2014 (2) TMI 1277 - SC - Indian Laws

State Bound by Promissory Estoppel for Uninterrupted Electricity Supply

M/s S.V.A. Steel Re-rolling Mills Ltd. etc. etc. Versus State of Kerala & Ors. etc. etc.

M/s S.V.A. Steel Re-rolling Mills Ltd. etc. etc. Versus State of Kerala & Ors. etc. etc. - 2014 AIR 1086, 2014 (2) SCR 336, 2014 (4) SCC 186, 2014 (13) JT ... Issues Involved:1. Promissory Estoppel2. Uninterrupted Electricity Supply3. Extension of Incentive Period4. Discriminatory Treatment5. Application of Section 22B of the Indian Electricity Act, 1910Detailed Analysis:Promissory Estoppel:The appellants argued that the respondent-State was bound by the principle of promissory estoppel to adhere to its promise of uninterrupted electricity supply for five years from the date of commercial production. The appellants had set up their manufacturing units based on this assurance. The respondent-State, however, contended that the principle of promissory estoppel was not applicable, citing judgments from State of Haryana & Ors. v. Mahabir Vegetable Oils Pvt. Ltd. and State of Rajasthan & Anr. v. M/s Mahaveer Oil Industries & Ors. The Court, after considering the arguments, held that the respondent-State was bound to give the benefits assured to the appellants, as no breach or non-entitlement was shown on the part of the appellants.Uninterrupted Electricity Supply:The appellants were promised uninterrupted electricity supply for five years, which was crucial for their manufacturing processes. However, due to certain difficulties, there were power cuts, adversely affecting their production. The Court acknowledged that the respondent-State was not generating enough electricity to meet all needs and recognized the practical difficulties in providing uninterrupted supply. Nevertheless, the Court emphasized that the respondent-State should have made necessary arrangements to fulfill its promise or compensate the appellants adequately.Extension of Incentive Period:The respondent-State had issued an order on 26th October 1999, extending the benefit period by the number of days during which power cuts exceeded 50%. The appellants argued that this extension was insufficient as even power cuts below 50% adversely affected their operations. The Court found the respondent-State's decision unreasonable and directed that the period of incentive should be extended for all days when 100% electricity supply was not provided, not just when the cut was 50% or more.Discriminatory Treatment:The appellants alleged discriminatory treatment, stating that other units like Malabar Cement and industries in the Export Processing Zone received uninterrupted electricity supply. The Court did not delve deeply into this issue but implied that the respondent-State should ensure fair treatment and fulfill its promises uniformly.Application of Section 22B of the Indian Electricity Act, 1910:The respondent-State invoked Section 22B of the Indian Electricity Act, 1910, which allows the State to regulate the supply, distribution, and consumption of electricity. The Court acknowledged this provision but emphasized that the respondent-State should have planned and regulated electricity supply to honor its commitments to the appellants. The Court held that the provision was not highly relevant in this case, as the primary issue was the assurance of uninterrupted supply given to the appellants.Conclusion:The Court concluded that the respondent-State was not wholly fair in extending benefits only for periods when power cuts were 50% or more. It directed the respondent-State to extend the incentive period for all days when 100% electricity supply was not provided. The impugned order of the High Court was quashed, and the appeals were allowed, with the respondent-State instructed to calculate the period of non-supply and extend the incentive period accordingly within two months. The appeals were allowed with no order as to costs.