Kerala High Court
K.R. Alloy'S Ltd. vs State Of Kerala on 10 February, 2005
Equivalent citations: 2005(2)KLT177
Author: K.S. Radhakrishnan
Bench: K.S. Radhakrishnan, M.N. Krishnan
JUDGMENT K.S. Radhakrishnan, J.
1. Petitioners have approached this Court seeking a declaration that they are also entitled to the extension of the period of concession at the pre 1992 tariff rates and exemption from payment of electricity duty for the period during which power cut was enforced in the State of Kerala and also for a direction not to limit the concessional tariff only to those industries which have suffered 50% or more power cut during the year 1996-97.
2. Petitioners submit that the Government of Kerala as part of its industrial policy had announced various concessions, incentives and invited entrepreneurs in the country to the State of Kerala for setting up their industries for the purpose of industrialisation of the State. Government had issued G.O.(Ms) 71/90/ID dated 21.5.1990 to that effect stating that the power connection would be given on completion of any project irrespective of whether a general power cut is in force or not. Further it was also stated that new units commencing industrial production would be exempted from power cut for a period of five years from the date of commercial production. It was further stated that exemption from payment of electricity duty for a period of five years from the date of commencement of commercial production would be given to the new units. Government passed yet another order, G.O.(Ms) No. 4/92/PD dated 6.2.1992 wherein it was stated that new industrial units would be exempted for five years from payment of enhanced power tariff which came into effect on 1.1.1992. It was also ordered that concession would be available to units from the date of commercial production between 1.1.1992 and 31.12.1996. Following the above mentioned Government Orders, Electricity Board passed order B.O.No. 559/92/plgcom dated 27.3.1992 stating that the concession in tariff would be applicable to industrial units which are manufacturing in nature and that if such units start their commercial production between 1.1.1992 and 31.12.1996 irrespective of date of permanent electric connection.
3. Petitioners submit that they have set up various industrial units in the State of Kerala based on the above connection and promises held out by the Government and the Kerala State Electricity Board. During the period when the petitioners were enjoying the pre 1992 tariff due to the exemption granted the State imposed power cut with the result many of the units could not effectively function so as to avail of the benefit of the pre-1992 tariff. Representations were preferred by the HT and EHT Electricity Consumers Association before the Government stating that the concession of power tariff could not be availed of by them fully due to the power cut during various spells for the years 1996-1997. Petitioners and others therefore sought extension of the tariff concession beyond five years to cover up the period they had suffered power cut. The Managing Director of the Kerala State Industrial Development Corporation had also recommended their request.
4. Government then passed order dated 26.10.1999 granting extension of the period of supply of power on pre 1992 tariff to the eligible industrial units, covered under the Government Order dated 6.2.1992, which had suffered power cut of 50% or more when power cut was in force. It was also ordered that the Government would reimburse the concessional amount in this regard to the Kerala State Electricity Board and the Board was directed to submit necessary proposals for the reimbursement of the amount to the Government in the Industries Department.
5. Kerala State Electricity Board had suffered loss of Rs. 35 crores because of the Government Order dated 26.10.1999 by granting extension of the period of supply of power on pre 1992 tariff to various industrial units which had suffered power cut of 50% or more. The said fact was intimated to the Government and the Government by order dated 6.9.2000 sanctioned disbursement of an amount of Rs. 7,56,94,223/- towards loss sustained by the Board. It was after considering all the aspects of the matter that the Government passed an order dated 6.9.2000 stating that new industries which had started commercial production between 23.3.1991 and 31.12.1996 engaged in manufacturing process should be continued to be charged at pre 1992 tariff so as to cover 50% or more power cut during the years 1996 and 1997. Board then issued Ext.P10 communication dated 18.10.2000 so far as the first petitioner is concerned stating that it would be eligible for the pre 1992 tariff for a period of 167 days for the period from 24.10.2001 to 2.4.2002. Sanction was accorded by the Board to the first petitioner for extension of pre 1992 tariff from 24.10.2001 to 8.4.2002 when there was 50% or more power cut as per order dated 6.9.2000. Petitioners submit that they are entitled to get concessional tariff not only for 167 days but for reset of the period also when power cut was in force.
6. While the matter was pending the Board issued Ext.P15 letter dt. 17.12.2004 to one of the petitioners stating that an amount of Rs. 2,78,77,380/- was due to the Board towards current charge balance for the period 5/01 to 10/03 after giving credit to the amount remitted. Another communication was also sent by the Board to one of the petitioners, A.P. Steel Re-rolling Mills stating that an amount of Rs. 3,53,77,380/-was due to it.
7. Senior Counsel for the petitioners submits that the Board is not justified in making such a huge demand. Counsel submitted that there is no statutory basis in support of the demands made by the Board. Counsel also submitted that the petitioners have set up their units in the State of Kerala on the basis of the concessions and promises held out by the State Government and the Electricity Board that they should be given power at the pre 1992 tariff for a specified time and there would not be any power cut. Counsel submitted that having set up the units on the basis of the promises made out by the State Government and the Electricity Board, respondents are not justified in imposing power cut and not extending the benefit of pre-1992 tariff for the entire period. Counsel submitted that there is no rationale in restricting the eligibility for the period when there was 5% or more power cut. Counsel submitted that the benefit be made uniformly applicable irrespective of the fact whether the power cut is 50% more or less than 50%. Counsel submitted that there is no rationale in fixing 50% as the cut of limit. Counsel also submitted that there is no justification in imposing heavy interest. Referring to Section 2(c) of the Interest Act, counsel submitted, when the amount has not been ascertained and therefore the Board is not justified in claiming interest on the amount demanded.
8. Counsel for the petitioners in support of his contentions placed reliance on the decisions in Northern India Iron and Steel Co. v. State of Haryana, (1976) 2 SCC 877, Raymond Ltd. v. M.P. Electricity Board, (2001) 1 SCC 534, Orissa State Electricity Board v. IPI Steel Ltd., (1995) 4 SCC 320, Man Industrial Corporation v. Rajasthan State Electricity Board, AIR 1986 Raj. 137, Mukand Iron & Steel Works Ltd. v. Maharashtra State Electricity Board, AIR 1982 Bom. 580, Nipha Steels Ltd. v. W.B.Electricity Board, (2003) 5 SCC 593, Andhra Steel Corporation Ltd. v. A.P. State Electricity Board, (1991) 3 SCC 263, Pawan Alloys & Casting Pvt. Ltd. v. U.P. State Electricity Board, (1997) 7 SCC 251 and Kap Steel Ltd. v. Karnataka State Electricity Board, AIR 1991 Karnt. 220. Considerable stress has been made on the decision in Pawan Alloys and Casting's case, supra, (1997) 7 SCC 251.
9. Counsel appearing for the respondent Electricity Board placed reliance on the decisions in the Adoni Cotton Mills Ltd. v. A.P. State Electricity Board, AIR 1976 SC 2414, Indian Metals & Ferro Alloys Ltd. v. State of Orissa, AIR 1987 SC 1727, N.J. Cyriac v. State of Kerala, 1987 (1) KLT 777 = AIR 1988 Ker. 86, Jiyajeerao Cotton Mills Ltd. v. M.P. Electricity Board, AIR 1989 SC 788, K.M. Nataraj v. State of Karnataka, AIR 1997 Karnataka 36, and K.S.E. Board v. M.R.F.Ltd., (1996) 1 SCC 597.
10. Counsel for the petitioners though placed reliance on several decisions, arguments were mainly addressed based on the decision of the Apex Court in Pawan Alloys & Casting's case, supra, (1997) 7 SCC 251, wherein the Supreme Court highlighted the principle of promissory estoppel holding that the Electricity Board has failed to substantiate the grounds for non-applicability of the principles of promissory estoppel even on the strength of Sections 49 and 78-A of the Electricity (Supply) Act. In that case, development rebate of 10% on the charges of electricity consumed by new industries was offered for a period of three years by the State Electricity Board by notification issued under Section 49 of the Electricity (Supply) Act pursuant to the direction issued by the State Government under Section 78-A of the Act to give effect to incentive scheme for the new industries. Apex Court held that the notifications constituted promise or representation to the new industries held out by the Board, as an instrumentality of the State, in its commercial interest to attract more consumers of electricity. On facts it was established that the new industries were established by spending large amounts of money altering the position irretrievably, the Board would be bound by the principle of promissory estoppel not to resile from its promise or representation before the expiry of three years. Further the Apex Court has specifically held that it was not the case of the Board that it sought to withdraw the incentive rebate on the ground of public interest.
11. The three Judges Bench of the Apex Court in Sharma Transport v. Government of A.P. and Ors., (2002) 2 SCC 188, after elaborately analysing the principle of promisory estoppel held as follows:
"Next plea is the oft-repeated one of promissory estoppel. It has to be noted that even though a concession is extended for a fixed period, the same can be withdrawn in public interest. In S.T.O. v. Shree Durga Oil Mills it has been held by this Court that a notification granting exemption of tax can be withdrawn at any point of time. There cannot be estoppel against any statute. Where it is in public interest, the Court will not interfere because public interest must override any consideration of private loss or gain (See Kasinka Trading v. Union of India). In Shrijee Sales Corporation v. Union of India, it was free to change its stand and withdraw the exemption already granted. One such reason for changing its policy decision can be resource crunch and the loss of public revenue. 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 supporting 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 not be sufficient to press into aid the doctrine. The principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. The doctrine of promissory estoppel is now well established one in the field of administrative law. The foundation for the claim based on the principle of promissory estoppel in public law was laid by Lord Denning in 1948 in Robertson v. Minister of Pensions. Prof.de Smith in his Judicial Review of Administrative Action (4th Edn. at p. 103) observed that "the citizen is entitled to rely on their having the authority that they have asserted."
12. We are of the view this is not a case where State Government and the Board had resiled from the contract or failed to honour their commitments. They have already granted pre 1992 tariff to those eligible industries for a period of five years. Petitioners however seek extension of the said period on the ground that they had also suffered power cut though less than 50%. Power cut had to be imposed for an equitable distribution of electrical energy, and for maintaining supply to various categories of consumers, contention of the petitioners that the Board or the Government have resiled from the contract without any valid reason cannot be accepted.
13. We are of the view, Section 22B of the Indian Electricity Act would lend support to the contention of the State Government and the Board, which we extract hereunder for easy reference.
22-B. Power to control the distribution and consumption of energy :--
(1) If the State Government is of opinion that it is necessary or expedient so to do, for maintaining the supply and securing the equitable distribution of energy, it may by order provide for regulating the supply, distribution, consumption or use thereof.
(2) Without prejudice to the generality of the powers conferred by Sub-section (1) an order made thereunder may direct the licensee not to comply, except with the permission of the State Government.
(i) the provisions of any contract, agreement or requisition whether made before or after the commencement of the Indian Electricity (Amendment) Act, 1959 (32 of 1959), for the supply (other than the resumption of a supply) or an increase in the supply of energy to any person, or
(ii) any requisition for the resumption of supply of energy to a consumer after a period of six months, from the date of its discontinuance, or
(iii) any requisition for the resumption of supply of energy made within six months of its discontinuance, where the requisitioning consumer was got himself the consumer of the supply at the time of its discontinuance.
Scope of Section 22-B came up for consideration before the Apex Court in Jiyajeerao Cotton Mills Ltd. v. M.P. State Electricity Board, AIR 1989 SC 788. After examining the scope of Section 22-B, the Court held as follows:--
"Section 22-B permits the State Government to issue an appropriate order for regulating the supply, distribution and consumption of electricity. The expression regulate occurs in other statutes also, as for example, the Essential Commodities Act, 1955 and it has been found difficult to give the word a precise definition. It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of relevant provisions, and the Court while interpreting the expression must necessarily keep in view the object to be achieved and the mischief sought to be remedied. The necessity for issuing the two orders namely, M.P.Electricity (Supply and Consumption Regulation) Order, 1975, and M.P.Electricity (Generation, Control and Consumption) Order, 1975 arose out of the scarcity of electricity available to the Board for supplying to its customers. The situation did not leave any option to the Board but 19 make limited supply of electricity of electricity to its consumers, and it must be held to have in the circumstances the right to stagger or curtail the supply. The orders were issued in this background and to make the direction mentioned therein effective it was considered essential to impose sanctions which could take any reasonable form; either disconnection in case of gross violation or the lesser sanction of enhanced tariff.
14. Petitioners have no quarrel that State was suffering acute shortage of water and consequently there was shortage of electricity during the relevant period. Power cut had to be imposed in public interest so as to maintain equitable distribution of electricity supply to the consumers of the State. Section 22-B specifically states that the State Government is legally entitled to pass an order providing for regulating the supply, distribution, consumption and use thereof and it further states that such an order would be without prejudice to the generality of the powers conferred by Sub-section (1) and that the Government have got the power to direct the Board to comply with any provision of any contract, agreement or requisition. Even if there is any contract agreement even then power under Section 22-B would have supervening effect. Section 22-B is a reserve power vested in the Government to be exercised whenever it is expedient and necessary to supply distribute and consumption or use of energy and to ensure equitable distribution. Section 22-B is also designed to safeguard acute conditions due to power shortage in public interest. Petitioners are equally bound by the provisions of Section 22-B which has conferred power on the State Government to impose power cut to control the distribution and consumption of electrical energy. It is in exercise of that statutory power State Government has imposed the power cut and there cannot be any estoppel against a statute and the Court will not interfere since public interest must override any consideration of private loss or gain.
15. In view of such circumstances, contention of the petitioners that State would extend the pre 1992 tariff to the petitioners to compensate the period of power cut cannot be sustained. Further no data or materials were furnished by the petitioners to what extent they have suffered due to power cut. Further taking note of the representation submitted, Government have passed an equitable order whereby concessional tariff was extended to the petitioners and others who have suffered power cut for period of more than 50%. We find no illegality in the said order passed by the State Government in public interest which was followed by the Board. Considering the perculiar facts and circumstances of the case, we are however of the view, imposition of interest at the rate of 25% is on the higher side. It would be just and proper if the rate of interest is reduced to 12%. We are inclined to scale down the rate of interest to 12% instead of 25%. Rest of the order would stand. Writ Petitions lack merits and the same is dismissed as above.