Holding

The impugned Government Order is to be given prospective operation only; retrospective withdrawal of the concession is invalid, and the hotels' appeal is allowed.

Summary

The Supreme Court examined whether the Kerala Government Order of 26 September 2000, which retrospectively withdrew electricity tariff concessions granted to classified hotels under a tourism‑industry policy, was valid. The hotels argued that the withdrawal violated their accrued rights, the doctrine of promissory estoppel, and Article 14 of the Constitution, while the Board contended that the order was prospective and that bills could not be raised under Section 56 of the Electricity Act, 2003. The Court held that the order must be given only prospective effect; a policy decision may be altered but cannot be applied retrospectively to extinguish vested rights unless expressly authorised by statute. The doctrine of promissory estoppel was not deemed applicable, and the bills were upheld as lawful. Consequently, the High Court’s order was set aside in part and the hotels’ appeal was allowed, with costs awarded.

Issues considered

The validity of the Government Order dated 26-9-2000 granting retrospective withdrawal of electricity tariff concessions.
Whether the doctrine of promissory estoppel creates a vested right for the hotels against the State.
Whether the withdrawal of concession violates Article 14 of the Constitution.
Whether bills raised by the Board after 15-5-1999 are barred by Section 56 of the Electricity Act, 2003.
Whether the State may alter or rescind a policy decision without retrospective effect.

Legislation cited

Constitution of Indias. Art.14
Customs Act, 1962s. Section 25(1)
Electricity Act, 2003s. Section 185(5), s. Section 56
Electricity (Supply) Act, 1948s. Section 78A
General Clauses Act, 1897s. Section 6

Subjects

administrative lawpolicy decisionretrospective effectpromissory estoppelelectricity tariff concessionArticle 14vested rightprospective operationKerala State Electricity Boardtourism industry

Judgment

[2008] 9 S.C.R. 752 ·

A KUSUMAM HOTELS (P) LTD.
v.
KERALA STATE ELECTRICITY BOARD & ORS.
(Civil Appeal No.101 of 2007)
MAY 16, 2008
B
[S.B. SINHA AND LOKESHWAR SINGH PANTA] _.,

Administrative law:

Policy decision taken by Central Government and fol-
c lowed by State Government - Grant of concessional electric-
ity tariff to hotels - Withdrawal of concession with retrospec-
live effect, by Government Order- Validity of-Held: Not valid,
as accrued right of hotel owners affected - Impugned GO must
be held to have a prospective operation and not a retrospec-
D live operation - That view would save it from being hit by Art.
14 of the Constitution - Doctrines - Doctrine of promissory
estoppel - Constitution of India, 1 ~50 - Art. 14.
By reason of a p91icy deci:;ion adopted by the Cen-
tral Government, 'tourism' was declared to be an 'indus-
E try'. The State of Kerala adopt~d the said policy of the
Central Government. Pursuant t<) the said policy decision,
various incentives were to be gr,mted. It was declared that
"tourism" will be treated as an 'industry' and concessions
such as concession in electricit)• and water charges would -4-.
F be made available to the 'tourism industry'.

In terms of the said policy decision, the Kerala State
Electricity Board (the Board) was directed to grant elec-
tricity tariff concessions to cla~;sified hotels and motels.
Subsequently, however, w.e.f. 15-5-1999, the Kerala State
G
Electricity Board withdrew th~! concessional industrial
tariff offered to hotels and App1~llants, who owned hotels -;-
situated at different parts of the State of Kerala, were
served with demand-cum-disconnection notices on the
H 752
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 753
ELECTRICITY BOARD & ORS.

basis of bills raised on commercial tariffs. A writ petition A
was filed thereagainst. In the meantime, the State of Kerala
issued a Government Order dated 26-9-2000 stating that
the concession on electricity tariff shall be limited only to
five years by the Department of Tourism, Government of
Kerala and the concession was not to be extended for B
any further period. The writ petition filed by the Appellants
~
was disposed of with a direction that commercial tariff be
+ charged w.e.f. 15-5-1999 onwards.
By reason of the said Government Order dated 26-9-
2000, the benefit of concession made available to the Ap- c
pellants had been taken away. The said Government Or-
der was given retrospective effect and retroactive opera-
ti on.
The contention of the Appellants before this Court is
D
that i) the concessions granted to Appellants should not
have been withdrawn from an anterior date; ii) that the
Board could not have directed application of commercial
tariff despite the fact that the hotels are still considered to
be an industry and iii) that in view of the provisions in
sub-section (2) of s.56 of the Electricity Act, 2003, no bill E
could have been raised after a period of two years.
Disposing of the appeals, the Court
HELD:1.1. Tourism was declared to be an industry.
\. ~
The wide range of concessions, inter alia, covered elec- F
tricity and water charges. It is not a case where some ex-
emptions or concessions were to be given for a specific
period or as a one time measure. No time limit was fixed
for applicability in respect of the policy decisions. Pursu-
ant thereto long term investments might have been made. G
It is not based on a principle of giving benefit with a view
... to facilitate the initial growth of the industry. It was not
based on any formula or criteria to evaluate the realiza-
tion of the object of grant of such concession over a pe-
riod. It was an open ended offer. It must, therefore, be held H
754 SUPREME COURT REPORTS [2008] 9 S.C.R.

A that the Government was satisfied that the need was to ..-..
grant concession if not permanently, at least for a long
time. [Para 15) [764-C,D,E]
1.2. However, the State is also entitled to change or
alter the economic policies. Appellants do not have any
8 vested right to enjoy the concessions granted to them
forever, particularly when the Board is constituted and
incorporated under the provisions of Electricity (Supply)
Act, 1948. Any policy decision adopted by the State would
not be binding on the Board, save and except provided
C for in the Act. The Board being an independent entity, the
duties and functions of the Board vis-a-vis the State are
enumerated in the Act. The Board, however, would be
bound by any direction issued by the State Government
on questions of policy. A dispute which may arise as to
D whether a question is or not a question of policy involv-
ing public interest, Central Government is the final arbi-
ter. The policy decision adopted by the State on the basis
whereof the Board felt obligated to grant electrical con-
nection in favour of the appellants on the basis of indus-
E trial tariff must, therefore, be understood in the context of
s.78A of the 1948 Act. What is binding on the Board is the
policy of the State. The direction of the State was to apply
a particular category of tariff to the appellants. Such di-
rections could have been withdrawn while making an-
F other tariff. [Para 16) (764-F,G, 765-A,B,C]
1.3. The doctrine of promissory estoppel applies to
the State. Also all administrative orders ordinarily are to
be considered prospective in nature. When a policy deci-
sion is required to be ,given a retrospective operati_on, it
G must be stated so expressly or by necessary implication.
The authority issuing such direction must have power to
do so. The Board, having acted pursuant to the decision
of the State, could not have taken a decision which would
be violative of such statutory directions. [Para 17) [765-
H D,E]
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 755
ELECTRICITY BOARD & ORS.

1.4. 15-5-1999 was fixed as the cut off date by the A
Board. It, by itself, could not have done so. But the State
for issuing the GO dated 26.9.2000 could have fixed the said
cut off date on its own. This Court although does not agree
that by granting retrospectivity to the said order, the entirety
of the Government Order should be set aside the same or B
.. per se would be held to be unreasonable, but what this Court
means to say is that it could be given effect to only from the
• date of the order, i.e., prospectively and not from an anterior
date, i.e., retrospectively. [Para 17] [765-F,G]
1.5. If the doctrine of promissory estoppel applies for c
the purpose of enforcing the concession granted in favour
of entrepreneurs, it can be withdrawn, inter alia, in public
interest. Despite absence of an overriding public interest,
however, although a different policy decision can be taken
but therefor adequate notice should be given. [Para 24] D
[771-G, 772-A]
1.6. The State, however, would be entitled to alter,
amend or rescind its policy decision. Such a policy deci-
sion, if taken in public interest, should be given effect to.
In certain situations, it may have an impact from a retro- E
spective effect but the same by itself would not be suffi-
cient to be struck down on the ground of unreasonable-
ness if the source of power is referable to a statute or statu-
...
~ tory provisions. In our constitutional scheme, however,
the statute and/or any direction issued thereunder must F
be presumed to be prospective unless the retrospectivity
is indicated either expressly or by necessary implication.
It is a principle of rule of law. A presumption can be raised
that a statute or statutory rules has prospective opera-
tion only. [Para 26] [774-D,E,F] G

'+ 1.7. The State of Kerala in this case did not grant any
concession by itself. The Central Government took a larger
policy of treating the tourism as an industry. A wide range
of concessions were to be granted by way of one time
H
756 SUPREME COURT REPORTS [2008] 9 S.C.R.

A measure; some of them, however, had a recurring effect.
So far as grant of benefits which were to be recurring in
nature, the State exercises its statutory power in the case
of grant of exemption from payment of building tax where-
for it amended the statute. It issued directions which were
B binding upon the Board having regard to the provisions
contained in Section 78A of the 1948 Act. The Board was
bound thereby. The Board, having regard to its financial
..
constraints, could have brought its financial stringency
to the notice of the State. It did so. But the State could not
have taken a unilateral decision to take away the accrued
c or vested right. [Para 27] [774-G, 775-A,B]
1.8. Appellants continued to derive the benefits in
terms of the original order. They obtained certificates of
classification. It is on the aforementioned context, the
D question as regards construction of the impugned notifi-
cation dated 26.9.2000 arises. Ex facie, the said policy
decision could not be given a retrospective effect or ret-
roactive operation. The State was not exercising the power
under any statute to grant or withdraw the concession. It
E was exercising its statutory power of issuing direction. It
is, therefore, a statutory authority. The 1948 Act does not
authorize the State to issue a direction with retrospective
effect. The Board, therefore, could only give prospective
effect to such directions in absence of any clear indica-
F tion contained therein. By reason of withdrawal of con- • 4

cession with retrospective effect, the accrued right of the
appellants had been affected. [Para 27] [775-C,D,E]
1.9. The impugned GO dated 26-9-2000 must be held
to have a prospective operation and not a retrospective
G operation. That view would save it from being vulnerable
to the challenge of being hit by Art. 14 of the Constitution.
;
[Para 29] [776-C,D] ~

Kasinka Trading & Anr v. Union of India & Anr [(1995) 1
sec 274] and Ku/deep Singh v. Govt. of NCT of Delhi [(2006)
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 757
ELECTRICITY BOARD & ORS.
,.. 5 sec 702]- distinguished. A
Lohia Machines Ltd. and Anr. v. Union of India (UOI) and
Ors. [(1985) 2 SCR 686]; M/s. Indian Metals and Ferro Alloys
Ltd. &Anr. v. State ofOrissa & Ors. [(1987) 3SCC189]; South-
em Petrochemical Industries Co. Ltd. v. Electricity Inspector
& Etio & Ors. [(2007) 5 SCC 447]; LML Ltd. v. State of UP & B
A. Ors. [2007 (14) SCALE 469]; UP Power Corporation Ltd &
Anr. v. Sant Steel & Alloys (P) Ltd. & Ors. [2007 (14) SCALE
36]; State of Orissa & Ors. V Mangalam Timber Products Ltd.
[(2004) 1 SCC 139]; Motila/ Padampat Sugar Mills v. State of
U.P. [(1979) 2 SCR 641; Union of India v. Godfrey Philips In- c
dia Ltd. Ltd. [(1985) 4 SCC 369]; Shrijee Sa/es Corporation &
Anr. v. Union of India [(1997) 3 SCC 398]; Sa/es Tax Officer &
Anr. v. Shree Durga Oil Mills & Anr. [(1998) 1 SCC 572] and
Ramchandra Murari/al Bhattad & Ors. v. State of Maharashtra
& Ors. [(2007) 2 sec 588]- relied on . D
.)I( .
Pawan Alloys & Casting Pvt. Ltd. v. UP State Electricity
Board & Ors. [(1997) 7 SCC 251]; Bannari Amman Sugars
Ltd. v. Commercial Tax Officer & Ors. [(2005) 1 SCC 625];
Ku/deep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702]
and MP Mathur & Ors. v. OTC & Ors. [(2006) 13 SCC 706]- E
referred to.
2. This Court, however, is not in a position to accept
the contention that the Bills could not have been issued
.....I_
having regard to sub-section (2) of s.56 of the 2003 Act. F
Appellants have incurred liabilities. Whereas the bills are
issued only in respect of the dues arising in terms of the
law as was applicable prior to the coming into force of
2003 Act. Sub-section (2) of s.56 shall apply after the said
Act came into force. The Board could have even framed a G
tariff in terms of the provisions appended to s.61 of the
Act. Appellants incurred liability to pay the bill. The liabil-
ity to pay electricity charges is a statutory liability. The
Act provides for its consequences. Unless, therefore, the
2003 Act specifically introduced, the bar of limitation as
H
758 SUPREME COURT REPORTS [2008] 9 S.C.R.

~
A regards the liability of the consumer incurred prior to com-
ing into force of the said Act. Having regard to s.6 of the
General Clauses Act, the liability continues. [Para 30] [776-
D,G,H, 777-A]

Southern Petrochemical Industries Co. Ltd. v. Electricity
B Inspector and E.T. I. 0. and Ors. [(2007) 5 sec 447]- relied on.
...
CIVILAPPELLATE JURISDICTION : Civil Appeal No. 101
of 2007

From the final Judgment and Order dated 18.5.2005 of
c the High Court of Kera~a at Frnakulam in W.A. No. 624/2005
WITH

C.A. Nos. 102, 103, 104, 105, 106 and 3309 of 2007

P.S. Patwalia, R. Venkataramani, P. Krishnamoorthy, Ankur
D
Chawla, Pallavi Langer, Prithvi Singh Sidhu, Manik Karanjawala, .,,._
A.K. Joseph, K. Rajeev and Romy Chacko for the Appellants.

M.T. George and R. Sathish for the Respondents.

The Judgment of the Court was delivered by
E
S.B. SINHA, J. 1. These appeals involving similar ques-
tions of facts and law were taken up for hearing together and
are being disposed of by this common judgment.

F
2. Appellants herein are owners of hotels situated at dif-
ferent parts of the State of Kerala.
.. '

By reason of a policy decision adopted by the Central Gov-
ernment, 'tourism' was declared to be an 'industry'. The State of
Kerala adopted the said policy of the Central Government. Pursu-
G ant to the said policy decision, various incentives were to be
granted. It was declared that 'Tourism" will be treated as an 'Indus-
try' and the concessions available to the' tourism industry' were : ~-

"(i) Subsidy for prepration of feasibility/project report.
(ii) Investment subsidy limited to 10% thereof.
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 759
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

(iii) Incentive for training local manpower. A

(iv) Augmenting availability of funds from State Financial
Corporations.

(v) Concession in electricity and water charges.
B
(vi) Allocation of land at concessional rate.

--4.. (vii) Exemption from building tax levied by the Revenue
Department. (Action to amend the Kerala Buildings
Tax Act 1975 will be taken separately)."

3. Apart from the concession in electricity and water C
charges and payment of building tax to be levied by the Rev-
enue Department which was open ended in nature, other con-
cessions were to be granted on a one time measure.

4. A new policy for grant of invei:;tment subsidy was also D
floated.
Classified hotels (One to Five Stars) came within the pur-
view thereof. In terms of the said policy decision, the Kerala
State Electricity Board (the Board) was directed to grant tariff
concessions to the classified hotels and motels consequent on E
the said declaration of Government of Kerala and Government
of India. The concessions to be granted thereby were :

"(1) The electricity tariff applicable to the categories listed
above will be ht i-industrial tariff/I. t. Iv industrial tariff
depending on the type of supply from 1.4.1987 F

(2) The tariff as indicated above will be applied to the
institutions either on production of proper certificate
from the Director of Tourism or based on list of
institutions eligible for the concessional tariff G
furnished by the director of tourism to the Secretary,
Kerala Electricity Board. The certificates/
communications should be given by the Director of
Tourism himself.

(3) In the case of institutions in the above categories H
760 SUPREME COURT REPORTS [2008) 9 S.C.R.

A applying for power connection hereafter tariff as ~

above will be applied by the Kerala State Electricity
Board on receipt of necessary certificate from the
Director of Tourism.

(4) Regarding the admissibility of the concession to any
B particular unit the matter will. be referred to the Director
of Tourism and the report on the matter will be j..

accepted by the Kerala State Electricity Board."

5. Indisputably, the appellants had set up or upgraded their
c hotels and motels. The Government of Kerala classified the
hotels in question in several categories for which they became
entitled to from the year 1990.
The Board, allegedly, had been suffering losses. The Gov-
ernment of Kera la, however, issued a Government Order on or
D about 25.8.1997 adopting the mode of grant of subsidy, inter
alia, to the industrial sector, the relevant portions whereof read )",.

as under:
"In the Government order read as first paper above it was
ordered that the actual cost of electricity concessions
E allowed to Industries in the State, as part of Industrial policy
will be reimbursed to Kerala State Electricity Board to the
extent necessary to reach 3% Rate of Return (ROR) starting
with the accounting year 1986-87, by adjusting the amount
of concession against the dues payable to Government ~

F .Jo
by Kerala State Electricity Board.
2. The Chairman, Kerala State Electricity Board in his
letters read above has reported that the loss sustained by
the Kerala State Electricity Board due to concessional
electricity tariff allowed to Industries during the last ten
G
years comes to Rs.60.3 crores and that the loss for the
year 1995-96 alone is Rs.24 crores. .(
xxx xxx xxx
4. Having considered the entire issue in detail, Government
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 761
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

are pleased to issue the following orders: A
(i) The Industries and the Agricultural Departments in
Government will find the funds from their respective
Budget required for giving subsidy to Industries and
farmers for the year 1997-1998 by re-appropriation.
The above departments will also provide required 8
~ amounts in their department budget from the financial
• year 1998-99 onwards.
(ii) The subsidy for electricity tariff admissible to Industrial
consumers and farmers will be disbursed to the c
beneficiaries by the concerned Departments from
the financial year 1998-99 onwards."
6. By an order dated 11.10.1999, the industrial tariffs
granted to the hotels in the State stood cancelled w.e.f
15.10.1999. It was ordered that industrial tariff already granted D
by various officers of the Board from 15.5.1999 would be sus-
pended by an order dated 8.11.1999, stating :
"The Board hereby orders that the institutions which were
already enjoying industrial tariff prior to 15.5.99 on the E
strength of certificate issued by Director of Tourism shall
continue to be charged at the industrial tariff until further
orders. This is subject to the final decision of the
Government on payment of subsidy. From 15.5.99 new
applications for granting industrial tariff will not be
sanctioned to such institutions. The field officers of the F
Board shall not grant industrial tariff from 15.5.99 to the
institutors certified by Director of Tourism."
7. The hotels of the appellants were reclassified in the year
1999 keeping in view the investment made by them. G
Appellants, however, were served with demand-cum-dis-
\. connection notices on the basis of bills raised on commercial
tariffs on or about 9.4.2000.
8. A writ petition was filed thereagainst. In the meantime, H
762 SUPREME COURT REPORTS [2008] 9 S.C.R.

A the State of Kerala issued a Government Order on or about
....
26.9.2000 stating that the concession on electricity tariff shall
be limited only to five years by the Department of Tourism, Gov-
ernment of Kerala. The concession was not to be extended for
any further period. Clause (3) of the said GO reads, thus :
B "These orders will be operative from 15.5.1999, the
effective date from which Kerala State Electricity Board >-
has withdrawn the concessional tariff offered to tourism i

units. The tourism units, which have received certificate of
eligibility for tariff concession from Director, Department
c of Tourism, have to produce a certificate from the Kerala
State Electricity 3oard regarding the total period for which
they have enjoyed the concessional tariff. They will be
eligible for concessional tariff only for a period of five years
including the period for which already enjoyed the
'D concession. i.e., if the tourism unit has already enjoyed
tariff for a period of three years prior to 15.5.1999, they
will be eligible for concessional tariff for a further period of
two years only. This period will be counted from the effective
date originally certified by the Director of Tourism,
E Government of Kerala for granting concessional tariff for
three years. If any tourism unit has already enjoyed
concessional tariff for a period of five years or more prior
to 15.5.1999, it will not be eligible for any extension of the

F
period of concession."

9. The writ petition filed by the appellants was disposed of
...
by an order dated 4.8.2004 directing that commercial tariff may
be charged w.e.f. 15.5.1999 onwards. After the aforementioned
Government Order dated 26.9.2000 was issued, demand-cum-
disconnection notices were issued again. Representations were
G made by the appellants which were rejected.

10. They preferred an intra court appeal. "1
~

Fresh writ petitions were filed, inter alia, praying for quash-
ing of the bill and the said Government Order as also for further
H classification of the hotel, as industrial units.
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 763
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

By reason of a judgment and order dated 16.2.2005, the A
said writ petition was disposed of directing that 18% interest
instead of 24% would be charged, if the demanded amount is
paid till 31.5.2005.
11. Intra court appeals were preferred thereagainst and
by reason of the impugned judgment, the same have been dis- B
_.... missed.
~
12. Mr. Patwalia, Mr. Venkataramani and Mr.
Krishnamoorthy, learned senior counsel appearing on behalf of
the appellants, would submit : c
(i) The concessions granted to the appellants should
not have been withdrawn from an anterior date.
(ii) The Board could not have directed application of
commerci,al tariff despite the fact that the hotels are D
still considered to be an industry.
(iii) In view of the provisions in sub-section (2) of Section
56 of the Electricity Act, 2003, no bill could have
been raised after a period of two years.
13. Mr. George, learned counsel appearing on behalf of E
the State Electricity Board and Mr. Sathish, learned counsel
appearing on behalf of the State of Kerala, would submit :
(a) 2003Act is not applicable in relation to the bills raised
under the Electricity (Supply) Act, 1948. F
(b) The impugned order dated 26.9.2000 is not
retrospective in operation. In any event, the State
has the requisite jurisdiction to stop grant of
concession even with retrospective effect.
G
(d) No foundational fact having been laid to establish
the plea of promissory estoppel, the same is not
available to the appellants particularly when they had
entered int'J a contract with the Board for which the
bills were to be raised on the basis of commercial H
764 SUPREME COURT REPORTS [2008] 9 S.C.R.

A tariff. ...
(e) Appellants having filed writ petitions after a long time,
the impugned judgment should not be interfered with.
14. Indisputably, by reason of the impugned Government
B Order, the benefit of one of the concessions made available to
the appellants by reason of the Government Order dated
11. 7.1996 had been taken away. The core question which arises
....
~
for our consideration is whether the said Government Order
dated 26.9.2000 is reasonable having been given retrospec-
c tive effect and retroactive operation.
15. Tourism was declared to be an industry. The wide range
of concessions as noticed hereinbefore, inter alia, covered elec- :
tricity and water charges. It is not a case where some exemp-
tions or concessions were to be given for a specific period or
D as a one time measure. No time limit was fixed for applicability
in respect of the policy decisions. Pursuant thereto long term
investments might have been made. It is not based on a prin-
ciple of giving benefit with a view to facilitate the initial growth of
the industry. It was not based on any formula or criteria to evalu-
E ate the realization of the object of grant of such concession over
a period. It was an open ended offer. It must, therefore, be held
that the Government was satisfied that the need was to grant
concession if not permanently, at least for a long time.
16. There cannot be any doubt whatsoever that a policy
F decision can be reviewed from time to time. It is also beyond
any doubt that the concessions granted can be withdrawn in
•"
public interest.
Indisputably, the State is also entitled to change or alter
the economic policies. Appellants do not have any vested right
G
to enjoy the concessions granted to them forever, particularly
when the Board is constituted and incorporated under the pro- ~

visions of Electricity (Supply) Act, 1948. Any policy decision
adopted by the State would not be binding on the Seard, save
"'
and except provided for in the Act. The Board being an inde-
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 765
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

pend~nt entity, the duties and functions of the Board vis-a-vis A
the State are enumerated in the Act. The Board, however, would
be bound by any direction issued by the State Government on
questions of policy. A dispute which may arise as to whether a
question is or not a question of policy involving public interest,
Central Government is the final arbiter. The policy decision B
adopted by the State on the basis whereof the Board felt obli-
_..
gated to grant electrical connection in favour of the appellants
on the basis of industrial tariff must, therefore, be understood in
the context of Section 78A of the 1948 Act. What is binding on
the Board is the policy of the State. The direction of the State
was to apply a particular category of tariff to the appellants. Such
c
directions could hcive been withdrawn while making another
tariff. The State indisputably has the power to grant subsidy from
its own coffer instead of directing the Board to grant conces-
sion.
D
.)>(
17. It is now a well settled principle of law that the doctrine
of promissory estoppel applies to the State. It is also not in dis-
pute that all administrative orders ordinarily are to be consid_-
ered prospective in nature. When a policy decision is required
to be given a retrospective operation, it must be stated so ex- E
pressly or by necessary implication. The authority issuing such
direction must have power to do so. The Board, having acted
pursuant to the decision of th~ State, could not have taken a
decision which would be violative of such statutorydirections .
.. ,..
15.5.1999 was fixed as the cut off date by the Board. It, by F
itself, could ngt have done so. But the State for issuing the GO
dated 26.9.2000 could have fixed the said cut off date on its
own. We although do not agree that by granting retrospectivity
to the said order, the entirety of the Government Order should
be set aside the same or per se would be held to be unreason- G
able, but what we mean to say is that it could be given effect to
~ only from the date of the order, i.e., prospectively and not from
an anterior date, i.e., retrospectively.
18. It was held in Lohia Machines Ltd. and Anr. v. Union
H
766 SUPREME COURT REPORTS [2008] 9 S.C.R.

A of India (UOI) and Ors. [(1985) 2 SCR 686] :
"On the other hand it is quite clear that if the relief granted
is to be withdrawn with retrospective operation from 1972
the assessees who have enjoyed the relief for all those
years will have to face a very grave situation. The effect of
B the withdrawal of the relief with retrospective operation
will be to impose on the assessee a huge accumulated
->
financial burden for no fault of the assessee and this is
bound to create a serious financial problem for the
assessee. Apart from the heavy financial burden which is
c likely to upset the economy of the undertaking, the
assessee will have to face other serious problems. On the
basis that the relief was legitimately and legally available
to the assessee, the assessee had proceeded to act and
to arrange its affairs. If the relief granted is now permitted
D to be withdrawn with retrospective operation, the assessee
may be found guilty of violation of provisions of other
statutes and may be visited with penal consequences ... "
Yet again in M/s. Indian Metals and Ferro Alloys Ltd. &
Anr. v. State of Orissa & Ors. [(1987) 3 SCC 189], it was opined:
E
"25 ... we hold that the High Court was not right in observing
that the orders under Section 22-B of the Act imposing
restrictions on consumption of power could not legally and
validly be passed by the Government "with retrospective
F effect" in the middle of a water year. But the position ,..,,
regarding disallowance of clubbing stands on an entirely
different footing. If a consumer had been allowed the benefit
of clubbing previously, that benefit cannot be taken away
with retrospective effect thereby saddling him with heavy
financial burden in respect of the past period where he
G
had drawn and consumed power on the faith of the orders
extending to him the benefit of clubbing ... "
19. It is not necessary for us to notice a large number of
decisions on promissory estoppel as the principle thereof has
H recently been noticed by this Court in Southern Petrochemical
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 767
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

Industries Co. Ltd. v. Electiicity Inspector & Etio & Ors. [(2007) A
5 sec 447] wherein it was stated :
"We are also unable to agree with Mr. Andhyarujina that
exemption from tax is a mere concession defeasible by
the Government and does not confer any accrued right to
the receipient. Right of exemption with a valid notification 8
issued gives rise to an accrued right. It is a vested right.
Such right had been granted to them permanently.
"Permanence" would mean unless altered by statute. Thus,
when a right is accrued or vested, the same can be taken
away only by reason of a statute and not otherwise. Thus, C
a notification which was duly issued would continue to
govern unless the same is repealed."
It was further held :
"126. This Court distinguished its earlier decision in D
Kasinka Trading v. Union of lndia 55 whereupon Mr
Andhyarujina placed strong reliance, in the following terms:
"40. The case of Kasinka Trading v. Union of India
cited by the appellant is an authority for the
proposition that the mere issuance of an exemption E
notification under a provision in a fiscal statute such
as Section 25 of the Customs Act, 1962, could not
create any promissory estoppel because such an
exemption by its very nature is susceptible to being
revoked or modified or subjected to other conditions. F
In other words, there .is no unequivocal
representation. The seeds of equivocation are
inherent in the power to grant exemption. Therefore,
an exemption notification can be revoked without
falling foul of the principle of promissory estoppel. It G
would not, in the circumstances, be necessary for
the Government to establish an overriding equity in
its favour to defeat the petitioner's plea of promissory
estoppel. The Court also held that the Government
of India had justified the withdrawal of exemption H
768 SUPREME COURT REPORTS (2008] 9 S.C.R.

A notification on relevant reasons in the public interest.
Incidentally, the Court also noticed the lack of
established prejudice to the promises when it said :

'The burden of customs duty, etc. is passed on
to the consumer and therefore the question of
B the appellants being put to a huge loss is not
understandable.' )I.
56
(See also Shrijee Sa/es Corpn. v. Union of lndia and •
STO v. Shree Durga Oil Mills) We do not see the relevance
c of this decision to the facts of this case. Here the
representations are clear and unequivocal".''

In LML Ltd. v. State of UP & Ors. (2007 (14) SCALE 469],
this Court opined :
"38. Those suppliers, who keeping in view of their capacity
D
·to supply uninterrupted electrical energy had made a
representation and pursuant thereto the consumers had 'f.

altered their position, cannot be permitted to take a different
stand as the doctrine of promissory estoppel would apply
against them. The said doctrine is premised on the conduct
E
of party making a representation to the other so as to
enable him to arrange its affairs in such a manner as if the
said representation would be acted upon. It provides for
a cause of action. It need not necessarily be a defence."

F Yet again in U. P Power Corporation Ltd & Anr. v Sant 4.

• Steel & Alloys (P) Ltd. & Ors. [2007 (14) SCALE 36], it was
held:
"In this background, in view of various decisions noticed
above, it will appear that the Court's approach in the matter
G of invoking the principle of promissory estoppel depends
on the facts of each case. But the general principle that
emerges is that once a representation has been made by ~
.
one party and the other party acts on that representation
and makes investment and thereafter the other party
H resiles, such act cannot stated to be fair and reasonable.:
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 769
ELECTRICITY BOARD & ORS. [S.B. SINHA, J.)

When the State Government makes a representation and A
invites the entrepreneurs by showing various benefits for
encouraging to make investment by way of industrial
development of the backward areas or the hill areas, and
thereafter the entrepreneurs on the representations so
made bona fidely make investment and thereafter if the B
State Government resile from such benefits, then it certainly

- is an act of unfairness and arbitrariness. Consideration of
public interest and the fact that there cannot any estoppel
against a Statute are exceptions."

In State of Orissa & Ors. V. Mangalam Timber Products C
Ltd. [(2004) 1 SCC 139], a Three Judge Bench of this Court,
held:

" ... The State Government having persuaded the
respondent to establish an industry and the respondent
0
having acted on the solemn promise of the State
Government, purchased the raw material at a fixed price
and also sold its products by pricing the same taking into
consideration the price of the raw material fixed by the
State Government and supplied; the State Government
cannot be permitted to revise the terms for supply of raw E
material adversely to the interest of the respondent and
effective from a back date and place the respondent in a
situation which it will not be able to resolve. The respondent
could not have revised its price from a back date and
recovered it from innumerable consumers to whom its F
finished products were supplied at a fixed price."
20. Our attention, however, has been drawn to a decision
of this Court in Kasinka Trading & Anr. v. Union of India & Anr.
[(1995) 1 SCC 274). Therein the power of the State to change G
its policy decision in public interest was emphasized. It was
held that the power which can be used for grant of concession,
namely, Section 25(1) of the Customs Act itself is the source to
rescind the earlier notification, stating :
"Since, the notification had been issued under Section H
770 SUPREME COURT REPORTS [2008] 9 S.C.R.

A 25(1) of the Act, the very same power was available to the
authority for rescinding or modifying that notification and
appellant ought to have known that the said notification
was capable of or liable to be revoked, modified or
rescinded at any time even before the expiry of 31.3.1981
B if the 'public interest' so demanded. To hold that after the
Government had issued the Notification No.66 of 1979 .~

indicating that it was to remain operative till 31.3.1981, it
could not be rescinded or modified before the expiry of
-
that date would amount to prohibiting the Government from
c discharging its statutory obligation under Section 25(1) of
the Act, if it was satisfied that it was in the 'public interest'
to withdraw, modify or rescind the earlier notification. The
plain language of Section 25 of the Act is indicative of the
position that it is the public interest and public interest
alone which is the dominant factor. It is not the case of the
D
appellants that the withdrawal of Notification No.66 of 1979 )l,

by the impugned notification was not in 'public interest'.
Their case, however, is that relying upon the earlier
notifications they had acted and the Government should
not be permitted to go back on its assurance as otherwise
E they would be put to huge loss. The courts have to balance
the equities between the parties and indeed the courts
would bind the Government by its promise 'to prevent
manifest injustice or fraud'."
.4,

F It was further held :
"23. The appellants appear to be under the impression
that even if, in the altered market conditions the continuance
of the exemption may not have been justified, yet,
Government was bound to continue it to give extra profit
G to them. That certainly was not the object with which the
notification had been issued. The withdrawal of exemption ~

"in public interest" is a matter of policy and the courts
would not bind the Government to its policy decisions for '""
all times to come, irrespective of the satisfaction of the
H Government that a change in the policy was necessary in
...
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 771
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. )

the "public interest". The courts, do not interfere with the A
fiscal policy where the Government acts in "public interest"
and neither any fraud or lack of bona tides is alleQed
much less established. The Government has to be left
free to determine the priorities in the matter of utilisation
of finances and to act in the public interest while issuing B
or modifying or withdrawing an exemption notification
under Section 25(1) of the Act."

21. We are not concerned with the exercise of a statutory
power in this case. We are concerned with issuance of a direc-
tion by the State which is binding on the Board as also how and C
to what extent it can be rescinded.

22. We may, however, notice that in Motilal Padampat
Sugar Mills v. State of UP [(1979) 2 SCR 641, this Court held:
"Public bodies are as much bound as private individuals D
to carry out representations of facts and promises made
by them, relying on which other persons have altered their
position to their prejudice
* * *
E
If our nascent democracy is to thrive different standards of
conduct for the people and the public bodies cannot
ordinarily be permitted. A public body is, in our judgment,
not exempt from liability to carry out its obligation arising
out of representations made by it relying upon which a F
citizen has altered his position to his prejudice."
23. Another Bench in Jit Ram v. State of Haryana [(1980)
3 SCR 689) took a different view. Jit Ram was overruled in
Union of India v. Godfrey Philips India Ltd. Ltd. [(1985) 4 SCC
369]. G
24. If the doctrine of promissory estoppel applies for the
purpose of enforcing the concession granted in favour of entre-
preneurs, it can be withdrawn, inter alia, in public interest. De-
spite absence of an overriding public interest, however, although H
772 SUPREME COURT REPORTS [2008] 9 S.C.R.

A a different policy decision can be taken but therefor adequate
notice should be given. It was so held in Shrijee Sales Corpo-
ration & Anr. v. Union of India [(1997) 3 SCC 398] in the follow-
ing terms:
"Once public interest is accepted as the superior equity
B which can override individual equity, the principle should
b~ applicable even in cases where a period has been
indicated. The Government is competent to resile from a
promise even if there is no manifest public interest
involved, provided, of course, no one is put in any adverse
c situation which cannot be rectified. To adopt the line of
reasoning in Emmanuel Ayodeji Ajay v. Briscoe quoted
in M.P Sugar Mills even where there is no such overriding
public interest, it may still be within the competence of the
Government to resile from the promise on giving
D reasonable notice which need not be a formal notice,
giving the promise a reasonable opportunity of resuming
his position, provided of course, it is possible for the
promise to restore the status quo ante. If, however, the
promise cannot resume his position, the promise would
E become final and irrevocable."

The same principle was reiterated in Sa/es Tax Officer &
Anr. v. Shree Durga Oil Mills & Anr. [(1998) 1 SCC 572].
25. In Pawan Alloys & Casting Pvt. Ltd. v. UP State E/ec-
F tricity Board & Ors. [(1997) 7 SCC 251], it was held: .4. ..

"60. So far as Point No. 3 is concerned the appellants are
on a weaker footing. It is true that by earlier notifications
dated 29-10-1982, 13-7-1984 and 28-1-1986 the scheme
of incentives by way of development rebate of 10% was
G continued to be offered to new industries to be established
in the plains of State of U.P. Identically worded Item 9 in
the earlier notifications and Item 8 in the last notification ..(
dated 28-1-1986 had continued the said incentive scheme.
By virtue of the last notification of 28-1-1986 it was clearly
H laid down by the Board that all new industries which might
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 773
ELECTRICITY BOARD & ORS. [S.B. SINHA, J]
.4. be established on and after 28-1-1986 will earn this A
development rebate for the three years' period from the
date of commencement of supply of electricity. It was also
provided that all the existing new industries which might
have earlier been established before 28-1-1986 and which
had still some part of unexpired period of three years of B
development rebat.e available with them also were given

~
• the continued benefit of the development rebate for the
unexpired period from 1-2-1986. What the impugned
notification of 31-7-1986 sought to do was to delete this
first para of Item 8 of the notification of 28-1-1986. The c
result was that from 1-8-1986 whatever unexpired period
for getting development rebate of 10% was available with
the new industries covered by the sweep of the said
notification, got withdrawn. It could not be said and it is
also not the case of the respondent-Board that in the light
D
of the notification of 31-7-1986 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% E
was available to the existing new industries on 31-7-1986,
they would lose that benefit of development rebate for the
rest of the unexpired period with effect from 1-8-1986
.. ,)I.
onwards. Hence it is not possible to agree with the
contention of learned counsel for the appellants that the F
said notification had any retrospective effect. It was purely
prospective and had resulted into two consequences -
(1) any new industry which entered into an agreement with
the Board for supply of electricity for the first time on and
after 1-8-1986 could not get the benefit of incentive of G
10% development rebate; and (it) all existing new industries
"'1:> which were armed with the guarantee of 10% development
rebate under the earlier notifications and had unexpired
period out of the three years from the date of earlier
commencement of supply of electricity to their concerns H
774 SUPREME COURT REPORTS [2008] 9 S.C.R.

~
A lost the benefit for that unexpired period which otherwise
would have been available to them from 1-8-1986 onwards
till the entire three years' period which had already
commenced would have been over. Both these effects of
the notification of 31-7-1986 were purely prospective in
B character and had no retrospective effect. Consequently
it cannot be said that the said notification was liable to be ~
struck down on the score of being retrospective in nature.
The third point for consideration, therefore, is answered in
the negative."
c Similar view has been taken in Bannari Amman Sugars
Ltd. v. Commercial Tax Officer & Ors. [(2005) 1 SCC 625];
Ku/deep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702];
and MP Mathur & Ors. v OTC & Ors. [(2006) 13 SCC 706].
26. The law which emerges from the above discussion is
D
that the doctrine of promissory estoppel would not be applicable 'I'~

as no foundational fact therefor has been laid down in a case of
this nature. The State, however, would be entitled to alter, amend
or rescind its policy decision. Such a policy decision, if taken in
public interest, should be given effect to. In certain situations, it
E may have an impact from a retrospective effect but the same by
itself would not be sufficient to be struck down on the ground of
unreasonableness if the source of power is referable to a stat-
ute or statutory provisions. In our constitutional scheme, how-
.6
ever, the statute and/or any direction issued thereunder must ....
F be presumed to be prospective unless the retrospectivity is in-
dicated either expressly or by necessary implication. It is a prin-
ciple of rule of law. A presumption can be raised that a statute
or statutory rules has prospective operation only.
27. The State of Kerala in this case did not grant any con-
G
cession by itself. The Central Government took a larger policy
~4
of treating the tourism as an industry. A wide range of conces-
sions were to be granted by way of one time measure; some of
them, however, had a recurring effect. So far as grant of ben-
efits which were to be recurring in nature, the State exercises
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 775
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

its statutory power in the case of grant of exemption from pay- A
ment of building tax wherefor it amended the statute. It issued
directions which were binding upon the Board having regard to
the provisions contained in Section 78A of the 1948 Act. The
Board was bound thereby. The Board, having regard to its fi-
nancial constraints, could have brought its financial stringency B
.A to the notice of the State. It did so. But the State could not have
r taken a unilateral decision to take away the accrued or vested
right. The Board's order dated 11.10.1999 in law could not have
been given effect to. The Board itself kept the said notification
in abeyance by reason of order dated 8.11.1999. c
Appellants, indisputably, continued to derive the benefits
in terms of the original order. They obtained certificates of clas-
sification. It is on the aforementioned context, the question as
regards construction of the impugned notification dated
26.9.2000 arises. Ex facie, the said policy decision could not D
be given a retrospective effect or retroactive operation. The
State was not exercising the power under any statute to grant or
withdraw the concession. It was exercising its statutory power
of issuing direction. It is, therefore, a statutory authority. The 1948
Act does not authorize the State to issue a direction with retro- E
spective effect. The Board, therefore, could only give prospec-
tive effect to such directions in absence of any clear indication
contained therein. By reason of withdrawal of concession with
. ).
retrospective effect, the accrued right of the appellants had been
affected. In Ku/deep Singh v. Govt. of NCT of Delhi. [(2006) 5 F
SCC 702], this Court held :
"In a case of this nature, where the State has the exclusive
privilege and the citizen has no fundamental right to carry
on business in liquor, in our opinion, the policy which would
be applicable is the one which is prevalent on the date of G
grant and not the one, on which the application had been
filed. If a policy decision had been taken on 16.9.2005 not
to grant L-52 licence, no licence could have been granted
after the said date."
H
776 SUPREME COURT REPORTS [2008] 9 S.C.R.

......
A We, however, are not concerned with a similar situation.

28. However, in Ramchandra Murarilal Bhattad & Ors. v.
State of Maharashtra & Ors. [(2007) 2 SCC 588], it was held :

"64. It is not a case where the court is called upon to
B exercise its equity jurisdiction. It is also not a case where
ex facie the policy decision can be held to be contrary to A
any statute or against a public policy. A policy decision 1

may be subject to change from time to time. Only because
a change is effect, (sic) the same by itself does not render
c a policy decision to be illegal or otherwise vitiated in law."

29. We, therefore, are of the opinion that the impugned
GO dated 26.9.2000 must be held to have a prospective op-
eration and not a retrospective operation. That view would save
it from being vulnerable to the challenge of being hit by Article
D 14 of the Constitution of India.
't--
30. We, however, are not in a position to accept the con-
tention that the Bills could not have been issued having regard
to sub-section (2) of Section 56 of the Act. Appellants herein
have incurred liabilities.
E
Sub-section (5) of Section 185 of the Electricity Act, 2003
reads, thus:

"(5) Save as otherwise provided in sub-section (2), the
mention of particular matters in that section, shall not be ~
4

F held to prejudice or affect the general application of section
6 of the General Clauses Act, 1897 (10 of 1897), with
regard to the effect of repeals."
Whereas the bills are issued only in respect of the dues
G arising in terms of the law as was applicable prior to the com-
ing into force of 2003 Act. Sub-section (2) of Section 56 shall
apply after the said Act came into force. The Board could have ~-
even framed a tariff in terms of the provisions appended to
Section 61 of the Act. Appellants incurred liability to pay the bill.
The liability to pay electricity charges is a statutory liability. The
H
KUSUMAM HOTELS (P) LTD. v. KERALA STATE 777
ELECTRICITY BOARD & ORS. [S.B. SINHA, J. ]

Act provides for its consequences. Unless, therefore, the 2003 A
Act specifically introduced, the bar of limitation as regards the
liability of the consumer incurred prior to coming into force of
the said Act. In our opinion, having regard to Section 6 of the
General Clauses Act, the liability continues. [See Southern Pet-
rochemical Industries Co. Ltd. v. Electricity Inspector and B
E. Tl.O. and Ors. [(2007) 5 sec 447].
31. We, therefore, are of the opinion that the High Court
was not correct in its view to the aforementioned extent. The
judgment of the High Court is, thus, set aside to the aforemen-
tioned extent. The appeals are allowed with costs. Counsels C
fee assessed at 25,0001- (Rupees five thousand only) in each
appeal.
CIVIL APPEAL NO. 106 OF 2005
32. Board has preferred this appeal only againstgrant of D
instalments in favour of the respondents. The contention of Mr.
George that the High Court could not have waived the provi-
sions of interest on the delayed payment under the tariff cannot
be accepted. In all other cases, the High Court directed that
18% interest would be payable following the decision of the Court E
in Kera/a State Electricity Board through its Special Officer
(Revenue) &Anr v. M.R.F Ltd. [(1996) 1SCC597]. The same
principle would apply in this case also but the bill having been
raised only in 2003, the question of charging any interest there-
upon from a retrospective date would not arise. F
33. This appeal is, thus, dismissed. However, there shall
be no order as to costs.
B.B.B. Appeals disposed of.