2007 (12) TMI 443 - SC - Indian Laws

Supreme Court Upholds Promissory Estoppel, Prevents Corporation from Reducing Hill Development Rebate

UP. POWER CORPORATION LTD & ANR Versus SANT STEELS & ALLOYS (P) LTD & ORS

UP. POWER CORPORATION LTD & ANR Versus SANT STEELS & ALLOYS (P) LTD & ORS - 2008 AIR 693, 2007 (12) SCR 1160, 2008 (2) SCC 777, 2007 (13) JT 352, 2007 ... Issues Involved:1. Validity of the reduction in hill development rebate from 33.33% to 17%.2. Applicability of the principle of promissory estoppel against the reduction in rebate.3. Public interest and statutory authority in modifying the rebate.4. Impact of the U.P. Electricity Reforms Act, 1999 on the rebate.Detailed Analysis:1. Validity of the Reduction in Hill Development Rebate:The appeals were filed against the order of the Allahabad High Court, which struck down Clause 9(a) of the notification dated 25.1.1999 and Clause 8(a) of the notification dated 18.6.1998, reducing the hill development rebate from 33.33% to 17%. The High Court directed the appellant-Corporation to continue providing the 33.33% rebate for the unexpired period of five years from the commencement of electricity supply.2. Applicability of the Principle of Promissory Estoppel:The High Court held that the appellant-Corporation was bound by the principle of promissory estoppel and could not revoke the benefit. The principle was invoked because the entrepreneurs had made significant investments based on the promise of a 33.33% rebate for five years. The Supreme Court examined whether promissory estoppel could prevent the appellant-Corporation from modifying the rebate.3. Public Interest and Statutory Authority in Modifying the Rebate:The appellant-Corporation argued that the modification was justified under Section 49 of the Electricity (Supply) Act, 1948, citing reasons such as public interest, large-scale theft of energy, and financial losses. The Corporation contended that the restructuring was necessary to avoid losses and was done in public interest. The Supreme Court reviewed whether these reasons constituted sufficient public interest to override the principle of promissory estoppel.4. Impact of the U.P. Electricity Reforms Act, 1999:The appellant-Corporation argued that the U.P. Electricity Reforms Act, 1999, which came into force in 2000, transferred the power to determine tariffs to a Commission, and thus, the principle of promissory estoppel could not be applied against the statute. The Supreme Court considered whether the benefits granted before the Act could be revoked after the Act came into force.Judgment Summary:Promissory Estoppel:The Supreme Court upheld the High Court's view that the principle of promissory estoppel applied, preventing the appellant-Corporation from reducing the rebate. The Court emphasized that the entrepreneurs had made investments based on the promise of a 33.33% rebate, and revoking this benefit would be unfair and arbitrary.Public Interest:The Court found that the reasons provided by the appellant-Corporation, such as financial losses and energy theft, did not constitute sufficient public interest to justify revoking the rebate. The Court noted that public interest must be overwhelming and supported by evidence, which was not the case here.Statutory Authority:The Court distinguished between primary legislation and delegated legislation. It held that while the Corporation had the authority to modify the rebate under Section 49 of the Act of 1948, such modifications must be fair and reasonable. The Court ruled that the modification was not justified in this case.U.P. Electricity Reforms Act, 1999:The Supreme Court accepted that the benefits could not be extended beyond the date the U.P. Electricity Reforms Act, 1999, came into force. Therefore, the benefits of the rebate would be protected only until the Act came into effect.Conclusion:The Supreme Court concluded that the appellant-Corporation could not revoke the 33.33% rebate before the U.P. Electricity Reforms Act, 1999, came into force. The appeals were disposed of, and the respondent units were entitled to the benefits until the new Act was enacted. The judgment emphasized the importance of maintaining the credibility of government representations to ensure good governance and public faith.