Holding

The doctrine of promissory estoppel does not apply; only industries that commenced production while the rebate was operative are entitled to it, and the appellant is not entitled to the concession.

Summary

The Andhra Pradesh State Electricity Board (APSEB) granted a 25% rebate on demand and energy charges to high‑tension industries, initially for three years from the date of regular production and later extended for two additional years by a government order dated 23 August 1985. The Board subsequently withdrew the concession in December 1987, and the State Government withdrew it in July 1989. Sarada Ferro Alloys Ltd., which began commercial production on 11 August 1990, claimed entitlement to the rebate based on the 1985 government extension and filed a writ petition. The Andhra Pradesh High Court applied the doctrine of promissory estoppel, holding that the Board and the Government were bound to grant the rebate for five years. On appeal, the Supreme Court held that the promise was conditioned on commencement of production during the period the incentive was operative, which the company failed to satisfy, and that promissory estoppel was inapplicable, especially to statutory orders under the Electricity Supply Act. Consequently, the Court set aside the High Court judgment and dismissed the writ petition, finding the company not entitled to the rebate.

Issues considered

Whether the doctrine of promissory estoppel applies to the Board's representation regarding the 25% rebate.
Whether Sarada Ferro Alloys Ltd. is entitled to the rebate when it commenced production after the concession had been withdrawn.
Whether statutory orders issued under the Electricity Supply Act, 1948 can be subject to promissory estoppel.

Legislation cited

Electricity (Supply) Act, 1948s. 49, s. 78A

Subjects

promissory estoppelelectricity rebatetariff concessionstatutory powerElectricity Supply Actincentive withdrawalhigh tension industries

Judgment

A A.P. STATE ELECTRICITY BOARD AND ORS.
v.
SARADA FERRO ALLOYS LTD.

FEBRUARY 25, 1993

B . N.M. KASLIWAL, JJ.]
(KULDIP SINGH AND
.

Promissory estoppel-Eiectricity Board-Gralll of rebate in demand -~
and energy charges-Subsequent withdrawal of rebate-Industry established
during the period when concession was not operative-Held not entitled to
c rebate-Doctrine of promissory estoppel held inapplicable.

The Andhra Pradesh State Electricity Board granted rebate of25 per
cent in demand and energy charges for High Tension industries and asked
the Director of Industries to identify the industries which would be eligible
~.
for the rebate. By its order dated July 13, 1976 the State extended the
D rebate to certain industries. The Board also issued order extending the
concession to the notified industri.es for a period of three years from the
date of their going into regular produetion. By an order dated August 23,
1985, the conc.ession already granted was extended for two more years, i.e.
a total of live year. However, by its order dated December 8, 1987 the Board
withdrew the concession. The State Government also issued similar order
E
dated July 27, 1989 withdrawing the rebate. The respondent-company
which established a Ferro Chrome industry and commenced production
on regular basis on August 11, 1990 claimed concession but the same was
refused by the Board on the ground that the said concession had already
been withdrawn. The company tiled a writ petition before the Andhra
F Pradesh High Court seeking a declaration that it was entitled to rebate as

~
declared by the State Government in its letter dated August 23, 1985. A
Single Judge of the High Court allowed the petition on the ground that the
respondent-company having acted upon the representation made by the >
Board and the State Government the doctrine of promissory estoppel was
attracted and as such the Board and the State Government were bound to
G
grant rebate for a period of live years. The writ appeal preferred by the
Board was dismissed by a Division Bench of the High Court. The
Electricity Board tiled an appeal in this Court.
~.
Allowing the appeal and setting aside the judgment of the High
H Court, this Court,
114
-· AP.S.E.B. v. SARADA FERRO ALLOYS [KULDIP SINGH, J.] 115

'"( HELD: 1. The High Court was not justified in applying the doctrine A
or promissory estoppel to the racts aod circumstances or this case.
[ll 7H,118A)
2. Only those industries were entitled to the beoelit or the incentive
who rullilled the requirements during the period the incentive was opera·
live. The promise or representation made by the Board in its letter dated B
July 13, 1976, ir any, was directly linked with the date or commencement or
production by the company. It is not disputed that the rupondent~om·
pany commenced production on commercial scale on August 11, 1990. The
incentive was withdrawn by the Board on December 8, 1987 and by the
Government on July 27, 1989. Whichever date is taken ioto accou11t the C
compan)· was not entitled to the incentive as it bad not commenced
production on or before either or these two dates. [119A:-B, DJ

2.1. E•·en if it is assumed that a promise or representation was made
by the Board the doctrine of promissory estoppel is not attracted in this
case as the company failed to act upon the said representation. Therefore, D
the assumption entertained by the High Court that once the company
started the process of setting up an industry and had incurred expendi·
lure, the Board was bound to keep its ince.1tive open for the company till
it started production is not correct. (1198-C]

Union of India v. Godfrey Phillips India Ltd., (1985] 4 S.C.C. 369,
E
relied on.

- 1993.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 766 of

F
From the Judgment and Order dated 7.2.92 of the Andhra Pradesh
High Court in W.A. No. 1271 of 1991.

Shanti Bhushan, K. Rajendra Chowdhary and R.K. Sharma for the
Appellants.
G
G.L. Sanghi, Duba Mohan Rao, Y.P. Rao, Dhruv Mehta, T.V.S.N.
~· . Chari, Ms. Suruchi Aggarwal and Ms. Bharati Reddy for the Respon-
dent.

The Judgment of the Court was delivered by H
116 SUPREME COURT REPORTS [1993] 2 S.C.R.
..
A KULDIP SINGH, J. Special leave granted.

The Andhra Pradesh State Electricity Board (the Board), in exercise
of its powers under Section 49 of the Electricity Supply Act, 1948 (the Act)
issued order dated September 17, 1975 granting rebate of 25% in demand
and energy charges for High Tension Industries. It was specifically men-
B tioned therein that the rebate was to be allowed from the date of going
into regular production on or after January 1, 1976. The Board, thereafter,
asked the Director of Industries to identify the High Tension Industries
which would be eligible for the 25% rebate declared by the Board. The
State Government issued the order dated July 13, 1976 extending the rebate
c to all the industries except 65 notified in the Government order dated
March 9, 1976. Thereafter the Board issued order dated August JO, 1976
extending the concession to ,.u
the High Tension Industries except the 65
exclud~d by the State Government.

D The State Government issued order dated August 23, 1985 specifying
certain incentives available to the industries in the three backwards districts
of the Sate. The concession of 25% tariff already granted by the Board was
extended for l wo more years i.e. a total of five years.

The Board withdrew the concession of 25% rebate to the High
E Tension Industries by its order dated December 8, 1987. The State_ "
Government also issued similar order dated July 27, 1989 withdrawing the
rebate.

F
The respondent Mis. Sarada Ferro Alloys Ltd. (the Company)
decided to establish an industry to produce Ferro Chrome. According to
-
the company it obtained a small scale industry certificate on September 5,
1986. It further obtained 'no o~jection' certificate from Andhra Pradesh
Pollution Board on November 12, 1986. The case of the company further
is that it purchased 4.01 acres of land during the period September 1986
to May~ 1989. The Board called upon the campany by its Ieiter dated
G December 9, 1987 LO deposit Rs. 8, 40, 200 towards service-lines. the
company entered into an agreement with the Board on August 21,1989 for
the supply of the electricity. It is the case of the company that it com-
menced production on regular basis on August 11, 1990.

H The company requested the Board by its letter dated June 29, 1991
AP.S.E.B. v. SARADA FERRO ALLOYS [KULDIP SINGH, J.] 117
--....,·
' to extend concession of 25% rebate for a period of five years from the date A
it started production. The company based its demand on the State Govern-
ment order dated August 23, 1985. The Board by its letter dated July 9,
1991 declined to give the concession to the company on the ground that
the said concession had already been withdrawn by the Board by its order
>-. dated December 8, 1987. B
The company challenged the communication of Board dated July 9,
1991 by way of a writ petition before the Andhra Pradesh High Court. The
company further sought a declaration that it was entitled to 25% power
rebate as declared by the State Government in its letter dated August 23,
1985. The learned Single Judge of the High Court by its judgment dated c
,,... November 8, 1991 allowed the writ petition. The writ appeal preferred by
the Board was dismissed by a Division bench of the High Court by its
judgment dated February 7, 1992. This appeal by way of special leave is
against the judgment of the High Court.
D
The High Court allowed the writ petition of the company on the sole
ground that the respondent-company having acted upon the representation
made by the Board and the State Government, the doctrine of promissory
estoppel was attracted and as such the Board and the State Government
'I' y.oere bound to grand 25% rebate for a period of five years. The Division E
Bench of tlie High Court based its conclusions on the reasoning which is
reproduced hereunder:-

- 'The material now before us clearly shows that by 30.6.87 the com-
pany had incurred an expenditure of Rs. 11,07,328 towards purchase of
land and other expenditure including civil works. Even if we take 8.12.87 F
....
as the relevant date it cannot be disputed that by that date considerable
expenditure was already incurred by the petitioner for setting up the
industry and this was done on the basis of the promise held out by the
Government in G.O. Ms. No. 375 dated 23.8.85 and the consequential B.P.
Ms. No. 689 dated 17.9.75, B.P. Ms. No. 691 dated 10.8.76 and B.P. Ms. G
No. 152 dated 13.2.78. Whichever date was taken into account, either
..!....
27.7.89 or 8.12.87, there is no valid reason for the Electricity Board to
withdraw the concessions earlier granted. As we have found on facts that
the first respondent had acted on the promise held out by the Government
and the Electricity Board, both of them are bound by that promise." H
118 SUPREME COURT REPORTS [1993] 2 S.C.R.

A We have given our thoughtful consideration to the reasoning and the Y
conclusions reached by the High Court. We are of the view that the High
Court was not justified in applying the doctrine of promissory estoppel to
the facts and circumstances of this case. This Court in Union of India v.
Godfrey Pltillips India Ltd., [1985] 4 SCC 369 explained the principles of
B promissory estoppel in the following words: ,1

"The true principal of promissory estoppel is that where
one party has by his word or conduct made to the other
a clear and unequivolcal promise or representation which
is intended to create legal relations or effect a legal
c 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 repre-
sentation would be binding on the party making it and he
D 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 whioh have taken place between the parties."

We may now examine the promise or representation said to have
been made by the appellant and acted upon by the company. The operative
E
part of the order dated July 13, 1976 issued by Board is as under:-

'The revised powere tariff notified by the A.P. State
Electricity Board with effect from 20.10.1975 offers a
rebate of 25% on demand and energy charges for
F specified H.T. consumers as an incentive to new industries
for the first three years from the date of tlleir going illto
production (emphasis supplied)."

The High Court has primarily based its conclusions on the Government
G letter dated August 23, 1985. The relevant part of the said order is as
under:-

"Power :- At present the Andhra Pradesh State Electricity
Board offers 25% tariff concession for the prst three years
for certain industries. This concession would be extended
H for two more years i.e. a total of five vears. Twentv-five
AP.S.E.B. v. SARADA FERRO ALLOYS [KULDIP SINGH, J.] 119

per cent concession tariff would be met for the additional A
2 years from out of the Industries budget.'

It is clear from the Government order reproduced above that the Govern-
ment extended the concession already granted by the Board for three years
for a further period of two years. We have, therefore, to see what is the
B
promise or the representation held out to the company in the order of the
Board dated July 13, 1976 reproduced above.

We are of the view that the promise or representation made by the
-- Board in its letter dated July 13, 1976, if any, was directly linked with the
dat.e of commencement of production by the company. It is not disputed C
that the respondent-company commenced production on commercial scale
on August 11, 1990. The incentive was withdrnwn by the Board on Decem-
ber 8, 1987 and by the Government on July 27, 1989. Whichever date is
taken into account the company was not entitled to the incentive as it had
not commenced production on or before either of these two dates. Even if D
it is assumed that a promise or representation was made by the Board in
its letter dated July 13, 1976, the do~trine of promissory estoppel is 11ot
attracted in this case as the company failed to act upon the said repre-
sentation. We do not agree with the assumption entertained by the High
Court that once the company started the process of setting up an industry E
and had incurred expenditure, the Board was bound to keep its incentive
open for the company till it started production. We are of the view that
only those industries were entitkd to the benefit of the incentive who

- filfilled the requirements during the period the incentive was operative.

Mr. Shanti Bhushan, learned counsel for the appellant has further
F
contended that the orders dated July 13, 1976 and December 8, 1987 were
issued by the Board in its statutory power under Section 49 of the Act.
According to him these orders being statutory there can be no promissory
estoppcl against the Board. He further contended that there were no
directions by the State Government under Section 78A of the Act. The G
view we have taken on the question of promissory estoppel it is not
necessary to go into these additional grounds urged by Mr. Shanti
Bhushan.

We allow the appeal and set aside the judgment dated November 8, H
120 SUPREME COURT REPORTS [1993] 2 S.C.R.

A 1991 of the learned Single Judge and dated February 7, 1992 of the Division
Bench of the High Court in writ appeal. The writ petition tiled by the
respondent-company in the High Court is dismissed. We leave the parties
to bear their own costs.

T.NA. Appeal allowed.

).

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