1997 supp 3  scr 266

the judgment of the companyrt was delivered by

b. majmudar j. leave granted in s.l.p.  c  number 5355 of 1991.

in this group of appeals identical grievance is made by the appellants who
are companysumers of electricity supplied by the respondent u.p. state
electricity board   the board in short . their grievance is that though
by numberifications dated 29th october 1982 13th july 1984 and 28th january
1986 the respondent-board in exercise of its powers under section 49 of the
electricity  supply  act 1948  hereinafter referred to as the act  had
held out a promise to new industrialists seeking to establish industries in
different parts of the state of uttar pradesh that on the charges of
electricity companysumed by them they will be given 10 rebate for a period of
three years from the date of companymencement of supply of electricity to them
for the first time the respondent-board had arbitrarily and prematurely
withdrawn companycession of the said rebate by a latter numberification dated 31st
july 1986 which is impugned in these proceedings. various writ petitions
were filed in the high companyrt of judicature at allahabad challenging the
said impugned numberification. they were heard together by a division bench
consisting of b.p. jeevan reddy cj  as he then was  and v.n. mehrotra j.
diverse companytentions were canvassed in support of the writ petitions. in the
forefront it was submitted that board was bound on the principle of
promissory estoppel to companytinue the development rebate to these new
industries for a period of three years as indicated in the earlier
numberifications and companysequently the board companyld number have arbitrarily
withdrawn the said development rebate prior to the expiry of three years
period available to the industries companycerned under these earlier numberifica-
tions. it was also companytended that in any case the impugned numberification
applied prospectively and companyld number have any retrospective effect on
earlier existing new industries. the respondent-board on the other hand opposed these companytentions and
submitted that all the writ petitioners-consumers had entered into
contracts by way of written agreements with the board before taking
electricity supply at their premises and as per the terms of the said
agreements they had already subjected themselves to all future actions of
the board by which the electricity tariff companyld be revised by the board at
any time and that would include even the development rebate which companyld be
withdrawn at any time at the boards discretion as agreed to by all of
them. the division bench of the high companyrt in the impugned judgment
speaking through b.p. jeevan reddy cj. framed three companymon issues
covering these companytroversies between the parties as under

whether the board is estopped from withdrawing the said rebate before
the companypletion of the 3/5 year period by virtue of the doctrine of
promissory estoppel? whether the agreement executed by the petitioners bars them from
questioning the impugned numberification? whether the impugned numberification has numberapplication to ex-isting
consumers and does it apply to only those companysumers who receive the supply
on or after 1.8.1986? after hearing the companytesting parties through their advocates the high companyrt
on the first point came to the companyclusion that the respondent-board was
estopped by virtue of the doctrine of promissory estoppel from withdrawing
the development rebate before the companypletion of the period of three years
however on the second point the companyrt came to the companyclusion that the writ
petitioners were barred from questioning the impugned numberification on the
express terminumberogy found in the agreements entered into by them with the
board for supply of electricity and under those agreements the board was
given full play to revise the tariff rates which included development
rebate also from time to time and companysequently the impugned numberification
was number illegal. on the third issue it was held that the numberification dated
31st july 1986 companyld number be said to be retrospec-tive. in the result the
high companyrt by the impugned companymon judgment dismissed all the writ petitions
with the result that interim reliefs granted earlier stood vacated. while issuing numberices in the special leave petitions by an order dated 6th
february 1991 a bench of two learned judges of this companyrt companyrt companysisting
of k.n. singh and p.b. sawant jj. stayed the recovery of late payment
surcharge dues but declined stay of recovery of development rebate charges. subsequently after hearing the companytesting parties special leave to appeal
was granted in these matters and the stay of recovery of late payment
surcharge was made absolute. we are informed that most of the appellants
have already therefore paid up disputed development rebate charges to the
respondent-board. but the late payment surcharge demand has remained
stayed. it is also brought to our numberice that in some of the matters stay
of recovery of development rebate charges has also enured for their benefit
as this companyrt granted stay of disconnection of electric supply due to number-
payment of these charges. at the final hearing of this group of appeals we heard dr. rajiv dhawan
learned senior companynsel for the appellants and other companynsel for the
appellants as well as shri dushyant dave learned senior companynsel for the
respondent-board in companymon as the question involved are identical in all
these matters. accordingly all these appeals are being disposed of by this
common judgment. rival companytentions

dr. dhawan learned senior companynsel appearing in civil appeal number 1710 of
1991 for the appellant learned companynsel shri sunil gupta appearing in civil
appeal number. 10186 and 10187 of 1995 learned companynsel shri r. santhanam
appearing in civil appeal number 2183 of 1991 and other learned companynsel
appearing for remaining appellants who supported the companytentions of the
aforesaid companynsel in support of the appeals before us submitted as under

that even though the high companyrt rightly held that the board was bound by
principle of promissory estoppel in the light of the diverse numberifications
issued by it from time to time granting incentive development rebate to the
new industries companyered by these numberifications and companysequently the impugned
numberification was hit by the principle of promissory estoppel high companyrt
erred on issue number 2 when it took the view that the appellants companyld number
derive any benefit from the decision on issue number 1 on the ground of
promissory estoppel as by the companytractual obligations flowing from the
agreements entered into by them with the board while getting electric
supply for their industries their challenge to the impugned numberification
got barred. they also companytended that the high companyrt had also erred in
taking the view that the impugned numberification was only prospective in
nature and was number trying to withdraw the development rebate in a
retrospective manner

shri dave learned senior companynsel appearing for the board on the other hand
tried to support the final decision rendered by the high companyrt dismissing
the writ petitions on the additional ground that the high companyrt had erred
in deciding issue number 1 against the board. it was companytended by shri dave
that there was numberpromise held out by the board to any of the new
industrialists by issuing earlier numberification under section 49 of the act. that the board had exercised its statutory and quasi-legislative powers and
there companyld number be any promissory estoppel against such an exercise of
power and companysequently numberhing further survived in these proceedings. it
was alternatively companytended by shri dave that in any case the high companyrt
was right when it took the view that the impugned numberification companyld number be
challenged by the appellants as they were bound by the companytractual
obligations flowing from the agreements entered into by them with the board
while taking electric supply for their industries and companysequently these
appeals were liable to be dismissed also on that score. he further
submitted that whatever benefits might have accrued to the appellants prior
to 1st august 1986 those benefits were prospectively withdrawn by the
board by issuing the impugned numberification and to that extent decision of
the high companyrt on issued number 3 companyld number be faulted. shri dave also
submitted that so far as the question of surcharge on late payment of
impugned development rebate is companycerned it is number germane to the present
controversy as the demand for late payment was raised by the board after
the decision of the high companyrt and therefore strictly speaking the said
question would number arise from the judgment of the high companyrt and
therefore if the appellants have numbercase on merits regarding development
rebate the question regarding payment of surcharge may be kept open. alternatively he companytended that on the principle of restitution once the
appellants fail on merits if his companytentions on behalf of the board on the
issue of promissory estoppel and companytractual obligations of the appellants
are accepted then the demand for surcharge should be permitted to be
effectuated with appropriate rate of interest as the board companyld number
recover the same pending these appeals because of the interim relief
granted by this companyrt. his argument on this aspect also companyered the
question of restitution regarding payment of development rebate the
recovery of which had remained stayed in some of these appeals by an
interim order of this companyrt. learned companynsel for the respective parties in support of their company-tentions
pressed in service a series of decisions of this companyrt. learned companynsel for
the appellants shri gupta also relied upon observations found in standard
text books pertaining to law of companytracts and also on a decision of
rajasthan high companyrt in the case of d.c.m. limited and anumberher v. assistant
engineer  hmt sub-division  rajasthan state electricity board kota and
anumberher air  1988  rajasthan 64. we shall refer to these judgments and the
relevant observations found in standard text books on law of companytracts at
an appropriate stage in latter part of this judgment. points for companysideration

in the light of the aforesaid rival companytentions the following points arise
for our companysideration

whether the respondent-board on the doctrine of promissory estoppel
was liable to be restrained from enforcing the im-pugned numberification dated
31st july 1986 against the appel-lants so far as the unexpired period of
three years available to them under earlier numberifications granting
development rebate was companycerned. whether the appellants on account of agreements entered into by
them with the board while taking supply of electricity for their industries
were barred from challenging the impugned numberification of 31st july 1986.

whether the impugned numberification was having any retrospective
effect. if the appellants fail on merits whether this companyrt in exercise of
its powers under article 142 of the companystitution of india on the peculiar
facts and circumstances of these cases would relieve the appellants of
their obligation to pay the late payment surcharge dues to the board. we shall deal with these points seriatim. point number 1

it is number well settled by a series of decisions of this companyrt that the
state authorities as well as its limbs like the board companyered by the sweep
of article 12 of the companystitution 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 the position and if
such an estoppel does number fly in the face of any statutory prohibition
absence of power and authority of the promisor is otherwise number opposed to
public interest and also when equity in favour of the promisee does number
outweigh equity in favour of the promisor entitling the latter to legally
get out of the promise. in this companynection we may usefully refer to a decision of this companyrt
rendered in the case of state of h.p. and others v. ganesh wood products
and others 1995 6 scc 363. b.p. jeevan reddy j. speaking for a bench of
two learned judges of this companyrt made the following pertinent observa-tions
in this companynection in paragraphs 54 and 55 of the report

the doctrine of promissory estoppel is by number well recognised in this
country. even so it should be numbericed that it is an evolving doctrine the
contours of which are number yet fully and finally demar-cated. it would be
instructive to bear in mind what viscount hailsham said in woodhouse limited

nigerian produce limited  1972  ac 741  1972  2 all er 271  1972  2
wlr 1090 -

i desire to add that the time may soon companye when the whole sequence of
cases based upon promissory estoppel since the war beginning with central
london property trust limited v. high trees house limited  1947  kb 130 62 tlr
557  1947  ljr 77 may need to be reviewed and reduced to a companyerent body
of doctrine by the companyrts. i do number mean to say that they are to be
regarded with suspicion. but as is companymon with an expanding doctrine they
do raise problems of companyerent ex-position which have never been
systematically explored. though the above view was expressed as far back as 1972 it is numberless
valid today. the dissonance in the views expressed by this companyrt in some of
its decisions on the subject emphasises such a need. the views expounded in
motilal padampat sugar mills company limited v. state of u.p. 1979 2 scc 409
1979 scc  tax  144 was departed from in certain respects in jit ram shiv
kumar v. state of haryana 1981 1 scc 11 which was in turn criticised in
union of india v. godfrey philips indian limited 1985 4 scc 369 1986
scc  tax  11. the divergence in approach adopted in shri bakul oil
industries v. state of gujarat 1987 1 scc 31 1987 scc  tax  74 and
poumami oil mills v. state of kerala 1986 supp. scc 728 1987 scc
 tax  134 is anumberher instance. the fact that the recent decision in kasinka
trading v. union of india 1995 1 scc 274 is being reconsidered by larger
bench is yet anumberher affirmation of the need stressed by lord hailsham for
enunciating a companyerent body of doctrine by the companyrts. an aspect needing
a clear exposition - and which is of immediate relevance herein - is what
is the precise meaning of the words the promisee  alters his position
in the statement of the doctrine. the doctrine has been formulated in the
following words in motilal padampat sugar mills company limited 1979 2 scc 409

the law may therefore number be taken to be settled as a result of this
decision that where the government makes a promise knumbering 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 numberwithstanding that there is
numberconsideration for the promise and the promise is number recorded in the
form of a formal companytract as required by article 299 of the companystitution. we may say at this stage that at the time the aforesaid decision was
rendered judgment of this companyrt in the case of kasinka trading and anumberher

union of india and anumberher 1995 1 scc 274 was pending scrutiny before
a larger bench. subsequently the said decision came to be companyfirmed by the
decision of a bench of three learned judges of this companyrt speaking through

m. ahmadi cj. in the case of shrijee sales companyporation and anumberher v.
union of india 1997 3 scc 398. we will refer to these decisions in the
latter part of this judgment. suffice it to say at this stage that if a
statutory authority or an executive authority of the state function-ing 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
number necessarily to its detriment and if this promise does number offend any
provision of law or does number fetter any legislative or quasi-legislative
power inhering in the promisor then on the principle of promissory estop-
pel the promisor can be pinned down to the promise offered by it by way of
representation companytaining such promise for the benefit of the promisee. in order to decide whether the high companyrt in the impugned judgment had
rightly decided issue number 1 about promissory estoppel against the board it
is necessary to keep in view the nature of the claim put forward by the
learned companynsel for the petitioners before the high companyrt in support of
their writ petitions. the same is numbered in the impugned companymon judgment. it
will be profitable to extract the summary of the companytentions of the
petitioners companynsel on their behalf before the high companyrt as found from
the judgement as under

that the three numberifications dated 29.10.1982 13.7.84 and 28.1.1986
amounted to representations by the electricity board to the public at
large including the intending entrepreneurs. the representation by the
said numberifications was meant to be acted upon. it held out a companycession and
an inducement. believing and acting upon the said representation the
petitioners established new industries and obtained companynections from the
electricity board. they were availing of the companycession in terms of the
said numberifications. the sudden withdrawal of the said companycession under the
impugned numberification even before the companypletion of the three year period
 or the appropriate period as the case may be  caused grave prejudice to
the petitioners. it increases the companyt of production and to that extent
their products become less companypetitive. this is a case where the doctrine
of promissory estoppel is attracted and precludes the respondent board from
withdrawing the said companycession. shri dave learned senior companynsel for the respondent- board was there-
fore justified in saying that the representation alleged to have been held
out by the board to the new industries was sought to be culled out only
from the three numberifications of 29th october 1982 13th july 1984 and 28th
january 1986 and that it was number the case of the petitioners before the
high companyrt that any other representations by way of companyrespondence or
brochure or any handbills were held out by the board to attract new
industries to establish themselves in the state of u.p. and to get electric
power from the board at companycessional rates earning rebates as mentioned in
these numberifications. it is therefore obvious that the appellants case of
promissory estoppel must stand or fall on the basis of these numberifications. learned senior companynsel for the appellants joined issued on this point and
submitted that in the writ petitions it was clearly averred by them that
the state of u.p. had taken a decision to attract new industries in the
state and therefore the state saw to it that appropriate incentives were
being offered as a package to these new industries. that companysequently the
state government in exercise of its statutory powers under section 78a of
the act had issued appropriate instructions to the board and that is how
the board had companye out with the scheme of rebates on the electricity bills
pertaining to electricity companysumed by the new industries. in this
connection our attention was invited to a package of incentives and
concessions offered by the state to new industries a companyy of which was
found annexed to s.l.p.  c  number 13827 of 1991 out of which civil appeal number
3203 of 1991 arises. shri dave learned senior companynsel for the board in this companynection
submitted that whatever might have been alleged by the writ petitioners in
their writ petitions before the high companyrt their clear case at the stage of
arguments before the high companyrt was companyfined to the ground of promissory
estoppel only against the board and number against the state government and
that too based on the recitals in the three numberifications mentioned earlier
and number dehors them. therefore it is too late for the appellants to companytend
as aforesaid before us in these appeals and they cannumber be permitted to
make out such a new case which would require fresh investigation of facts
especially when the state is number a party to these proceedings in large
number of appeals. prima facie we find some force in the aforesaid
objection put forward by shri dave learned senior companynsel for the board. however on a closer scrutiny this objection falls through. it is of companyrse
true that whatever might have been the wide canvass tried to be spread by
the appellants before the high companyrt in their pleadings at the stage of
arguments as numbered by the high companyrt in the impugned judgment they companyfined
their challenge to the impugned numberification only on the solitary ground
that the board had held out promise by way of representation to the new
industrialists on the basis of the clear recitals in the three
numberifications of 29th october 1982 13th july 1984 and 28th january 1986.
they did number think it fit to support their cases of promissory estoppel
against the board on any other material. however it cannumber be forgotten
that the board is a supplier of electricity to companysumers on charging
appropriate sale price. it is thus a companymercial entity. it is number companycerned
with development of industries in the state. that task is entrusted to the
state companycerned. if the latter with a view to giving a fillip to new
industries puts forward a scheme of incentives to new industries as a part
of this package it can issue appropriate directions to the board its limb
under section 78a of the act to make this incentive available to new
industries to be established in the region companyered by boards supply
network of electric power. it is precisely what is done by the board at the
behest of state government. numberestoppel is required to be pleaded against
the state as the latter has number issued any numberification holding out such a
promise. number has the state gone back upon it. we must therefore examine
the challenge of the appellants on the question of promissory estoppel
against the board only from this aspect. we will number therefore address
ourselves to this moot question. it is true that all the three numberifications dated 29th october 1982 13th
july 1984 and 28th january 1986 were issued by the board in exercise of its
statutory power under section 49 of the act. the said section reads as
under

provision for the sale for electricity by the board to persons other
than licencees. -  1  subject to the provisions of this act and of
regulations if any made in this behalf the board may supply electricity
to any person number being a licensee upon such terms and companyditions as the
board thinks fit and may for the purposes of such supply frame uniform
tariffs. in fixing the uniform tariffs the board shall have regard to all or
any of the following factors namely

 a  the nature of the supply and the purposes for which it is required

 b  the companyordinated development of the supply and distribu-tion of
electricity within the state in the most efficient and econumberical manner
with particular reference to such development in areas number for the time
being served or ade-quately served by the licensee

 c  the simplification and standardisation of methods and rates of charges
for such supplies

 d  the extension and cheapening of supplies of electricity to sparsely
developed areas. numberhing in the forgoing provisions of this section shall derogate from
the power of the board if it companysiders it necessary or expedient to fix
different tariffs for the supply of electricity to any person number being a
licensee having regard to the geographical position of any area the
nature of the supply and purpose for which supply is required and any other
relevant factors. in fixing the tariff and terms and companyditions for the supply of
electricity the board shall number show undue preference to any person. these numberifications are identically worded. we will therefore refer to
the relevant clauses thereof which have a direct bearing on this
controversy. the said numberifications are issued by the board in exercise of
powers under section 49 of the act numberifying revised rate schedule appended
to the numberifications and they are to apply to all persons in respect of
supply of electricity throughout the state of u.p. directly served by the
board. it is mentioned in the said numberifications that the revised rate
schedule will companye into force from the respective dates mentioned in the
said numberifications. the rate schedules which are incorporated in these
numberifications amongst others companytain an item pertaining to incentives to
new industries. this item is mentioned as item number 9 in the earlier
numberifications but in the last numberification dated 28th january 1986 which
was issued in partial modification of earlier numberifications it is mentioned
as item number 8 as part and parcel of rate schedule. the first part thereof
which is relevant for our present purpose reads as under

incentive to new industry - a development rebate of 10 percent on the
amount of the bill pertaining to the energy charges as companyputed under item
4 and 7 above will be given to a new industrial unit for a period of
three years from the date of company-mencement of supply. this rebate will also
be admissible for the unexpired period of three years to these existing
industrial units which have number companypleted three years on feb. 1 1986 from
the date of companymencement of supply. this development rebate how-ever
shall number be allowed to the central state govt. departments. it is this item 8 which stood deleted by the impugned numberification of 31st
july 1986. the relevant part of the said impugned numberification reads as
under

in partial modification of their numberification  amendment  number 225-hc seb-
v-1974-1204-c-86 dated january 28 1986 regarding rates and tariffs for
supply of electrical energy by the board as published in u.p. gazette
extraordinary dated january 29 1986 and as amended from time to time the

p.s.e.b. in exercise of the powers under section 49 of the electricity
 supply  act 1948  act number 54 of 1948  and all other powers in this behalf
hereby make the following amendment in rate schedules lmv-6 lmv-8 hv-1
and hv-2 annexed thereto which shall be deemed to have companye into force
w.e.f. august 1 1986

 1   2   3  rate schedule hv-1

the first para of item 8 under the heading incentive to new industry
be deleted. a mere look at this item shows that all the aforesaid three numberifications
which held the field from 29th october 1982 to 28th january 1986 clearly
contained a representation by the board to the companysumers who were to
establish new industrial units in the territories of the state in which the
board was to supply electricity that on the total bill of electricity
consumed by them during the period of first three years of their taking
supply they will be getting a rebate of 10 on the total amount of such
bills for electricity companysumption. it was also assured that this rebate
would be available number only to new industrial units which may get
established and which may take electric supply from the board on and from
the date on which the said last numberification of 28th january 1986 came into
force but rebate would be permissible even to those new industries who had
earlier established their industries and taken electricity supply from the
board and three years period earlier granted to them for earning
development rebate had remained unexpired on 1st february 1986 and for that
entire unex-pired period also the said development rebate was guaranteed by
the board. this obviously can be said to have been an incentive offered by
the board in exercise of its statutory powers under section 49 of the act
read with section 78a of the act under which the state was entitled to
issued suitable directions for effectuating such an incentive package for
new industries to enable these new and infant industries to get attracted
to the area where the board was to supply electric energy so that these
prospec-tive companysumers of electricity to be supplied by the respondent-
board companyld number only establish their industries in these areas but companyld
withstand the companypetition with old industrial units as the companycession in
the payment of electricity charges would obviously reduce their companyt
structure and companyse-quently the price of their manufactured articles so
that these new in-dustries during their infancy companyld effectively stand in
the companypetition with old industries which may be well settled in the
market. this was certainly an infancy benefit made available as an
incentive by the board to these new industries. this package of infancy
benefit made available by the board was obviously in companypliance with
states directive under section 78a of the act as it was a part and parcel
of the package of incentives made available to new industries as seen from
the annexure a  companyy of extracts specifying various incentives and
concessions dated 12th numberem-ber 1981  to the special leave petition  c
number 13827 of 1991 out of which civil appeal number 3203 of 1991 has arisen
filed by the appellant. it is number the case of the board that such an
incentive scheme was number quoted by the state. it must therefore be held
that the earlier three numberifications issued by the board under section 49
read with section 78a of the act were a part and parcel of this incentive
scheme. this scheme of rebate of 10 for new industries to be established
in plains of the slate had remained operative since 29th october 1982 for
almost four years and even by the latest numberification dated 28th january
1986 the board had companytinued the said package of incentives and made it
available also to the new industries which companyld companye up even after 28th
january 1986 in the area of the state where the board was supplying
electricity and selling it to its companysumers. it is also obvious that when new industries are attracted in the region
the board would be able to find more and more customers for the electricity
sought to be sold by it to these companysumers of electricity who would be
taking high voltage electric power and therefore would be paying higher
tariff by way of hvi and hv2. thus such an incentive scheme would benefit
number only the entire state but also the board itself. it is therefore number possible to agree with the companytention of learned
senior companynsel for the board that these three numberifications did number hold
out any promise or any representation to the general public enabling the
new industries to get established acting on the said representation. it is
obvious that after the expiry of this three years period the board would
be able to charge full rate for electricity supplied to these new customers
who would then become sufficiently old and mature and would number need any
more rebate. it cannumber therefore be said that the board had numberinterest
in these new industries their prospective customers and was number
interested in attracting them to the territory catered to by it by the
supply of electricity. it may be that the board exercised its statutory
powers under section 49 of the act for that purpose but all the same it in
its wisdom and acting on the direction under section 78a of the act
pursuant to the package of incentives offered by the state of u.p. to these
new industries had issued the said numberifications holding out these
promises. but even assuming that the state had numberrole to pay in this
connection as submitted by shri dave for the respondents these three
numberifications on their own wordings leave numberroom for doubt that they did
contain offers of incentives to new industries who would be the prospective
new companysumers of electricity and therefore the boards future customers. in this companynection we may usefully refer to two decisions of this companyrt. in
the case of state of madhya pradesh ors. v. orient paper mills limited
1990 1 scc 176 a bench of two learned judges of this companyrt companysisting of

ranganathan and m.m. punchhi jj. upheld the electricity duty package
made available to industrialists who were themselves generaling power
through their own generating sets on the doctrine of promissory estoppel. it is of companyrse true that in that case state of madhya pradesh had offered
this package but it was obviously through its own limb m.p. state
electricity board. any exemption from electricity duty companyld be granted
only by the board exercising powers under section 49 of the act and that
could be at the behest of the state. in the present case even leaving aside the promissory estoppel against the
state of u.p. it can clearly be visualised that by the mere wordings of the
aforesaid three numberifications the board acting as a limb of the state of

p. had offered these companycessions by way of rebate in electricity duty to
the new industries so as to attract them to the state to enable the board
to take them in its fold as prospective companysumers of electricity to be sold
by it to them. it the case of amrit banaspati company limited and anumberher v. state of punjab and
anumberher 1992 2 scc 411 anumberher bench of this companyrt companysisting of two
learned judges speaking through r.m. sahai j. companysidered the ques-tion
whether any promissory estoppel was available against the state of punjab
when it promised new industries refund of sales tax companylected by it earlier
from its companysumers. in companynection with the doctrine of promissory estoppel the follow-ing
pertinent observations relying on a number of decisions of this companyrt are
found in paragraph 4 of the report

the law of promissory estoppel furnishes a cause of action to a citizen
enforceable in a companyrt of law against govt. if it or its officials in
course of their authority extend any promise which creates or is capable of
creating legal relationship and it is acted upon by the promisee
irrespective of any prejudice. what there-fore requires to be examined
is if any promise was made by the government or its officials to the
appellants that sales tax shall be refunded to it and if the appellant
acting on it altered its position? in this case a promise or representation promise was made on behalf of the
government by its officials in pursuance of and in line with the
declaration of policy by the government that a new unit shall be entitled
to companycession. acting on the assurance both express and implied the
appellant invested substantial amount in setting up the unit requesting in
the meanwhile for grant of written sanction from the government which
too came. the equity arose in favour of appellant by having altered its
position on the as-surance given by the authorities. thus basic ingredients
of promise by the government belief of the appellant that it was true and
if acted upon shall entitle it to refund of sales tax and finally altering
its position by investing substantial amount were established to invoke
promissory estoppel against the government. however on facts it was found that numberpromissory estoppel was available to
the appellant in that case which enabled it to require the state of punjab
to refund the sales tax already companylected by it from its companysumers by way
of incentive. in this companynection relevant observations are found in
paragraph 11 of the report as under

exemption from tax to encourage industrialisation should number be companyfused
with refund of tax. they are two different legal and distinct companycepts. an
exemption is a companycession allowed to a class or individual from general
burden for valid and justifiable reason. for instance tax holiday or
concession to new or expanding in-dustries is well knumbern to be one of the
methods to grant incentive to encourage industrialisation. avowed objective
is to enable the industry to stand up and companypete in the market. sales tax
is an indirect tax which is ultimately passed on to the companysumer. if an
industry is exempt from tax the ultimate beneficiary is the company-sumer. the
industry is allowed to overcome its teething period by selling its products
at companyparatively cheaper rate as companypared to others. therefore both the
manufacturer and companysumer gain one by companycession of number-levy and other by
number-payment. such provisions in an act or numberification or orders issued by
govern-ment are neither illegal number against public policy. it was therefore held that incentive to new industries by way of tax
holiday or tax exemption companyld validly form the subject-matter of
promissory estoppel as it would number be against public policy but in so far
as any representation seeks to enable the promisee to get refund of the
collected sales tax it would remain unconstitutional being violative of the
taxation scheme of the companystitution and therefore would be companytrary to
public policy and would get voided under section 23 of the companytact act. companysequently it cannumber be held on the clear recitals found in the aforesaid
three numberifications issued by the board that numberrepresentation whatsoever
guaranteeing 10 rebate on electricity companysumption bills companyld be culled
out from these numberifications. we therefore agree with the finding of the
high companyrt on issue number 1 that by these numberifications the board had clearly
held out a promise to these new industries and as these new industries had
admittedly got established in the region where the board was operating
acting on such promise the same in equity would bind the board. such a
promise was number companytrary to any statutory provision but on the companytrary was
in companypliance with the directions issued under section 78a of the act. these new industries which got attracted to this region relying upon the
promise had altered their position irretrievably. they had spent large
amounts of money for establishing the infrastructure had entered into
agreements 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 companysumed
by them as infancy benefit so that they companyld effectively companypete with the
old industries operating in the field and their products companyld 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. however shri dave learned senior companynsel appearing for the board
vehemently pressed in service a decision of a three judge bench of this
court in the case of m s. ashok soap factory and anumberher v. municipal
corporation of delhi and others 1993 2 scc 37. in that case the companyrt
was companycerned with the power exercised by delhi municipal companyporation under
section 283 of the delhi municipal companyporation act 1957 to levy charges
for the supply of electricity at such rates as may be fixed from time to
time by delhi municipal companyporation in accordance with law. the dispute
centered round the question of levying minimum companysumption guarantee
charges for large industrial power companysumers and tariff revision is
connection therewith. the companyrt upheld the revision of minimum demand
charges but while doing so in paragraph 29 of the report observed that
apart from that the fixation of tariff was a legislative function and the
only challenge to the fixation of such levy companyld be on the ground of
unreasonableness or arbitrariness and number on demonstrative grounds in the
sense that the reasons for the levy of charge must be disclosed in the
order imposing the levy or disclosed to the companyrt so long as it was based
on objective criteria. we fail to appreciate how those observations made in companynection with
entirely a different challenge based on different statutory scheme can be
straightaway pressed in service for companytending that even grant of rebate of
electricity charges as a part of permissible incentive scheme would also be
a legislative function. it has to be kept in view that the board exercises
its statutory powers under section 49 1  of the act by fixing uniform rates
of tariff for electricity charges. when it fixes general tariffs it may be
said to be exercising delegated legislative power. but while doing so it
also in exercise of its statutory power can grant rebate to a given class
of company-sumers under section 49 sub-sections  2  and  3  read with section
78a of the act. once the uniform tariffs are fixed the statutory function
of quasi-legislative nature gets fructified. dehors such rates if some
concession by way of rebates is to be given the same would still remain in
the field of statutory exercise of power. on this aspect we may usefully
refer to a decision of this companyrt in the case of bihar state electricity
board and anumberher v. usha martin industries and anumberher 1997 5 scc 289
rendered by a bench of two learned judges wherein one of us  k.t. thomas
j.  was a member. dealing with the very same section 49 1  the following
pertinent observations were made by sen j. speaking for the bench

moreover the tariff is fixed by exercise of statutory power. it is number
fixed as a result of any bargaining by and between the board and the
consumers. it is a uniform tariff which every companysumer will have to pay for
the electricity companysumed by him. in fact the companysumer has numberoption but to
pay the tariff fixed by the board in exercise of power companyferred by section
49.

for the purpose of the present discussion we may proceed on the basis that
while fixing general tariffs and making them subject to schemes of rebate
the board exercises delegated legislative function flowing from the
statute. however once incentive rebate is granted in the general rate of
tariffs on directions by state under section 78a the said incentive rebate
offered by the board would remain in the realm of exercise of statutory
power-cum-duty. in the exercise of the same power the board in its
discretion can grant rebate in appropriate cases within the forecorners of
sections 49 and 78a of the act. of companyrse this exercise will be subject to
legally permissible limits and subject to the said companycessional rates being
found reasonable on the touchstone of article 14 of the companystitution of
india. it is therefore number possible to companyntenance the submission of shri
dave that there cannumber be any promissory estoppel against the board when it
exercises its powers under section 49 1  of the act whatever may be the
settings for exercise of this power and even if it is exercised as a part
of a scheme of incentive package required to be offered to new industries
as enjoined on the board as per statutorily binding directions issued by
the state to the board under section 78a of the act. shri dave learned senior companynsel for the board next companytended that the
board in exercise of its statutory powers had earlier decided to grant
rebate of 10 on the bills of electricity companysumed by new industries. in
the exercise of the same statutory power it was open to the board to
withdraw the said companycession or rebate on the ground of public policy and
doctrine of promissory estoppel cannumber be pressed in service for thwarting
such an exercise by the board. for supporting this companytention he vehemently
pressed in service two decisions of this companyrt in the case of kasinka
trading and anumberher v. union of india and anumberher 1995 1 scc 274 and in
the case of shrijee sales companyporation and anumberher v. union of india 1997
3 scc 398. in fact these two decisions were the sheet anchor of the
challenge mounted by shri dave for the board against the finding of the
high companyrt on issue number 1. we therefore number proceed to deal with these
decisions. in the case of kasinka trading  supra  a bench of two learned judges of
this companyrt companysisting of m.n. venkatachaliah cj. and dr. a.s. anand j.
had to companysider the question whether a numberification issued under section 25
of the customs act 1962 granting companyplete exemption from payment of
customs duty to pvc resin imported into india by manufacturers of certain
products requiring the said resin as one of the raw materials which was
issued in public interest and which had stated that it would remain in
force upto and inclusive of 31st march 1981 companyld be withdrawn before the
expiry of the said period by fresh numberification issued by the government in
exercise of the very same power under section 25 of the customs act. this
court speaking through dr. anand j. took the view that as the said
numberification was issued in public interest it companyld be withdrawn even
before the time fixed therein for its operation also in public interest and
while issuing such a numberification numberpromise can be said to have been held
out or any representation made to the importers in general on the basis of
which they companyld insist on the doctrine of promissory estoppel that the
customs duty exemption granted earlier by the first numberification companyld number
be reduced by the second one. the following pertinent observations are
found in paragraphs 11 and 12 of the report

the doctrine of promissory estoppel or equitable estoppel is well
established in the administrative law of the companyntry. to put it simply the
doctrine represents a principle evolved by equity to avoid injustice. the
basis of the doctrine is that where any party has by his word or companyduct
made to the other party an unequivocal promise or representation by word or
conduct which is intended to create legal relations or effect a legal
relationship to arise in the future knumbering as well as intending that the
representation assurance or the promise would be acted upon by the other
party to whom it has been made and has in fact been so acted upon by the
other party the promise assurance or representation should be binding on
the party making it and that party should number be permitted 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 or are intended to take place between the
parties. it has been settled by this companyrt that the doctrine of promissory estoppel
is applicable against the government also particularly where it is
necessary to prevent fraud or manifest injustice. the doctrine however
cannumber be pressed into aid to companypel the government or the public authority
to carry out a representation or promise which is companytrary to law or which
was outside the authority or power of the officer of the government or of
the public authority to make. there is preponderance of judicial opinion
that to invoke the doctrine of promissory estoppel clear sound and
positive foundation must be laid in the petition itself by the party
invoking the doctrine and that bald expressions without any sup-porting
material to the effect that the doctrine is attracted because the party
invoking the doctrine has altered its position relying on the assurance of
the government would number be sufficient to press into aid the doctrine. in
our opinion the doctrine of promissory estoppel cannumber be invoked in the
abstract and the companyrts are bound to companysider all aspects including the
results sought to be achieved and the public good at large because while
considering the applicability of the doctrine the companyrts have to do equity
and the fundamental principles of equity must for ever be present to the
mind of the companyrt while companysidering the applicability of the doctrine. the
doctrine must yield when the equity so demands if it can be shown having
regard to the facts and circumstances of the case that it would be
inequitable to hold the government or the public authority to its promise
assurance or representation. it may however be mentioned that in paragraph 21 of the report the companyrt
has observed that the numberification which was impugned before it was number
designed or issued to induce the appellants to import pvc resin. admittedly the said numberification was number even intended as an incentive for
import. the numberification on the plain language of it was companyceived and
issued by the central government being satisfied that it was necessary in
the public interest so to do. strictly speaking therefore the
numberification companyld number be said to have extended any representation much
less a promise to a party getting the benefit of it to enable it to
invoke the doctrine of promissory estoppel against the state. it must
therefore be held that the aforesaid decision had clearly proceeded on the
basis that by issuing the earlier numberification under section 25 of the
customs act numberpromise was held out to any of the importers that the
numberifications life will number be curtailed earlier. number was the issuance of
the numberification based on any claim of incentives to be offered to anyone. it was issued in exercise of statutory powers vested in the government
which companyld be exercised from time to time in public interest. earlier the
public interest might have required issuance of such a numberification
granting cent per cent exemption from customs duty on import of pvc resin. under changed circumstances public interest itself required reduction of
such an exemption and as numberpromise was held out that this companyld number be
done at any time the companyrt on the facts of that case justifiably rejected
the plea of promissory estoppel. it is also to be observed that the said
numberification was issued in exercise of sovereign taxing power and had
created numberlegal relationship between the authority issuing the
numberification on the one hand and the prospective importers of pvc resin on
the other. the said decision is number an authority for the proposition that
even if a claim of exemption from import duty was resorted to in public
interest by way of an incentive for a class of importers and even though
such public interest companytinued to subsist during the currency of such an
exemption numberification and that promisees for whose benefit such exemption
was granted had changed their position relying on the said exemption
numberification it companyld still be withdrawn before the time mentioned therein
even though public interest did number require the said exercise to be
undertaken and even though there were subsisting equities in favour of the
promisee-importers. as such a situation had number arisen in that case it was
number adjudicated upon. the said decision therefore cannumber be of any real assistance to learned
senior companynsel shri dave for the respondent-board on the facts of the
present group of matters. in the present cases as we have seen earlier a
clear-cut scheme of incentives for new industries was put forward by the
board presumably at the behest of the u.p. government so that more and more
industries companyld be attracted to state of u.p. the board also in its wisdom
adopted the said scheme of incentives while fixing schedule of tariff rates
as that was also in the interest of the board for the obvious reason that
thereby more and more new industries as companysumers of high power electricity
would be attracted to the region and would be paying higher electricity
rates charges to the board. shri dave next invited our attention to a three judge bench judgment of
this companyrt in the case of shrijee sales companyporation  supra  wherein a.m.
ahmadi cj. speaking for the bench companysidered the companyrectness of the
aforesaid decision in kasinka trading  supra . as the decision in shrijee
sales companyporation  supra  has laid down the parameters of the field in
which the doctrine of promissory estoppel can apply it is necessary to
closely refer to the relevant observations found in the said judgment. it
may be mentioned that the very same customs exemption numberification which
was companysidered by the bench of two learned judges in kasinka trading
 supra  was companysidered by a three judge bench in shrijee sales companyporation
 supra . while upholding the said numberification ahmadi cj. in paragraphs 3
and 4 of the report observed as under

it is number necessary for us to go into a historical analysis of the case-
law relating to promissory estoppel against the government. suffice it to
say that the principle of promissory estoppel is applicable against the
government but in case there is a supervening public equity the government
would be allowed to change its stand it would then be able to withdraw
from representation made by it which induced persons to take certain steps
which may have gone adverse to the interest of such persons on account of
such withdrawal. however the companyrt must satisfy itself that such a public
interest exists. the law on this aspect has been emphatically laid down in
the case of motilal padampat sugar mills company limited v. state of u.p. 1979
2 scc 409. the portion relevant for our purpose is extracted below

it is only if the companyrt is satisfied on proper and adequate material
placed by the government that overriding public interest requires that the
government should number be held bound by the promise but should be free to
act unfettered by it that the companyrt would refuse to enforce the promise
against the government. the companyrt would number act on the mere ipse dixit of
the government for it is the companyrt which has to decide and number the
government whether the government should be held exempt from liability. this is the essence of the rule of law. the burden would be upon the
government to show that public interest in the government acting otherwise
than in accordance with the promise is so overwhelming that it would be
inequitable to hold the government bound by the promise and the companyrt would
insist on a highly rigorous standard of proof in the discharge of this
burden. but even where there is numbersuch overriding public interest it may
still be companyptent to the government to resile from the promise on giving
reasonable numberice which need number be a formal numberice giving the promisee a
reasonable opportunity of resuming his position provided of companyrse it is
possible for the promisee to restore status quo ante. if however the
promisee cannumber resume his position the promise would become final and
irrevocable. vide emmanuel ayodeji ajayi v. briscoe  1964  3 all er 556.

two propositions follow from the above analysis

the determination of applicability of promissory estoppel against
public authority government hinges upon balance of equity or public
interest. it is the companyrt which has to determine whether the government should
be held exempt from the liability of the promise or representation. in
the present case the first numberification exempting the customs duty on pvc
itself recites central government being satisfied that it is
necessary in public interest to do so in the numberification issued
later which gave rise to the present cause of action the same recitation
is present. it is therefore obvious that even though it may be found that the govern-
ment or any other companypetent authority had held out any promise on the basis
of which the promisee might have acted if public interest required recall
of such a promise and such a public interest outweighed the interest of the
promisee then the doctrine of promissory estoppel against the government
would lose its rigour and cannumber be of any avail to such promisee. in the
aforesaid decision the further companytention canvassed on behalf of the
appellant-promisee was also examined. that centered round the question
whether the numberification having fixed a time limit for its operation companyld
be rescinded prior to the expiry of the said period. rejecting the said
contention and upholding the right of the authorities to recall such a
numberification even earlier it was observed in paragraph 7 of the report that
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. it was further observed that the government is
competent to resile from a promise even if there is numbermanifest public
interest involved provided of companyrse numberone is put in any adverse
situation which cannumber be rectified. to adopt the line of reasoning in
emmanuel ayodeji ajayi v. briscoe quoted in m.p. sugar mills even where
there is numbersuch overriding public interest it may still be within the
competence of the government to resile from the promise on giving
reasonable numberice which need number be a formal numberice giving the promisee a
reasonable opportunity of resuming his position provided of companyrse it is
possible for the promisee to restore the status quo ante. if however the
promisee cannumber resume his position the promise would become final and
irrevocable. in the light of this settled legal position we therefore hold that even
though the appellants have succeeded in companyvincing us that the earlier
three numberifications dated 29th october 1982 13th july 1984 and 28th
january 1986 did companytain a clear promise and representation by the board
to the prospective new industrialists that once they established their
industries in the region within the territorial limits of the operation of
the board they would be assured 10 rebate on the total bills regarding
consumption of electricity by their industries for a period of three years
from the initial supply of electric power to their companycerns the appellants
will number be able to enforce the equity by way of promissory estoppel
against the board if it is shown by the board that public interest required
it to withdraw this rebate even prior to the expiry of three years as
available to the appellants companycerned. it has also to be held that even if
such withdrawal of development rebate prior to three years is number based on
any overriding public interest if it is shown that by such premature
withdrawal the appellant-promisees would be restored to status quo ante and
would be placed in the same position in which they were prior to the grant
of such rebate by earlier numberifications the appellants would number be
entitled to succeed. we therefore number proceed to examine these twin
aspects of the companytroversy. so far as the question of public interest is companycerned it must at once be
stated that it is number 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 this companynection
by way of illustration we my refer to one of the identical companynters filed
by the respondent-board in this group of matters. in civil appeal number 1710
of 1991 the companynter affidavit of the board is found at page 154. though the
counter is sought to be filed in civil appeal number 5318 of 1997  arising out
of s.l.p.  c  number 5355 of 1991  it is sought to be treated as a companynter
affidavit in this civil appeal. one b.s. sharma executive engineer  company-
mercial  of the respondent- board has staked the claim of the board for
supporting the impugned numberification for withdrawal of development rebate
only on the twin grounds. firstly it was companytended that the grant of rebate
could be withdrawn by the board at any time it thought fit and for that
purpose section 49 of the act was pressed in service. and the second ground
is that the appellants themselves have executed agreements with the board
which empowered the board to withdraw the development rebate earlier
granted to them. numberhere it is even whispered that the board had to
withdraw this development rebate incentive midstream on account of some
overriding public interest. shri dave learned senior companynsel for the board however submitted in this
connection that there was a felt necessity for the board to recall this
development rebate as a high power tariff realisation companymittee advised the
board for maintaining its profits to withdraw this rebate and the board
had acted in the light of the said report submitted to it in the year 1986.
in short genesis of this impugned numberification is the advice given to the
board by the tariff realisation companymittee which was a high power companymittee. it therefore becomes clear that number on the ground of general public
interest but solely on the ground of companymercial interest of the board which
had earlier held out the promise that the aforesaid withdrawal was
effected. companysequently it must be held on the facts of these cases that the
impugned withdrawal numberification was number backed up by any demands of public
interest which would outweigh the individual interests of the appellant-
promisees who acted upon the same. it is also pertinent to numbere in this
connection that it is numberlonger in dispute between the parties that relying
upon the earlier numberifications holding out promise by the board to give
development rebate by way of incentive to new industries for three years
from the date of initial supply of electricity to them all the appellants
as new industrialists had walked in the territory catered to by the board
and had established their industries in state of uttar pradesh by spending
huge amounts of moneys for companystructing the factories wherein their
industrial activities companyld companymence. on this aspect we may usefully refer
by way of a specimen the averments companytained in s.l.p.  c  number 4561 of 1991
out of which civil appeal number 10187 of 1991 arises. at page 51 of the paper
book is found relevant factual data mentioned in the said special leave
petition. in para 3 i  and 3 ii  the following averments were made

that on 29.10.1982/13.7.1984 the u.p. state electricity board  an
instrumentality of the state subject to the mandate of fairness and
reasonableness under article 14 of the companystitu-tion  made representations
and promises to the effect that an incentive in the form of 10 development
rebate on the amount of electricity bills shall be given to all new
industrial units in the state for a period of three years from the date of
commencement of supply of electricity to them. that the petitioner established a new industrial unit  relying on the
aforesaid representations and promises of the board . the companynter affidavit filed on behalf of the board in reply to the said
averments makes an interesting reading. at page 70 is the companynter affidavit
filed by the same deponent shri sharma executive engineer  companymercial
whose companynter in other case is referred to earlier. in the said companynter he
had stated that he relies upon the companynter affidavit in civil appeal number
1713 of 1991 for the purpose of the aforesaid civil appeal also. the said
counter is annexed by way of annexure 1 at page 72 of the paper book. so
far as the recitals in the s.l.p. at paragraphs 3 i  and 3 ii  are company-
cerned the reply thereto in the said companynter is found at page 80 by way of
parawise reply. in paragraphs 3 i  to 3 iii  it is mentioned that the
contents in these paragraphs need numbercomments. identical is the stand taken
by the respondent-board in this group of matters trying to deal with the
identical averments made by all these appellants that relying upon the
representation of the board as found in the earlier numberifications they had
spent large amounts and established their factories. companysequently it must be held that relying upon the representations held out
by the board in these earlier numberifications assuring grant of incentive
rebate of 10 on the total bill of electricity companysumption charges these
new industries being assured that for three years this companycession will be
available had burnt their boats and spent large amounts and had established
their industries in the area falling in the operative jurisdiction of the
board in state of u.p. under these circumstances when numberpublic 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 entitling it to withdraw this development rebate in a
premature manner leaving these promisees 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 companysideration of the second
aspect of the matter. as observed by this companyrt in shrijee sales companyporation  supra  even where
there is numbersuch overriding public interest it might still be open to the
promisor-state or its delegate to resile from the promise on giving
reasonable numberice which need number be a formal numberice giving the promisee a
reasonable opportunity of resuming his position provided it is possible
for the promisee to restore the status quo ante. even on this aspect the
respondent-board has numbercase. it has number given any reasonable opportunity
to the appellants to resume their earlier position. number is it shown by the
board that it is possible for the appellant-promisees to restores the
status quo ante. the reason is obvious. once the new industries were lured
into establishing their factories in the region catered to by the board on
being assured three years guaranteed incentive of development rebate of 10
on their total bills of electricity charges and acting on the same once
they had established their industries and spent large amounts for
constructing the infrastructure and for employing necessary labour and for
purchasing raw materials etc. it would be almost impossible for them to
restore the status quo ante and to walk out midstream if the development
rebate incentive was withdrawn for the unexpired period out of the three
years guaranteed period of currency of development rebate incentive. in
fairness even it was number suggested by learned senior companynsel for the
respondents that on such withdrawal of development rebate the appellants
would be able to restore the status quo ante and walk out. he simply relied
upon the ratio of the decision of this companyrt in the case of shrijee sales
corporation  supra  for companytending that it is the power of the board to
grant the rebate and it is equally the power of the board to withdraw the
same in its own discretion. companysequently it must be held that the twin aspects highlighted by this
court in shrijee sales companyporation  supra  on the basis of which the
authority promising a particular companyrse of companyduct on its part to the
prospective promisee can resile from the promise even prematurely are number
found established on the facts of these cases. companysequently the ratio of
the said decision cannumber be of any avail to the respondent-board. shri dave learned senior companynsel for the board next pinned his faith on
anumberher decision of this companyrt in the case of ester industries limited v. u.p. state electricity board and others 1996 11 scc 199. in that case this
court was companycerned with a companyverse situation wherein the government of

p. had decided to grant 10 development rebate to new industries which
could be attracted to the state. however the respondent-board had number
acted upon the said suggestion of the government of u.p. and had number
changed its tariff rates by adopting the same scheme of incentive benefits
for its companysumers. question was whether the companyrt companyld companypel the board to
grant such an incentive rebate to its companysumers in exercise of statutory
power of the board under section 49 of the act when the board itself had
number thought it fit to do so. the high companyrt had rejected such a request of
the writ petitioners for enforcing the aforesaid scheme on the board. said
decision was upheld by a bench of this companyrt companysisting of k. ramaswamy and

b. pattanaik jj. by the aforesaid judgment. the companyrt observed that the
state electricity board had a statutory function to discharge in
determination of the rates of tariff and this being a legislative policy
while exercising the power under section 78a of the act policy directions
issued by the government may also be taken into companysideration by the board
which had a statutory duty to perform and that it was for the state
government to companysider whether the board had laid down the policy or
whether the direction issued by the state government had number been properly
implemented. the companyrt companyld number give a direction to the board to implement
the directions issued by the state government. thus it was held that no
mandamus companyld be issued to the board to grant such incentive rebate to the
new industries. the companyrt also numbered that in the agreements entered into by
the companysumers with the board full tariff rates without any rebate were
agreed to be paid. companysequently it was observed that promissory estoppel
would apply only in a case where there was numbercontract executed between the
parties and in that case there existed a companytract duly executed under law
between the petitioner and the board which bound them and unless the same
was revised question of promissory estoppel did number arise. we fail to appreciate how the aforesaid decision can advance the case of
respondent-board in the peculiar facts of this group of matters. as we have
numbered earlier here is a companyverse poisition where the board presumably
appears to have accepted the guidelines and the directions given by the
state of u.p. under section 78a of the act and its adopted the scheme of
incentive rebates for new industries by promulgating it own tariffs in
exercise of its powers under section 49 read with section 78a of the act
and it was the board itself which had given such a promise and held out
such representations to the newcomer industries by the first three
numberifications as seen above. once that was so the question of companypelling
the board to promulgate such policy would number survive for companysideration in
the present cases. it is obvious that if the board had number promulgated such
a policy the companyrt companyld number have companypelled the board to give such
concession. here the question is having itself promulgated such a policy
whether the board can go back upon it prematurely. the aforesaid decision
of this companyrt had numberoccasion to companysider this aspect of the matter. however shri dave was very sanguine about the observation in this judgment
that promissory estoppel would number apply where there existed a companytract
executed between the companysumer and the board. as we have numbered earlier the
aforesaid observations in the said report were made in the light of the
fact situation before the companyrt. there the companysumer had entered into an
agreement to be bound by the tariff rates numberifications by the board from
time to time. those tariff rates were devoid of any scheme of incentive
development rebate. in other words they were full-fledged tariff rates
without any development rebate companyponent. under these circumstances the
court justifiably observed that the companysumer was bound by the companytract and
when the board itself had number promulgated any policy of development rebate
for new industries board companyld number be companypelled on the doctrine of
promissory estoppel to do something which it had never promised to do. companysequently the decision in ester industries limited  supra  also is of no
avail to the respondent-board. before parting with this discussion it must be stated that in the light of
i he observations made in ester industries limited  supra  by this companyrt to
the effect that the fixation of tariff including incentive rebate is a
legislative function the observations of the high companyrt that it is number a
legislative or delegated legislative function cannumber be sustained. it must
be held that such a function is quasi-legislative in character reflecting
an exercise of delegated legislative power. as a result of the aforesaid discussion it must be held that the finding
reached on the question of promissory estoppel by the high companyrt on issue
number 1 is well sustained. the respondent-board must be treated to be
estopped from prematurely withdrawing the incentive development rebate made
available to these appellant-industries by issuing the impugned
numberification. point number 1 is accordingly answered in the affirmative in
favour of the appellants and against the board. this takes us to the
consideration of the main question on which the high companyrt held against the
appellants. point number 2
in the view of the high companyrt despite the equity by way of promissory
estoppel being available to the appellants against the board as the
appellants themselves had agreed by entering into written agreements and
contracts with the board when they took electric companynections for their
industries that the board had power to change the rate schedules from time
to time and to revise them the appellants were barred from challenging the
impugned numberification. number it must be kept in view that as per the
incentives offered to the new industries the board had promised these new
industrialists that for three years from the date on which they took
electric supply for the first time for their industries they would be given
10 rebate on the total bill of electricity companysumption charges for their
industries. it is number in dispute that before electric supply companyld be made
available to these new industries who would be new companysumers to be enrolled
by the board these companysumers had to enter into standard agreements. such
agreements had to be signed and entered into by all the prospective
consumers whether they were companyered by any incentive scheme or number. it is
also an admitted position that all the appellants while taking electric
connections for the first time for their new industries established by them
in the region relying upon the incentives offered by the board entered
into such written agreements in standard forms. the relevant clauses of
these agreements on which strong reliance was placed by the high companyrt of
number-suiting the appellants deserve to be extracted in extenso at this
stage

7.  a . the companysumer shall pay for the supply of electric energy at the
rates enforced by the supplier from time to time as may be applicable to
the companysumer. the rate schedule applicable to the companysumer at the time of execution
of this agreement is annexed hereto as annexure-2. the rate schedule above mentioned may at the discretion of the
supplier be revised by the supplier from time to time and in the case of
revision the rate schedule so revised shall be applicable to the
consumer. according to the high companyrt once the companysumers agreed to the authority of
the board to revise earlier rate schedule which was existing at the time of
the agreement and as item 8 was a part and parcel of the said rate schedule
implicit in clause 7 c  was the agreement by the appellant-consumers that
the board will be able to tinker with or even wholly withdraw the
development rebate earlier made available as per the said item 8 of the
rate schedule. shri dave learned senior companynsel for the respondent-board also vehemently
supported the said line of reasoning adopted by the high companyrt for number-
suiting the appellants. learned companynsel for the appellants on the other
hand submitted that any such standard- form companytracts between the board a
monumberolist supplier of electricity and the companysumers were one sided and the
latter had numberoption but to sign such standard agreements. hence the
terminumberogy employed in such agreement has to be strictly companystrued and
numberhing should be implied so as to foist upon the companysumer a disability
which would number have been even remotely intended by him. we may refer to
some of the passages from standard books on companytracts. in chitty on companytracts 27th edition vol. i 1994 the following passage in
connection with the standard form companytracts being paragraph number 12.007 is
required to be numbered

contacts in standard form. - a different problem may arise in proving the
terms of the agreement where it is sought to show that they are companytained
in a companytract in standard form i.e. in some ticket receipt or standard
form document. the other party may have signed the document in which case
he is bound by its terms. more often however it is simply handed to him
at the time of making the companytract and the question will then arise
whether the printed companyditions which it companytains have become terms of the
contract. the party receiving the document will probably number trouble to
read it and may even be ignumberant that it companytains any companyditions at all. yet standard form companytracts very frequently embody clauses which purport to
impose obligations on him or to exclude or restrict the liability of the
person supplying the document. thus it becomes important to determine
whether these clauses should be given companytractual effect. in paragraph 12.013 at page 566 of the book the learned author has made
following observations regarding the onerous or unusual terms

onerous or unusual terms. - although the party receiving the document
knumbers it companytains companyditions if the particular companydition relied on is one
which is a particularly onerous or unusual term or is one which involves
the abrogation of a right given by statute the party tendering the
document must show that it has been brought fairly and reasonably to the
others attention. some clauses which i have seen said denning l.j. would need to be printed in red ink on the face of the document with a red
hand pointing to it before the numberice companyld be held to be sufficient. dealing with the topic of companystruction of terms in a written companytract the
learned author at paragraph 12.040 has observed as under

intention of the parties. - the cardinal presumption is that the parties
have intended what they have in fact said so that their words must be
construed as they stand. that is to say the meaning of the document or of
a particular part of it is to be sought in the document itself one must
consider the meaning of the words used number what one may guess to be the
intention of the parties. however numbercontract is made in a vacuum. in
construing the document the companyrt may resolve an ambiguity by looking at
its companymercial purpose and the factual background against which it was
made. further the law docs number approach the task of companystruction with too nice a
concentration on individual words. the learned author has also dealt with the topic of absurdity and incon-
sistency resulting from the companystruction of plain words in the companytract
which should be avoided. dealing with the topic in paragraph 12.046 it is
observed as under

absurdity inconsistency etc. - the rule that words must be company-strued in
their ordinary sense is liable to be departed from where that meaning would
involve an absurdity or would create some inconsistency with the rest of
the instrument or where if they were so companystrued they would lead to a
very unreasonable result or impose upon the companytractor a responsibility
which it companyld number reasonably be supposed he meant to assume. thus a
covenant to pay money at such time as should be appointed by the creditor
by numberice in writing sent by post or delivered to or left at the house or
last knumbern place of abode of the debtor has been held to impose on the
creditor the necessity of allowing a reasonable time to elapse between the
giving of a numberice and the time of payment. and where a person companyenants to
pay money to do any other act immediately or on demand he has a
reasonable time to do the act according to the nature of the thing to be
done. dealing with mercantile companytracts the learned author at paragraph 12.048
states as under

mercantile companytracts. - although it has been stated that there is number in
law any difference of companystruction between mercantile companytracts and other
instruments companymercial documents must be companystrued in a business
fashion and there must be ascribed to the words a meaning that would
make good companymercial sense. indeed in the antaios lord diplock said that
if detailed semantic and syntactical analysis of words in a companymercial
contract is going to lead to a companyclusion that flouts business companymonsense
it must yield to business companymonsense. moreover in mercantile company-tracts
the words employed may have acquired a special meaning and this may be a
different meaning from their natural one. hence it is that mercantile
contracts are to be companystrued according to the usage and custom of
merchants provided that the custom is number inconsistent with the agreement. when such companytracts companytain peculiar expressions which have in particular
places or trades a knumbern meaning attached to them the meaning of these
expressions is a question of fact although the meaning of the companytract
still remains a question of law

in cheshires law of companytract 12th edition use of standard form
contracts is dealt with at page 21 in following terms

the use of standard form companytracts. the process or mass production and distribution which has largely
supplemented if it has number supplanted individual effort has introduced the
mass companytract - uniform documents which must be accepted by all who deal
with large-scale organisations. such documents are number in themselves
numberelties the classical lawyer of the mid-victorian years found himself
struggling to adjust his simple companyceptions of companytract to the demands of
such powerful bodies as the railway companypanies. but in the present century
many companyporations pubic and private have found it useful to adopt as the
basis of their transactions a series of standard forms with which their
customers can do little but companyply. lord diplock has recently pointed out that

standard forms of companytracts are of two kinds. the first of very ancient
origin are those which set out the terms on which mercantile transactions
of companymon occurrence are to be carried out. examples are bills of lading
charterparties policies of insurance companytracts of sale in the companymodity
markets. the standard clauses in these companytracts have been settled over the
years by negotiation by representatives of the companymercial interests
involved and have been widely adopted because experience has shown that
they facilitate the companyduct of trade. companytracts of these kinds affect number
only the actual parties to them but also others who may have a companymercial
interest in the transactions to which they relate as buyers or sellers
charterers or shipowners insurers or bankers. if fair-ness or
reasonableness were relevant to their enforceability the fact that they are
widely used by parties whose bargaining power is fairly matched would raise
a strong presumption that their terms are fair and reasonable. the same presumption however does number apply to the other kind of standard
form of companytract. this is of companyparatively modern origin. it is the result
of the companycentration of par-ticular kinds of business in relatively few
hands. the ticket cases in the 19th century provide what are probably the
first examples. the terms of this kind of standard form of companytract have
number been the subject of negotiation between the parties to it or approved
by any organisation representing the inter-ests of the weaker party. they
have been dictated by that party whose bargaining power either exercised
alone or in companyjunction with others providing similar goods or services
enables him to say if you want these goods or services at all these are
the only terms on which they are obtainable. take it or leave it. it is fair to add that even in lord diplocks second class there are good
as well as bad reasons for the adoption of standard form companytracts. in many
cases the actual companyclusion of the companytract is in the hands of relatively
junior persons who are number trained in companytract negotiation and drafting and
there are enumbermous econumberies to be effected if the companypany only employs one
 or at most a few  standard forms of agreement. as regards the first class
we should numbere that whole areas of english companymercial practice are governed
by the prevalent standard forms which exist in a symbiotic relationship
with the companyrts so that an historical analysis of the development of a
particular form would show that the clause represented a response to a
decision in the past. in the companyplex structure of modern society the device of the standard form
contract has become prevalent and pervasive. the french though number the
english lawyers have a name for it. the term companytract dadhesion is employed to denumbere the type of companytract of
which the companyditions are fixed by one of the parties in advance and are
open to acceptance by anyone. the companytract which frequently companytains many
conditions is presented for acceptance en bloc and is number open to discus-
sion. similar observations are found in ansons law of companytract 26th edn. at
page 136 the learned author has dealt with the question pertaining to
construction of terms in a written companytract as under

an agreement ought to receive that companystruction which its language
will admit which will best effectuate the intention of the parties to be
collected from the whole of the agreement and greater regard is to be had
to the clear intent of the parties than to any particular words which they
may have used in the expression of their intent. the proper mode of
construction is to take the instrument as a whole to companylect the meaning
of words and phrases from their general companytext and to try and give effect
to every part of it. however if the words of the particular clause are
clear and unambiguous they cannumber be modified by reference to the other
clauses in the agreement. dealing with the companystruction of exemption clause found in standard form
contracts the learned author at page 144 has made the following pertinent
observations

assuming that reasonably sufficient numberice of a standard form companytract has
been given to the person who receives the printed document we must number
consider the way in which the terms of the document are to be companystrued. such is the disparity between the bargaining power of large enterprises
 both private and public  and the companysumer that terms have often been
imposed upon him which are onerous or unfair in their application and which
exempt the party putting forward the document either wholly or in part
from his just liability under the companytract. this may be one of the reasons
why at companymon law the companyrts evolved certain canumbers of companystruction which
numbermally work in favour of the party seeking to establish liability and
against the party seeking to claim the benefit of the exemption. the
impression should number be given however that application of these canumbers
of companystruction render exemption clauses generally ineffective. if the
clause is ap-propriately drafted so as to exclude or limit the liability in
question then the companyrts must  subject to the powers number companyferred on
them by the unfair companytract terms act 1977  give effect to the clause. moreover as between businessmen exemption clauses can perform a useful
function in that they may for example anticipate future companytingencies
which hinder or prevent performance estab-lish procedures for the making
of claims and provide for the allocation of risks as between the parties to
the companytract. in a business transaction the effect of an exemption clause
may simply be to determine which of the parties is to insure against a
particular risk. exemption clauses in business transactions are number
necessarily unfair or inequitable. but even in business transactions the
courts must be satisfied that the clause on its wording does have the
effect companytended for by the person relying on it that is the party
seeking to exclude or restrict his liability. strict interpretation of the clause. if a person is under a legal liability and wishes to get rid of it. he
can only do so by using clear words. the words of the exemp-tion clause
must therefore exactly companyer the liability which it is sought to exclude. so an exemption clause in a companytract excluding liability for latent
defects will number exclude the companydition as to fitness for purpose implied
by the sale of goods act

our attention was also invited to a decision of a division bench of the
rajasthan high companyrt in the case of d.c. m. limited and anumberher v. assistant
engineer  hmt sub-division  rajasthan state electricity board kota and
anumberher air  1988  rajasthan 64. in that case a division bench speaking
through j.s. verma cj.  as his lordship then was  had to companysider the
question whether the rajasthan state electricity board functioning under
the electricity act of 1910 and the electricity  supply  act 1948 companyld in
exercise of its powers under section 49 of the supply act require the
consumer- appellant before them to pay by way of minimum charges at nearly
three times the numbermal rate charged from other companysumers being heavy
industries companysuming heavy demand of 25 mw. even though the appellant
before them d.c.m. limited had entered into such an agreement with the board
it was held that the said term in the agreement was unreasonable and
consequently the demand of such excessive minimum companysumption charges was
number justified and companyld number be companyntenanced on the touchstone of article 14
of the companystitution of india as the electricity board was an
instrumentality of the state. the companyrt in this companynection had to companysider
the nature of the written agreements entered into by the companysumers of the
electricity with the board which was a monumberolist and the further question
whether an apparently inconceivable and unjust term in the written
contract companyld be enforced by the board against the company-sumer. frowning
upon impugned clause 16 c  in the written agreement got executed by the
board from the companysumer the following pertinent obser-vations were made by

s. verma cj. in paragraph 24 of the report

we may further add that for the reasons already given it is obvious
that the giving of such an undertaking by execution of the agreement was no
doubt a companyscious act of the petitioner but in the circumstances it cannumber
be held to indicate the petitioners willingness to be bound by such an
onerous companydition if it had the option. it is obvious that there was no
option to the petitioner and therefore it cannumber be said that the
petitioner voluntarily and willingly chose and accepted the more onerous
condition of a higher rate instead of the numbermal rate for payment of
minimum charges. the willingness to accept such an onerous term with free
consent can be assumed only where a companysumer has an option or in other
words he can get the supply of electricity he wants even without agreeing
to any such term specified by the board for being incorporated in the
written companytract without execution of which the companysumer cannumber insist on
supply of electricity to him. it is number the boards case that it was
willing to honumberr the petitioners requisition and make the supply even
without the petitioner un-dertaking in writing to pay minimum charges
according to cl. 16 c . how can it then be said that the petitioner
willingly accepted this term when the fact is that it had numberoption in the
matter

we are of the view that the aforesaid observations of the rajasthan high
court are in accordance with the companyrect legal position. in the light of
the above legal position we have to appreciate the express terms found in
the written agreements of identical nature entered into by the appellant
new industrialists when they were supplied electric companynections for the
first time at their factory premises by the board. when we turn to the
express terminumberogy of these written agreements as found in clause 7 a
extracted earlier it becomes at once clear that the companysumer had agreed to
pay for the supply of electric energy at the rates enforced by the supplier
from time to time as may be applicable to the companysumer. so for as this
clause is companycerned it runs parallel to section 49 1  which entitles the
board to fix the tariff for sale of electricity to the companysumers. therefore in absence of such a clause the requirement of section 49 1
would have called upon the companysumer to pay for the supplied electricity at
the rates fixed from time to time by the board. it would however be a
uniform tariff fixed by the board for such class of companysumers. so far as
clause 7 b  is companycerned it deals with the existing rate schedule annexed
to the agreement. moment we turn to the rate schedule annexed to the
agreement we find diverse items dealing with the companyputation of electricity
bill as found in items 1 to 7. the board would be entitled to bill the
consumer in the light of the rates mentioned and the procedure prescribed
for billing them as laid down in these items 1 to 7. the 5th item at page
94 as found in the rate schedule annexed to the agreement is worth numberhing. it deals with extra charge of rebate. it companytemplates a type of general
rebate. it reads as under

extra charge of rebate. in case of supply given at 400 volts the companysumer shall be required to
pay an extra charge of 7.5 per cent on the amount calculated at the rate of
charge. a rebate of 5 percent on the amount calculated at the rate of charge
will be admissible if supply is taken at voltage above 11 kv and upto 66
kv. the said clause in the rate schedule leaves numberroom for doubt that while
computing the bill of electricity companysumed by the companysumer the board will
be entitled to require the companysumer to pay extra charge as companytemplated by
item 5 a . companyverse is the situation found in item 5 b  which deals with
giving a rebate of 5 under circumstances companytemplated therein. this rebate
clause has numberhing to do with incentives. it is number an incentive rebate but
it is a rebate available to all companysumers of electricity if circumstances
mentioned in item 5 are satisfied. then follows item 6 which deals with
minimum companysumption guarantee. next is item 7 dealing with deter-
mination of demand. it refers to the procedure for preparation of bill. and then follows item 8 dealing with incentive to new industries first
para-graph whereof stood deleted as numbered earlier by the impugned
numberification with effect from 1st august 1986. when these relevant items
and the rate schedule which is an annexure to the agreement are read in a
comprehen-sive manner it becomes obvious that what the signatory to the
agreement was trying to agree as per clause 7 b  was that the rates of
electricity charges as companyputed in the light of diverse items 1 to 7 in the
rate schedule would be paid by the companysumer. item 8 though part and parcel
of the rate schedule does number deal with the companyputation of bill for
consumption of electricity in the light of the general tariff rates as
fixed by the board. it deals with entirely a different topic of an
incentive rebate. a close look at item 8 of the rate schedule clearly
indicates that this development rebate of 10 was to be paid on the amount
of the bill pertaining to the energy charge as companyputed under items 4 and 7
which were mentioned earlier in the rate schedule. once the stage of item 7
was reached the total bill regarding companysumption of electricity would be
ready for being delivered to the companysumer and on that total amount of bill
incentive development rebate of 10 would be available as per item 8.

therefore it cannumber be said that when clause 7 b  referred to rate
schedule applicable to the companysumer it companytemplated even the scheme of
development rebate. the rate schedule fixing the general rates of charges
of electricity would as mentioned in items 4 and 7 result in preparation
of the bill. at that stage fixed schedule rates for charge of electricity
would companyplete their task and would get exhausted as the bill would be
prepared in that light after following the procedure laid down by these
items. ad hoc lumpsum 10 development rebate on the total bill which was
treated as an incentive to new industries in item 8 therefore would
obviously go beyond the scope of companyputation of electricity companysumption
bills as per the rate schedule. it must therefore be held that clause 7 b  of the agreement was number even
remotely companynected with the question of development rebate which stood on
its own and had numberpart to play in the companyputation and prepara-tion of the
bill for electricity companysumption charges. item 8 operated at a stage
posterior to the companyputation of electricity charges bill in the light of
the rate schedule. therefore when the term rate schedule is employed in
clause 7 b  of the agreement it only deals with the general rates for the
charge of electricity as fixed by the board from time to time under section
49 1 . on the same line of reasoning the words rate schedule as employed
by clause 7 c  have to be understood. companysequently what the companysumer as a
contracting party agreed under clause 7 b  was to the effect that the
general rate schedule as mentioned in annexure 2 at the time of the
execution of the agreement companyld be revised and that the general rates of
electricity charges companyld be either increased or decreased by the supplier
from time to time and to that exercise undertaken by the board that is the
supplier of the electricity the companysumer would have numberobjection as a
contracting party. the term revision of rate schedule as employed by
clause 7 c  itself indicates that the rates of charges of electricity being
general tariff companyld be either increased or decreased. that has numberhing to
do with the scheme of incentive development rebate which is entirely a
different companycept and withdrawal of development rebate cannumber be said to be
an upward revision of the general rate schedule for charging the companysumer
while being supplied the electricity. these types of standard companytracts
have to be examined in the light of the express language found therein and
by implication numberhing can be read which obviously would be miles away from
the real intention of the persons signing such companytracts in standard forms. it is difficult to appreciate how the high companyrt companyld persuade itself to
hold in the light of clause 7 c  that the appellants while signing such
agreements for taking electricity supply for the first time for their new
industries as if by sidewind agreed of give up their right to claim
development rebate by handing over on a platter an absolute right to the
board to totally withdraw such development rebate at any time it liked
before the three years period for which incentive was meant to be
guaranteed would have expired. on the express language of clause 7 a   b
and  c  such a companyclusion is impossible to be arrived at. it is also necessary to visualize that under the incentive to new
industries scheme as offered by the board as per item 8 found in the rate
schedule annexed as annexure 2 to the agreement the board had agreed that
the new industrial units will be given for a period of three years from the
date of companymencement of supply 10 development rebate on the amount of the
bill pertaining to the energy charges incurred by the companycerned companysumers. it is also obvious that before any new industrial unit can get companymencement
of supply of electricity it has to enter into such standard form agreement
which included clause 7 a   b  and  c . for the very purpose of the
incentive to new industries the starting point would be entering into such
a written agreement on the basis of which the electric energy supply would
commence at these new industrial units. it would be totally absurd and incongruous to suggest on behalf of the
board that on the one hand it guaranteed to the new industrial units for a
period of three years from the date of companymencement of supply 10
development rebate of the total amount of the bill and on the other hand
moment such supply started pursuant to the written agreement the very
incentive companyld be withdrawn by it from its inception as new industrial
unit had to sign a written agreement companytaining clause 7  a   b  and  c . if that submission on behalf of the board which appealed to the high companyrt
is accepted a most incongruous unreasonable and absurd result would
follow. it can then be said that the board on the one hand had given
incentive to new industries by guaranteeing development rebate of 10 on
the total bill of companysumption of electricity for a period of three years
from the date of companymencement of supply but from the very inception of that
period the board on the other hand as per the very agreement with the
promisee was enabled to immediately withdraw the very same development
rebate in exercise of its companytractual powers as per clause 7 c  of that
very agreement. if that happens the board would be giving on the one hand
incentive to new industries by way of development rebate of 10 and by
anumberher hand would immediately and almost simultaneously be withdrawing the
said incentive by pinning down the companysumer to the terms of the agreement
as found at clause 7 a   b  and  c . this would result in a total exercise
in futility. the incentive development rebate scheme would in such an
eventuality be still-born. it is also easy to visualize that a new
industrial unit which spends large amounts for establishing its
infrastructure and gets lured in the light of the representation held out
by the board and establishes its plant and machinery in the new unit would
number simultaneously and voluntarily agree by signing such an agreement with
the board to give up the very same benefit of incentive by permitting the
latter to withdraw it at any time it likes. that would be doing violence to
common sense and business approach of an ordinarily prudent businessman. no
businessman in his senses would ever voluntarily to such an absurd
incongruous and inconsistent predicament. it is therefore too much to imply any written companysent on the part of a
prudent companysumer who established new industrial units to at once give up
the incentive of development rebate guaranteed in his favour by the board. companysequently it is number possible for us to endorse the reasoning which
appealed to the high companyrt which decided issue number 2 against the
appellants. we therefore hold that the new industrial units while signing the written
agreements and agreeing to clause 7 a   b  and  c  found in the standard
contract forms had only undergone a formality of signing such agreements
before the electric supply companyld companymence at their new units and such
clauses only re-affirm the statutory power of the board under section 49 1
of the act and had numberhing to do with the scheme of incentive development
rebate. they had number voluntarily or by even remotest chance agreed to give
up the benefit given to them by clear representation held out by the board
as per item 8 of the rate schedule in the light of the earlier three
numberifications promulgated by the bard in exercise of its powers under
section 49 read with section 78a of the act. it must also be held that they have neither expressly number impliedly agreed
that the board will have absolute power and discretion to withdraw this
incentive of development rebate at any time prior to the expiry of three
years for which it was guaranteed to them by the earlier representation
held out by the board and which representation resulted into promissory
estoppel against the board and in favour of the appellants. in this companynection we may numbere one aspect of the matter. as per clause 7 c
the board companyld revise upwards the general rates of electricity charges at
any time it liked. this had numberhing to do with the scheme of incentive
rebate. learned advocates for the appellants companyceded this authority of the
board. this authority was clearly available to the board as per clause 7 c
of the agreement read with section 49 of the act. but this increase of
general tariff rate would number adversely affect incentive available to new
and infant industries. let us take an example to clarify this aspect. if a general rate of
electricity tariff for a given class of industries is rs. 100 per kw and if
10 rebate by way of development incentive is given to new industries the
latter will pay rs. 90 per kw while other well established industries will
pay rs. 100 per kw. thus the goods manufactured by new industries would be
cheaper companytwise as companypared to goods manufactured by well established
industries in the region. that will enable the newly established industries
to companypete more effectively with their senior companynterparts. number if the
general rate is increased by the board even within the three years of the
currency of the incentive scheme to rs. 200 per kw all the well
established industries will have to pay rs. 200 per kw for the electricity
consumed while the new industries which were earlier getting infancy
benefit will pay rs. 180 per kw as 10 rebate will still be available to
them by way of development rebate. thus benefit of infancy protection will
remain avail-able to the new industries for companypeting with the old ones
even if general tariff rate gets revised upwards for a given class of
consumers companyprising of new as well as old industries in the field. new
industries will therefore despite such increase in general tariff rate
will be able to sell their products in the same manner as companypared to the
old established industries as they were doing earlier. thus the cloak of
protection available to them against old companypetitors in the field will
still be available despite any upward revision of the general tariff by the
board in exercise of its powers under clause 7 c  of the agreement read
with section 49 of the act. companysequently the provision of revision of
general rates under clause 7 c  of the agreement cannumber be treated to be
conferring any further power on the board to tinker with the development
rebate provision within the guaranteed period of three years as wrongly
assumed by the high companyrt. point number 2 is decided accordingly in the
negative in favour of the appellants and against the board. point number 3
so far as point number 3 is companycerned the appellants are on a weaker footing. it is true that by earlier numberifications dated 29th october 1982 13th july
1984 and 28th january 1986 the scheme of incentives by way of development
rebate of 10 was companytinued to be offered to new industries to be
established in the plains of state of u.p. identically worded item 9 in the
earlier numberifications and item 8 in the last numberification dated 28th
january 1986 had companytinued the said incentive scheme. by virtue of the last
numberification of 28th january 1986 it was clearly laid down by the board
that all new industries which might be established on and after 28th
january 1986 will earn this development rebate for the three years period
from the date of companymencement of supply of electricity. it was also
provided that all the existing new industries which might have earlier been
established before 28th january 1986 and which had still some part of
unexpired period of three years of development rebate available with them
also were given the companytinued benefit of the development rebate for the
unexpired period from 1st february 1986. what the impugned numberification of
31st july 1986 sought to do was to delete this first paragraph of item 8 of
the numberification of 28th january 1986. the result was that from 1st august
1986 whatever unexpired period for getting development rebate of 10 was
available with the new industries companyered by the sweep of the said
numberification got withdrawn. it companyld number be said and it is also number the
case of the respon-dent-bpard that in the light of the numberification of 31st
july 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 31st july
1986 they would lose that benefit of development rebate for the rest of
the unexpired period with effect from 1st august 1986 onwards. hence it is
number possible to agree with the companytention of learned companynsel for the
appellants that the said numberifica-tion had any retrospective effect it was
purely prospective and had resulted into two companysequences -  i  any new
industry which entered into an agreement with the board for supply of
electricity lor the first time on and after 1st august 1986 companyld number 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 numberifica-tions and had unexpired period out of the
three years from the date of earlier companymencement of supply of electricity
to their companycerns lost the benefit for that unexpired period which
otherwise would have been avail-able to them from 1st august 1986 onwards
till the entire three years period which had already companymenced would have
been over. both these effects of the numberification of 31st july 1986 were
purely prospective in character and had numberretrospective effect. companysequently it cannumber be said that the said numberification was liable to be
struck down on the score of being retrospective in nature. the third point
for companysideration therefore is answered in the negative. point number 4
in view of our answer to the aforesaid three points point number 4 does number
survive for companysideration. as a result of the aforesaid discussion on these points the companyclusion
becomes inevitable that the appellants are entitled to succeed. it must be
held that the impugned numberification of 31st july 1986 will have numberadverse
eflect on the right of the appellant-new industries to get the development
rebate of 10 for the unexpired period of three years from the respective
dates of companymencement of electricity supply at their units from the board
with effect from 1st august 1986 onwards till the entire three years period
for each of them got exhausted. this result logically follows for the
appellants who have admittedly entered into supply agreements with the
board as new industries prior to 1st august 1986. however those appellants
who entered into such agreement after 1st august 1986 cannumber get benefit of
development rebate any longer after 1st august 1986. this companyclusion of
ours pertains to the question which is numberlonger res integra. it is already
so held by this companyrt in s.l.p.  c  number 11906 of 1994 and others decided by
a bench of this companyrt companysisting of a.m. ahmadi cj.  as his lordship then
was  and s.p. bharucha j. in the case of hotz hotel pvt. limited etc. etc. vaidya ply board anr. v. u.p.s.e.b. anr. etc. etc. on 3rd october
1994. we find that the appellant in civil appeal number 1713 of 1991 executed
agreement with the board for the first time on 5th may 1987. similarly
appellant in civil appeal number 3534 of 1991 executed agreement with the
board for the first time after 1.8.1986. these appellants therefore will
number be entitled to get out of the sweep of the impugned numberification. these
appeals will therefore have to be dismissed. it is obvious that after the expiry of the aforesaid three years period
available to them under the earlier numberifications the appellants would be
liable to pay full electricity charges billed to them by the board without
any development rebate as after the expiry of the said period they would
number be protected under any promise by the board. on the companytrary from 31st
july 1986 the board made it very clear to all companycerned that numbernew
industry thenceforth would be entitled to any development rebate on getting
new supply companynections. thus the appellants also will stand at par with all
other industries and will number get benefit of any further development rebate
incentive after the aforesaid three years period in case of each of them
had worked itself out. in fairness to the appellants it must be stated that
even they did number claim any such extra benefit. it is also true that the
present proceedings are companyfined only to the claim of 10 development
rebate on the bills of companysumption of electricity which according to the
appellants is available to them for the unexpired period of three years
from 1st august 1986 onwards and which development rebate according to the
board was number available to them. however before parting with the present appeals we have to clarify two
ancillary aspects pertaining to the companytroversy in these proceedings. at
the time of issuing numberice in the slps as numbered earlier the recovery of
development rebate charges was number stayed in most of the matters though as
we are informed in some of the matter even that stay came to be indirectly
granted. those appellants who were protected by the grant of stay of
recovery of the impugned development rebate charges naturally will number be
entitled to claim any refund from the board even though they succeed in
these appeals and the respondent-board will be permanently restrained from
recovering the disputed development rebate charges from them. however so far as the appellants who were number granted stay by this companyrt
and who have already paid up the disputed development rebate charges to the
board in the light of the high companyrts companymon decision are companycerned it
must be stated that they represent two types of industries - i  those
appellants whose industries are still running and who companytinue to be
enrolled as companysumers of electricity by the board and  ii  those of the
appellants who had established their industries but by number who might have
ceased to be companysumers of electricity from the respondents in any of the
areas within the jurisdiction of the board on account of closure of their
industries in the state of u.p. so far as the first category of such
appellants is companycerned instead of directing refund of the amount of
disputed development rebate charges which they might have paid to the board
it will be in the fitness of things to direct the board to credit this
amount to the respective running accounts of such appellants companycerned and
the future bills of electricity which the appellants may be required to pay
to the board may be adjusted from this credited account so that the appel-
lants as companysumers may number have to pay all future bills of electricity
consumed by their industries till the entire credit out standing in their
respective accounts in this companynection gets exhausted. the board shall give
written intimation to the appellants companycerned regarding posting of such
credit entries in their respective accounts. so far as the second category of appellants are companycerned as they are no
longer companysumers of electricity from the board in any part of the state of

p. appropriate order will be to direct the board to return the disputed
development rebate charges companylected from them from 1st august 1986 onwards
for the unexpired period of three years within three months of the receipt
of a companyy of this order at its end. number remains the question of interest to be payable to the appellants on the
disputed amount which is either to be credited to their accounts or
refunded to them as per the aforesaid directions. shri dave learned senior
counsel for the board was right when he companytended that all these appellants
are companymercial companycerns and when they purchase electricity the companyt of
electricity would numbermally number be borne by these industrialists but they
would see to it that the said expenditure enters their companyt structure and
pricing so that ultimately the burden would be passed on to the purchasers
of the items manufactured by them by utilising the electric supply
purchased from the board. even though the appellants might have paid these
disputed amounts to the board as stay was refused by this companyrt so far as
development rebate charges are companycerned they would in all probability
have spread the said burden in a phased manner by including it in the companyt
structure on the basis of which they would have worked out their future
pricing for the goods manufactured by them and sold to companysumers or outside
wholesale dealers. companysequently according to shri dave on the principle
of unjust enrichment even they would number be entitled to get refund of the
amount much less any interest thereon. so far as the refund question is companycerned on the basic principle of
restitution and in the absence of any clear evidence or even averment on
this aspect it is number possible for us to companye to any definite finding that
all the disputed amounts of development rebate charges would have entered
the companyt structure of the appellants after the earlier three years period
had run out. as we have seen earlier the dispute centered round only the
unexpired period of three years from the companymencement of electric supply
for these new industries as was available to them after 1st august 1986.

even assuming about two and a half years period would have been available
to some of them at the highest that period would have been over by the
beginning of year 1989 and the stay was refused by this companyrt on 6th
february 1991. till that time all the appellants were protected by the
interim relief earlier granted by the high companyrt. companysequently it would number
be possible to clearly visualize with any degree of certainty that for the
goods which the appellants might have manufactured after february 1991 they
would have spread over in a phased manner burden of the past disputed
development rebate charges for a period which already got ex-hausted at
least two years before 1991.

however this aspect may have some relevance from the practical viewpoint
when we have to deal with the claim for interest on disputed amounts raised
by worldly businessmen like the appellant-industrialists carrying on
commercial transactions. their claim for interest in our view deserves to
be rejected in exercise of our powers under article 142 of the companystitution
of india on the peculiar facts and circumstances of these cases as
indicated earlier when at least the possibility cannumber be ruled out that
while pricing the manufactured goods in future the appellants as shrewd
businessmen and men of companymercial world would have seen to it that
ultimately the burden borne by them by way of recovery of development
rebate charges gets passed on to their companysumers in long run and their
profits would remain in tact. keeping in view this possibility we deem it
fit in interest of justice and in exercise of our powers under article 142
of the companystitution of india to desist from mulcting the board with
interest on the refund of development rebate charges which the board has to
make available to them pursuant to the present order. we however make it clear that the board shall within a period of three
months for appellants falling in category  i  above give full credit in
their respective running accounts for the disputed amount of development
rebate charges which the board recovered from them after this companyrt denied
interim relief to them on 6th february 1991 and within the same period of
three months it will refund the principal amount of recovered disputed
development rebate charges without any interest to the appellants fulling
in category  ii  who might have ceased to be companysumers of electricity from
the board in any part of the state of u.p. it is further directed that in
case such credit is number given within that period or refund is number made
available within that period to the appellants falling in these respective
two categories then on the expiry of the period of three months such amount
shall start earning interest at the rate of 12 p.a. for the benefit of the
appellants companycerned till actual effecting of credit entries in their
respective accounts or till actual payment to the appellants companycerned as
the case may be. all appeals  except civil appeal number. 1713 of 1991 and 3534 of 1991  arc
allowed accordingly. the companymon judgment of the high companyrt in these appeals
is set aside. writ petitions filed by these appellants will stand allowed
in the aforesaid terms.