of a concession as an incentive to draw investment, particularly in the industrial sector cannot be made subject to an unexpected accident in the line of its progress. In this view of the matter, I am inclined to hold that fixing of WA 1257/2005, etc. -7- 30/09/1995 as the cut off date as per Ext.P6 for applying for the exemption extended as per Ext.P1 Government Order is unreasonable, patently arbitrary and unconstitutional. It infracts Article 14 of the Constitution of India." 6. It was held inter-alia that the Government Order Ext.P1 did not fix a cut off date for making the application for claiming the incentives and there is also no intention in Ext.P1 Government Order that the concession extended thereby is limited to any specific period. There is no demonstrable nexus for such decision to any object sought to be achieved, which in turn is relatable to the intention of issuing Ext.P1 Government Order and it was also held that the fixation of cut off date can be treated only as a reckless exercise of executive power without duly adverting to and considering all facts and factors relevant for a decision in that regard even assuming that a time limit could be fixed. Finally it was held that the benefit in the form of a concession as an incentive to draw investment, particularly in the industrial sector cannot be made subject to an unexpected accident in the line of its progress. Thus, there is infraction of Article 14 of the Constitution of India and the Government Order was found as WA 1257/2005, etc. -8- unreasonable, patently arbitrary and unconstitutional. 7. Learned Special Government Pleader, Shri Tom K. Jose submitted that the view taken by the learned Single Judge is not correct. He submitted that any benefit or concession given by the Government can be withdrawn at any time. It is also submitted that the principle of promissory estoppel cannot therefore be applied in this case. It is further submitted by referring to the said principles analysed in various situations by the Apex Court that the Government found that Exts.P1 and P2 cannot operate indefinitely and Ext.P6 really operates as a curtailment of the same. 8. Learned Special Government Pleader therefore submitted that when Ext.P6 order was issued on 21.8.1995 and as 30.9.1995 was fixed as the cut off date for submitting the application, there is no unreasonableness or arbitrariness in the matter and the parties had time upto the said date for submitting the application also. It is therefor submitted that the parties were put on notice about the same. 9. Learned Senior Counsel, Shri M. Pathrose Mathai, appearing for some of the respondents disputed the above contention, by relying upon the well settled principles stated by the Apex Court in various decisions. It is WA 1257/2005, etc. -9- submitted that when the Government has formulated a policy and has given a concession and has attracted the entrepreneurs on those offers, such withdrawal abruptly will result in an arbitrary action. It is submitted that the principle of promissory estoppel is squarely attracted to the facts of this case. All the parties have invested money and going by the orders Exts.P1 and P2 they are entitled for duty exemption. The same was initially fixed as five years from the date of commencement of commercial production to new units which was modified as one from the date of giving permanent power connection to the new units. Such being the case, the order Ext.P6 cannot be supported. Apart from that, it is submitted that there is no reasonable notice as contended by the learned Special Government Pleader, here. The order Ext.P6 is dated 21.8.1995 and 30.9.1995 is fixed as the cut off date. Nobody can expect the unit to comply with all the formalities with respect to the commencement of the unit within such a short notice and then prepare for making the application. Without completing all the steps for production, no application can be filed also. Learned Senior Counsel relied upon para 35 of the decision of the Apex Court in **U.P. Power Corporation Ltd. and another v. Sant Steels & Alloys (P) Ltd. and others** {(2008) 2 WA 1257/2005, etc. -10- ## SCC 777} wherein it has been held as follows: “35. In this 21st century, when there is global economy, the question of faith is very important. Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the shortsightedness of the governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellantCorporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith.” 10. Learned Senior Counsel Shri K. Sreekumar appearing for a party respondent also supported the above plea and he relied upon various decisions of the Apex Court. It is submitted that the contentions in the appeals cannot be sustained. It is submitted by the learned counsel WA 1257/2005, etc. -11- appearing for the other party respondents also that the Government is bound to act in terms of Exts.P1 and P2 and squarely the principles of promissory estoppel will apply here. 11. Since various judgments have been relied upon, we will be coming to the principles stated therein, after referring to the contents in certain orders produced in O.P.No.6838/1998. We extract Exts.P1 and P2 in full as hereunder: ## “ **Ext.P1** G.O.(Ms)No.71/90/ID Dated, Thiruvananthapuram, 21.05.1990 Read:- G.O.(Ms) No.121/89/ID dated 5.8.1989 ## **O R D E R** 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. WA 1257/2005, etc. -12- 2. New units commencing industrial production will be exempted from power cut for a period of five 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 line extension is required or if the additional line to be provided is less than 500 metres in length.” ## **Ext.P2** G.O.(Ms)No.25/91/ID Dated, Thiruvananthapuram, 2/3/1991 ## **O R D E R** In partial modification of the orders issued in the G.O. read above, Government are pleased to order that the Five year period of exemption from power cut and payment of Electricity duty ordered therein will commence from the date of giving permanent power connection to new units.” Ext.P3 is the order passed by the Kerala State Electricity Board, which also is reproduced below: WA 1257/2005, etc. -13- “The Board hereby adopts Government Order G.O.(MS) No.71/90/ID/dated 21.5.1990, regarding incentives to industries. The said G.O. is appended.” Under clause (3) of Ext.P1 exemption from payment of electricity duty is for a period of five years from the date of commencement of commercial production. The Government order has obviously been issued based on the announcement made by the Finance Minister in the budget speech of the current year, in which the order was issued, viz. 1990. The said order is effective from 1.4.1990. Ext.P6 in full is reproduced below: ## **"Ext.P6** G.O.(Ms)No.14/95/PD Dated, Thiruvananthapuram, 21/8/1995 Read:- G.O.(Ms)No. 94/78/PW & E dated 7.7.1978 G.O.(Ms)No. 71/90/PD dated 21.5.1990 G.O.(Ms)No. 04/92/PD dated 6.2.1992 G.O.(Ms)No. 34/93/PD dated 17.9.1993 ## **O R D E R** On the Government Orders read as first and second paper above, Government have issued orders granting Electricity duty concessions to Industrial units coming within the purview of the said Government Orders, subject to certain conditions prescribed therein. Last date of apply for the concessions has not been WA 1257/2005, etc. -14- specified in these Government Orders. It has come to the notice of Government that application for the benefit contemplated in the above Government Orders are received by the Chief Electrical Inspector even now. Government do not propose to keep this benefit open ended indefinitely. Having examined all aspects, Government issue the following orders: 1. 30/9/1995 is fixed as the cut off date for applying for electricity duty concession sanctioned as per the Govt. orders read as first and second papers above. 2. The industrial units which started commercial production during the period in between 8/7/1978 and 31/3/1990 will be considered for the benefit of the electricity duty exemption sanctioned in the Govt. order read as first paper above, provided they are still in operation, such units will be allowed to apply for exemption till the date 30/9/1995. 3. 31/3/1997 and 16/12/1998 are fixed as the last date of applying for electricity duty concession declared in the Government orders read as third and fourth paper above respectively. Applications after 31/3/1997 and 16/12/1998 will not be permitted. 4. Orders granting exemption from payment of electricity duty will be issued, in future by the Government." 12. What is proposed therein is to fix a cut off date for applying for WA 1257/2005, etc. -15- electricity duty exemption. It is not a case where the benefit under Exts.P1 and P2 has been withdrawn. In plain terms, such an intention cannot be gathered from a reading of Ext.P6, even though learned Special Government Pleader wanted us to imply that what the Government intended is to withdraw the benefit itself. We cannot agree. In fact, from the compilation of the Government Orders produced in W.A.No.1257/2005, we get an order dated 7.7.1978 issued by the Public Works & Electricity (Electricity-A) Department. The same is based on G.O.(MS) No.57/71/W&P dated 14.9.1971. The Government Order dated 14.9.1971 exempted new industrial units of large, medium and small types commissioned after 26.5.1971 anywhere in the State (except the areas mentioned therein) from payment of electricity duty payable by them in respect of electricity consumed, for a period of five years from the date of giving power connection for production to the extent of 10% of duty in the case of electricity intensive industries and 5% in the case of ordinary industries. The order proceeds to say that “In the budget speech 1977-78 it has been stated, inter-alia, that Government would consider the question of exempting new industrial units and expansion projects from payment of WA 1257/2005, etc. -16- electricity duty for a period of three years as an incentive to industries.” Significantly, it is stated as follows: “As the concession announced in the budget speech is a blanket concession, Govt. order that complete exemption from payment of electricity duty for a period of 3 years from 1.4.77 will be granted to all new industrial units as well as expansion projects any where in this State as specified below: 1. Units which were newly started or completed expansion on a date subsequent to 1.4.1977 will be eligible for the concession. 2 to 5 omitted.” The then policy is evident from the above order also. What is argued by the learned Special Government Pleader is that Ext.P1 will apply for a period of five years from the date of the said order which according to us, is not correct. Going by clause 3 of the said order, five years will have to be reckoned from the date of commencement of commercial production. 13. The first of the decisions referred to us, is that of the Apex Court in **Pawan Alloys and Casting Pvt. Ltd. (M/s), Meerut v. U.P. State Electricity Board and others** (1997 KHC 1041 = AIR 1997 SC 3910). Therein, the respondent Electricity Board promised to the new industrialists WA 1257/2005, etc. -17- that on the charges of electricity consumed by them they will be given 10% rebate for a period of three years from the date of commencement of supply of electricity to them for the first time. By a later notification dated 31.7.1986 that was withdrawn, which was under challenge. 14. The applicability of the principle of promissory estoppel was considered and in para 9 it was held as follows: “9. It is now well settled by a series of decisions of this Court that the State authorities as well as its limbs like the Board covered by the sweep of Article 12 of the Constitution of India being treated as 'State' within the meaning of the said Article, can be made subject to the equitable doctrine of promissory estoppel in cases where because of their representation the party claiming estoppel has changed its position and if such an estoppel does not fly in the face of any statutory prohibition, absence of power and authority of the promisor, is otherwise not opposed to public interest, and also when equity in favour of the promisee does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise.” The limitations, obviously, will be: (a) Statutory prohibition; (b) absence of power and authority of the promisor; © not opposed to public interest; and WA 1257/2005, etc. -18- (d) equity in favour of the promisee does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise. After referring to the various decisions of the Apex Court, viz. **Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.** {(1979) 2 SCC 409} and **Kasinka Trading v. Union of India** {(1995) 1 SCC 274} which was confirmed by a three Judge Bench in S **hrijee Sales Corporation v. Union of India** {(1997) 3 SCC 398}, it was held further in para 10 as follows: “10........................Suffice it to say at this stage that if a statutory authority or an executive authority of the State functioning on behalf of the State in exercise of its legally permissible powers, has held out any promise to a party who relying on the same has changed its position not necessarily to its detriment and if this promise does not offend any provision of law or does not fetter any legislative or quasi-legislative power inhering in the promisor then on the principle of promissory estoppel the promisor can be pinned down to the promise offered by it by way of representation containing such promise for the benefit of the promisee.” In para 21, their Lordships held that the new industries had, based on the promise, altered their position irretrievably. They had spent large amounts of money for establishing the infrastructure, had entered into agreements WA 1257/2005, etc. -19- with the Board for supply of electricity and therefore, had necessarily altered their position relying on these representations thinking that they would be assured of at least three years' period guaranteeing rebate of 10% on the total bill of electricity to be consumed by them as infancy benefit, so that they could effectively compete with the old industries operating in the field and their products could effectively compete with their products. On these well established facts the Board can certainly be pinned down to its promise on the doctrine of promissory estoppel. It was considered whether there is any overriding public interest. In para 29, it has been held as follows: “29. So far as the question of public interest is concerned, it must at once be stated that it is not the case of the respondent Board that it sought to withdraw the incentive development rebate made available earlier by it to the new industries on the ground of any public interest.” In para 32, it has been further held as follows: 32.Under these circumstances when no public interest was sought to be pressed in service by the Board for withdrawal of this incentive rebate, as seen earlier, the equity which had arisen in favour of the appellants remained untouched and undisturbed by any overwhelming and superior equity in favour of the Board WA 1257/2005, etc. -20- entitling it to withdraw this development rebate in a premature manner leaving these promises high and dry before the requisite period of three years earlier guaranteed to them by way of development rebate had got exhausted. This takes us to the consideration of the second aspect of the matter.” In these cases also, no overriding public interest has been pleaded by the appellants and hence the above aspects will squarely apply to the facts of these cases also. 15. The next decision is that of the Apex Court in **State of Punjab v. Nestle India Ltd. and another** {(2004) 6 SCC 465}. Therein, after referring to various judgments and **Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.** {(1979) 2 SCC 409}, their Lordships have explained the legal position in paragraphs 28, 29 and 30 as follows: “28. This Court rejected all the three pleas of the Government. It reiterated the well known pre-conditions for the operation of the doctrine. - (1) a clear and unequivocal promise knowing and intending that it would be acted upon by the promisee; - (2) such acting upon the promise by the promisee so that it would be inequitable to allow the promisor to go back on the WA 1257/2005, etc. -21- promise. 29. As for its strengths it was said that the doctrine was not limited only to cases where there was some contractual relationship or other pre-existing legal relationship between the parties. The principle would be applied even when the promise is intended to create legal relations or affect a legal relationship which would arise in future. The Government was held to be equally susceptible to the operation of the doctrine in whatever area or field the promise is made, contractual, administrative or statutory. To put it in the words of the Court : "The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Art. 299 of the Constitution. (SCC p.442, para 24) Equity will, in a given case where justice and fairness, demand, prevent a person from insisting on strict legal rights, even where they arise, not under any WA 1257/2005, etc. -22- contract, but on his own title deeds or under statute (p. 425 para 8). Whatever be the nature of the function which the Government is discharging , the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it." (p.453 para 33) (Emphasis added) 30. So much for the strengths. Then come the limitations. These are : (1) Since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. But it is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. (p. 443 para 24) (2) No representation can be enforced which is prohibited by law in the sense that the person or authority making the representation or promise must have the power to carry out the promise. If the power is there, then subject to the preconditions and limitations noted earlier, it must be exercised. Thus, if the statute does not contain a provision WA 1257/2005, etc. -23- enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute. But if the statute confers powers on the Government to grant the exemption, the Government can legitimately be held bound by its promise to exempt the promisee from payment of sales tax. (SCC p.453)” 16. The above legal position will show that there should be a clear and unequivocal promise knowing and intending that it would be acted upon by the promisee and such acting upon the promise by the promisee so that it would be inequitable to allow the promisor to go back on the promise. With regard to the limitation, it was held that only if the Court is satisfied, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. For this, adequate material should be placed. The other limitations like prohibition by law and absence of a provision in the statute to grant exemption, have also been noted in para 30. On the facts of the case, it was WA 1257/2005, etc. -24- held in para 47 as follows: “47.The appellants have been unable to establish any overriding public interest which would make it inequitable to enforce the estoppel against the State Government. The representation was made by the highest authorities including the Finance Minister in his Budget Speech after considering the financial implications of the grant of the exemption to milk. It was found that the overall benefit to the State's economy and the public would be greater if the exemption were allowed. The respondents have passed on the benefit of that exemption by providing various facilities and concessions for the upliftment of the milk producers. This has not been denied. It would, in the circumstances, be inequitable to allow the State Government now to resile from its decision to exempt milk and demand the purchase tax with retrospective effect from 1st April, 1996 so that the respondents cannot in any event readjust the expenditure already made. The High Court was also right when it held that the operation of the estoppel would come to an end with the 1987 decision of the Cabinet.” The appellant State there, was not able to establish any overriding public interest. The position is the same herein, as no such plea is there and no adequate materials have been placed. 17. The principles have again been restated in **Kusumam Hotels (P)** WA 1257/2005, etc. -25- **Ltd. v. Kerala State Electricity Board and others** {(2008) 13 SCC 213}. After considering the principles applicable for enforcing the promise, it was held in para 24 that adequate notice is required in cases where a different policy decision has been taken. It was held as follows: “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.........................” Reliance was placed on the decision of the Apex Court in S **hrijee Sales Corporation's case** {(1997) 3 SCC 398}. In the said decision also it was held as follows: “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 promisee a WA 1257/2005, etc. -26- reasonable opportunity of resuming his position, provided of course, it is possible for the promisee to restore the status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable." (emphasis supplied) 18. The relevant principles with regard to the doctrine, have been explained in **Shree Sidhbali Steels Limited and others v. State of U.P. and others** {(2011) 3 SCC 193}, in paragraphs 32 and 33 which are extracted below: “32. The doctrine of promissory estoppel is by now well recognized and well defined by catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard and fast rule but an elastic one, the objective of which is to do justice WA 1257/2005, etc. -27- between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of doctrine of promissory estoppel the promisee must establish that he suffered in detriment or altered his position by reliance on the promise. 33. Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the Court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promisee and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, WA 1257/2005, etc. -28- the Government or public authority cannot be compelled to make a provision which is contrary to law.” 19. We will now come to the application of the above principles to the facts of these cases. In the context of the case, the learned Single Judge in the judgment in O.P.No.6838/1998, has noticed that the petitioner therein had obtained SSI registration on 31.8.1994 to set up the unit and the Green Channel Clearance Committee had cleared his project on 23.11.1994. The unit was given service connection on 29.12.1995 after necessary completion of the structures and installation of equipments of the factory. Commercial production commenced on 24.4.1996, as evidenced by Ext.P9 certificate of the District Industries Centre. Sanction order for energisation of the unit was issued on 27.3.1996. Therefore, the question is whether the Government can be heard to say that Ext.P6 order is one for withdrawing the incentive itself. 20. The Government Order, Ext.P1, as noticed already, referred to the announcement made by the Minister of Finance in the said year's budget speech. The order was effective from 1.4.1990. The object of the announcement is to give some incentives to new industries in the matter of WA 1257/2005, etc. -29- power connection. Such units have been exempted from power cut for a period of five years from the date of commencement of commercial production and are exempted from payment of electricity duty for five years from the date of commencement of commercial production. The modification made in Ext.P2 is only that instead of five years from the date of commencement of commercial production, it was clarified that the five year period will commence from the date of giving permanent power connection to the new units. The idea being one to give incentives to the new units, the cut off date fixed, which is against the said object, cannot be held to be reasonable. The Government had no case also that the order has been issued because of any public interest. The concession granted is not at all withdrawn in Ext.P6. 21. Then the question is how the equity will work out. It is clear that the respondents had spent large amounts for establishing infrastructure, applied for electricity connection and have altered their position relying on the representations. The benefit granted was one for guaranteeing exemption for five years of the total bill of electricity. This is effectively meant for enabling them to compete with old industries operating in the WA 1257/2005, etc. -30- field and their products could effectively compete with other products. Therefore, the situation therein cannot come to the help of the appellants, as the Government and the Board will have to be pinned down to their promise on the doctrine of promissory estoppel. None of the limitations for the applicability of the doctrine contained in the decisions discussed above, are also applicable here. It is not the case that a concession granted is prohibited by law or is against the statutory provision. Therefore, the equity which has arisen in favour of the respondents remained untouched and undisturbed and no superior equity in favour of the Government is also evident. We notice that Section 11 of the Kerala Electricity Duty Act, 1963 gives power to the Government to exempt any licensee or consumer, as the case may be, from the payment of the whole or part of the electricity duty payable on energy consumed by him, for such period and subject to such terms and conditions as may be specified in such notification. 22. The learned Single Judge was therefore rightly held that the order impugned is unreasonable and arbitrary. 23. The next question is whether the argument of the learned Special Government Pleader that a reasonable period was provided under Ext.P6 WA 1257/2005, etc. -31- for the parties to submit the application. The order is on 21.8.1995 and the cut off date fixed is 30.9.1995. In fact, none of the promisees can restore status-quo ante as they have applied for power connection after putting infrastructure and other paraphernalia. Therefore, it is not a case where they can be restored to the earlier position. The situation therefore is one wherein it would be almost impossible for them to restore the status-quo ante and to walk out midstream, as explained by the Apex Court in **Pawan Alloys and Casting Pvt. Ltd.'s case** (1997 KHC 1041) in para 33. Such is not the case pleaded by the appellants in the counter affidavit filed in the original petition. Therefore, the said test is also not satisfied in this case and the provision is arbitrary for want of adequate notice also. In fact, as already observed, there is no adequate overriding public interest, and none had been pleaded in the counter affidavit. The findings of the learned Single Judge do not warrant any interference. 24. Learned Special Government Pleader relied upon the judgment of a learned Single Judge in O.P.No.19575/2000 wherein the benefit was denied on the plea that the applicant did not file the application before 30.9.1995, viz. the cut off date. In fact, the same learned Single Judge, after -32- WA 1257/2005, etc. the present judgment was rendered, has upheld the contentions of the parties, which is the subject matter of W.A. No.642/2006, arising from O.P.No.17409/1998. The learned Single Judge has chosen to follow the judgment in O.P.No.6838/1998. Therefore, the said contention has no merit. For all these reasons, we dismiss the writ appeals upholding the judgments of the learned Single Judges. No costs. ## **(T.R.RAMACHANDRAN NAIR, JUDGE)** **(A.V. RAMAKRISHNA PILLAI, JUDGE)** ## **kav/**