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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, INDU MALHOTRA, JJ.
The State of Jharkhand and Ors. – Appellants
Versus
Brahmputra Metallics Ltd., Ranchi and Anr. – Respondents
Civil Appeal Nos. 3860-3862 of 2020 (Arising out of SLP (C) Nos. 14156-14158 of 2020)
Decided on : 01-12-2020
(A) Jharkhand Industrial Policy 2012 – Clause 32.10 – Bihar Electricity Duty Act 1948 – Section 9 read with Rule 6 of Bihar Rules, 1949 – Rebate/deduction from electricity duty – Delay on part of government in issuing an exemption notification – As an integral component of the policy, Clause 32.10 envisages the grant of an exemption from the payment of 50 per cent of the electricity duty for a period of five years both for new and existing industrial units setting up captive power plants for self-consumption or captive use The period of five years was to be reckoned from the date of the commissioning of the plant. Under Clause 35.7(b), the entitlement would ensue from the financial year following the date of production – Alacrity expected by Industrial Policy 2012 of State of Jharkhand did not find a resonance in its administrative apparatus – When a statute, such as Bihar Act 1948, empowers State to grant an exemption from its provisions, State has the discretion to determine date from which and period over which exemption will operate – An individual or entity cannot compel State to issue a notification providing for an exemption or to insist upon terms on which government does so – Whether an exemption should be issued and if so, terms for exemption, have to be determined by State – But this case does not rest on that principle nor did claim of respondent require High Court to make a departure from it – Industrial Policy 2012 contained a representation that a rebate/deduction would be granted – It held out a representation that a notification would be issued in a month – These were solemn commitments made by State of Jharkhand – It is time for State government to take notice of observations of High Court in regard to administrative lethargy – If object of formulating industrial policy is to encourage investment, employment and growth, administrative lethargy of State apparatus is clearly a factor which will discourage entrepreneurship – State having held out a solemn representation, it would be manifestly unfair and arbitrary to deprive industrial units within State of their legitimate entitlement – It is one thing for State to assert that writ petitioner had no vested right but quite another for State to assert that it is not duty bound to disclose its reasons for not giving effect to exemption notification within period that was envisaged in Industrial Policy 2012 – Both accountability of State and solemn obligation which it undertook in terms of policy document militate against accepting such a notion of state power – Since State has offered no justification for delay in issuance of notification, or provided reasons for it being in public interest, such a course of action by State is arbitrary and is violative of Article 14 – Respondent was entitled to exemption from electricity duty. (Paras 20, 21, 22, 44, 45, 46 and 51)
(B) Doctrine – Promissory Estoppel – Doctrine of promissory estoppel cannot be used as a sword, to give rise to a cause of action for enforcement of a promise lacking any consideration – Its use in those decisions has been limited as a shield where promisor is estopped from claiming enforcement of its strict legal rights, when a representation by words or conduct has been made to suspend such rights – Under English Law, doctrine of promissory estoppel has developed parallel to doctrine of legitimate expectations – Doctrine of legitimate expectations is founded on principles of fairness in government dealings – It comes into play if a public body leads an individual to believe that they will be a recipient of a substantive benefit – Scope of doctrine of legitimate expectation is wider than promissory estoppel because it not only takes into consideration a promise made by a public body but also official practice, as well – Under doctrine of promissory estoppel, there may be a requirement to show a detriment suffered by a party due to reliance placed on promise – Although typically it is sufficient to show that promisee has altered its position by placing reliance on promise, fact that no prejudice has been caused to promisee may be relevant to hold that it would not be inequitable for promisor to go back on their promise – However, no such requirement is present under doctrine of legitimate expectation – While basis of doctrine of promissory estoppel in private law is a promise made between two parties, basis of doctrine of legitimate expectation in public law is premised on principles of fairness and non-arbitrariness surrounding conduct of public authorities. (Paras 29, 32, 34 and 35)
Facts of the case:
Issue for determination is whether respondent is entitled to claim a rebate or deduction of 50 per cent of amount assessed towards electricity duty for FYs 2011-12, 2012-13 and 2013-14. The respondent claims its entitlement on the basis of the Industrial Policy 2012 (notified by the appellant on 16 June 2012) and a statutory notification dated 8 January 2015 issued under Section 9 of the Bihar Electricity Duty Act 1948. The Bihar Act 1948 was adopted with effect from 15 November 2000 for the State of Jharkhand under the provisions of the Bihar Reorganization Act 2000.
Findings of Court:
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, we hold that such a course of action by State is arbitrary and is violative of Article 14.
Result : Appeals disposed of with directions.
The facts of this case revolve around the respondent, a manufacturing entity with a captive power plant, which claims entitlement to a rebate or deduction of 50% of electricity duty for the fiscal years 2011-12, 2012-13, and 2013-14. The respondent's claim is based on the representations made in the Industrial Policy 2012 of the State of Jharkhand, which explicitly promised that such a rebate would be granted for a period of five years from the date of commissioning of the captive power plant. The respondent received a certificate of commencement of commercial production on 31 May 2013, with the plant having started commercial operations on 17 August 2011, and obtained registration under relevant rules in November 2011, making it liable to pay electricity duty from October 2011 (!) (!) .
The respondent submitted returns for the relevant fiscal years, seeking the rebate/deduction, which were accepted by the assessing authorities, although the assessments were made after the issuance of a notification under Section 9 of the Bihar Electricity Duty Act 1948. The industrial policy's promise was that the notification would be issued within one month, but the State delayed issuance for nearly three years, ultimately issuing a notification in January 2015, which was made prospective from the date of issuance (!) (!) .
The High Court found that the delay and the prospective nature of the notification violated the State's solemn representations in the Industrial Policy 2012, leading to a breach of legitimate expectations and a violation of principles of fairness and non-arbitrariness. The Court held that the State's administrative lethargy and failure to justify the delay rendered its actions arbitrary and in violation of constitutional principles of equality and fairness (!) (!) .
The respondent, relying on the doctrine of promissory estoppel and legitimate expectations, sought to enforce the promise of the five-year rebate, arguing that the delay and retrospective enforcement would unjustly deprive them of the benefits promised. The State, on the other hand, contended that the claim was not valid for the earlier years, given the absence of a formal claim in the returns and the prospective nature of the notification. The dispute also involved considerations of whether the delay in filing writ petitions should bar relief and whether the respondent had passed on the duty to its customers, which would affect the applicability of the unjust enrichment doctrine (!) (!) (!) (!) .
In essence, the core facts highlight a conflict between the State's administrative actions and representations made under the industrial policy, and the respondent's reliance on those representations to claim a statutory rebate, with the timing and manner of notification issuance being central to the dispute.
JUDGMENT :
Dr. Dhananjaya Y. Chandrachud, J
| A | The appeal |
| B | The issue |
| C | Captive power plant : assessment to electricity duty |
| D | Industrial Policy 2012 |
| E | Exemption from Electricity Duty |
| F | Before the High Court |
| G | Submissions of Counsel |
| H | Analysis |
| H.I | A State in breach of policy commitments |
| H.2 | Building on Motilal Padampat |
| H.3 | Promissory estoppel – origins and evolution |
| H.4 | From estoppel to expectations |
| H.5 | Indian Law and the doctrine of legitimate expectations |
| H.6 | Expectations breached by the State of Jharkhand |
| H.7 | The technical defences to the claim |
| I | Conclusion |
1. Leave granted.
A The appeal
2 This appeal arises from a judgment of the High Court of Jharkhand. While allowing a petition instituted by the respondents under Article 226 of the Constitution, the Division Bench:
(i) struck down the last paragraph of a notification dated 8 January 2015 issued by the State government in its Department of Commercial Taxes, giving prospective effect to the rebate/deduction from electricity duty offered under the Jharkhand Industrial Policy, 20121[“Industrial Policy 2012”];
(ii) directed that the notification shall be deemed to be in effect from 1 April 2011, when the Industrial Policy 2012 was enforced with retrospective effect; and
(iii) upheld the claim of the respondent that it was entitled to a rebate/deduction from electricity duty in terms of the representation held out in the Industrial Policy 2012, and that the denial of the exemption by the State government for FYs 2011-12, 2012-13 and 2013-14 was contrary to the doctrine of promissory estoppel.
The State is in appeal to challenge the judgment dated 11 December 2019.
B. The issue
3. The issue for determination is whether the respondent is entitled to claim a rebate or deduction of 50 per cent of the amount assessed towards electricity duty for FYs 2011-12, 2012-13 and 2013-14. The respondent claims its entitlement on the basis of the Industrial Policy 2012 (notified by the appellant on 16 June 2012) and a statutory notification dated 8 January 2015 issued under Section 9 of the Bihar Electricity Duty Act 19482[“the Bihar Act 1948]. The Bihar Act 1948 was adopted with effect from 15 November 2000 for the State of Jharkhand under the provisions of the Bihar Reorganization Act 2000.
C. Captive power plant : assessment to electricity duty
4. The respondent was granted a certificate of commencement of commercial production on 31 May 2013. The certificate records that the integrated manufacturing unit of Sponge Iron and Mild Steel Billets, together with a captive thermal plant of 20 MW capacity set up by the respondent commenced commercial production on 17 August 2011. A certificate of registration was granted to the respondent on 22 November 2011 under Rule 4 of the Bihar (Jharkhand) Electricity Duty Rules 19493 , according to which it was liable to pay duty for distribution and/or consumption of the energy from 1 October 2011. On the basis of the returns submitted by the respondent in Form-III, read with Rule 9 of the Bihar Rules 1949, assessment orders were passed by the assessing officer for FY 2011-12 on 9 December 2014, for FY 2012-13 on 18 December 2015 and for FY 2013-14 on 16 December 2016.
D. Industrial Policy 2012
5. The Industrial Policy 2012 was notified by the State government on 16 June 2012. Some of the salient features of the Industrial Policy 2012 need to be visited:
(i) Clause 32.10 provided an exemption from the payment of 50 per cent of the electricity duty for a period of five years, for captive power plants established for self-consumption or captive use:
“32.10 Incentive for captive power plant
New or existing industrial units setting up captive power plant shall be exempted from the payment of 50% of electricity duty for a period of five years
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