Holding

The Board is bound by its promise and estopped from prematurely withdrawing the development rebate; the agreements do not bar the challenge; the 1986 notification is prospective; the Board must refund the rebate without interest.

Summary

The Uttar Pradesh State Electricity Board, exercising powers under Section 49 of the Electricity (Supply) Act, 1948, issued three notifications promising a 10% rebate on electricity charges to new industries for three years. It later withdrew this incentive by a notification dated 31 July 1986. The appellants, who had relied on the promise and paid the rebate charges, challenged the withdrawal. The Supreme Court held that the Board was estopped by the doctrine of promissory estoppel from withdrawing the rebate before the three‑year period expired, that the standard‑form agreements did not bar the challenge, and that the 1986 notification was prospective, not retrospective. Consequently, the Board must refund the rebate amounts already collected, but no interest was awarded. The appeals were allowed, setting aside the High Court judgment, except for two specific appeals which were dismissed.

Issues considered

Whether the Board is estopped by promissory estoppel from withdrawing the 10% development rebate before the three‑year period.
Whether the agreements entered into by the appellants with the Board preclude them from challenging the impugned notification.
Whether the notification dated 31 July 1986 is retrospective in nature.
Whether the appellants are entitled to a refund of the rebate charges and interest.

Legislation cited

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

Subjects

promissory estoppelelectricity supplydevelopment rebatestatutory authoritycontractual agreementretrospective notificationrefundadministrative lawpublic interestequity

Judgment

A M/S. PAWAN ALLOYS AND CASTING PVT. LTD.,
MEERUT ETC. ETC.
v.
U.P. STATE ELECTRICITY BOARD AND ORS.

AUGUST 5,. 1997
B
(S.B. MAJMUDAR AND K.T. THOMAS, JJ.)

Electricity (Supply) Act 1948 : Section 49--Notification by Board
promising 10% rebate on electricity consumption to new industries for a period
C of three years-Prematurely withdrawn by notification dated 31st July,
1986-High Court holding that though Board is estopped from withdrawing
the rebate on the principle of proinissory estoppel, appellalits ba"ed from
challenging the notification in view of the agreements ·entered into by them
with the Board for revised tariff rates-On appeal held the Board can be
D pinned down to its promise on the doctrine of promissory estoppel-Notifica-
tion not withdrawn on the ground of general public interest but solely for
commercial interest of the Board-Agreement to revise general rates of charges
has nothing to do with· development rebate-Appellants not bamd from chal-
lenging the impugned notification-Notification is purely prospective in na-
ture-Appellants who have already paid the development rebate charges are
E entitled to refund-Claim of interest rejected-Administrative law-Promissory
estoppel.

Constitution of lndia, 1950 .'

Article 142-Jurisdiction-Exercise of-Could be invoked in the
F peculiar facts and-circumstances of the given case.
Appellants were consumers of electricity supplied by the respondent-
Board. The respondent-Board in exercise of its powers under Section 49
of the Electricity (Supply) Act; 1948 issued notifications promising new
industrialists seeking to establish industries in the State, that on the
G charges of electricity consumed by them they will be given 10% rebate for
a period of three years from the date of commencement of supply of
electricity to them for the first time. Subsequently the respondent-Board
by notification dated 31st July 1956 withdrew the above concession. On
challenge, the High Court, while dismissing the petition held that (i) the
H respondent-Board was estopped by virtue of doctrine of promissory estop-
266
PAWAN ALLOYS AND CASTING PVI'. LTD. v. U.P. STATEELECTRICITYBD.267

pel from withdrawing the development rebate before completion of the A
period of three years; (ii) the appellants were barred from challenging the
impugned notification in view of the agreement entered into by them with
the Board for revision of tariff rates at the time of taking electric supply
and thus the impugned notification was not illegal; and (iii) the impugned
notification is not retrospective in nature.
B
Being aggrieved by the decision of the High Court the appellants
have filed the present appeals.

The appellants conten.ded that the Board was bound by the principle
of promissory estoppel to continue development incentive for a period of C
three years and consequently the Board could not have withdrawn the said
rebate by impugned notification; the High Court erred in holding that they
were barred from challenging the impugned notification on the ground
that they have entered into an agreement with the Board while getting
electricity supply; the impugned notification was liable to be struck down
being retrospective in nature. D

The respondent-Board contended that there was no promise held out
by them and they had only exercised statutory or quasi legislative powers
and thus there could not be any promissory estoppel against such an
exercise of power; it was open to the Board to withdraw the rebate on the E
ground of public policy and doctrine of promissory estoppel cannot be
pressed in service; the appellants were barred by the contractual obligation
flowing from the agreement entered into by them with the Board while
taking electric supply and were thus barred from challenging the im-
pugned notification.
F
Allowing the appeals, this Court

HELD : 1.1. The respondent-Board can be pinned down to its
promise on the doctrine of promissory estoppel. The respondent-Board
must be treated to be estopped from prematurely withdrawing the incen- G
tive development rebate made available to the appellant industries by
Issuing the impugned notification dated 31st July, 1986. (301-F]

1.2. If a statutory authority or an executive authority of the State
functioning on behalf of the State in exercise of its legally permissible
powers, has held out any promise to a party who relying on the same has H
268 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A changed its position not necessarily to its detriment and if this promise
does not offend any provision of law or does not fetter any legislative or
quasi- legislative power inhering in the promisor, then on the principle of
promissory estoppel the promisor can be pinned down to the promise
offered by it by way of representation containing such promise for the
B benefit of the promisee. (279-B-C]

State of H.P. and Ors. v. Ganesh Wood Products and Ors., (1995] 6
sec 363, referred to.
1.3. The Board had held out a promise by way of representation to
C the new industrialists on the basis of the clear recitals in three notifica-
tions. The said notifications were issued by the Board in exercise of powers
under Section 49 of the Electricity (Supply) Act notifying revised rate
schedule appended to the notifications and they are to apply to all persons
in respect of supply of electricity throughout the State directly served by
the Board. These notifications clearly contained a representation by the
D Board to the consumers, who were to establish new industrial units in the
territories of the State in which the Board was to supply electricity; that
on the total bill of electricity consumed by them during the period of first
three years of their taking supply they will be getting a rebate of 10% on
the total amount of such bills for electricity consumption. This Court
E agrees with the finding of the High Court that by these notifications the
Board had clearly held out a promise to these new industries and as these
new industries had admittedly got established in the region where the
Board was operating, acting on such promise, the same in equity would
bind the Board. Such a prontise was not contrary to any statutory
provision but on the contrary was in compliance with the directions issued
F under Section 78A of the Act. (281-B; 282-F; 283-H; 284-A]

State of Madhya Pradesh & Ors. v. Orient Paper Mills Ltd., (1990] 1
SCC 176; Amrit Banaspati Co. Ltd. and Anr. v. State of Punjab and Anr.
(1992] 2 SCC 411; Bihar State Electricity Board and Anr. v. Usha Martin
G Jndust1ies and Anr., (1997] 5 sec 289, referred to.

Mis. Ashok Soap Fact01y and Anr. v. Municipal C01poration of Delhi
and Ors., [1993] 2 SCC 37, distinguished.

1.4. It is also obvious that when new industries are attracted in the
H region, the Board would be able to find more and more customers for the
PAWAN ALLOYS AND CASTING PVT. LTD. v. U.P. SfATE ELECTRICITY BD. 269

electricity sought to be sold by it to these consumers of electricity who A
would be taking high voltage electric power and, therefore, would be paying
higher tariff by way of HVl and HV2. Thus such an incentive scheme would
benefit not only tht! entire State but also the Board itself. It cannot be said
that these three notifications did not hold out any promise or any repre•
sentation to the general public enabling the new industries to get estab- B
lished acting on the said representation. [285-B-C]

1.5. The impugned withdrawal of notification was not backed up by
any demands of public interest which would outweigh the individual inter·
ests of the appellant-promisee. It is not the case of the respondent-Board
that it sought to withdraw the incentive development rebate made available C
by it to the new industries on the ground of any public interest. The Board
felt it necessary to recall this development rebate as a high power Tariff
Realisation Committee advised the Board for maintaining its profits, to
withdraw this rebate and the Board had acted in the light of the said
Report. It, therefore, becomes clear that ·not on the ground of general D
public interest but solely on the ground of commercial interest the notifica·
tion has been withdrawn. Thus when no public interest was sought to be
pressed in service by the Board for withdrawal of this incentive rebate, the
equity which had arisen in favour of the appellants remained untouched
and undisturbed by any overwhelming and superior equity in favour of the
Board entitling it to withdraw this development rebate in a premature E
manner leaving these promises high and dry before the requisite period of
three years earlier guaranteed to them by way of development rebate had
got exhausted. [296-D-H; 297-A-B; 298-F]

Kasinka Trading and Anr. v. Union of India and Anr., [1995] 1 SCC F
274; Shrijee Sales Corporation and Anr. v. Union of India, [1997] 3 SCC 398,
held inapplicable.

1.6. The respondent-Board has not given any reasonable opportunity
to the appellants to resume their earlier position. Nor is it shown by the G
Board that it is possible for the appellant-promisees to restore the status
quo ante. Once the new industries were lured into establishing their fac- •
tories in the region catered to by the Board on being assured three years
guaranteed incentive of development rebate of 10% on their total bills or
electricity charges and acting on the same once they had established their
industries and spent large amount for constructing the infrastructure and H
270 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A for employing necessary labour and for purchasing raw material etc., it
would be almost impossible for them to restore the status quo ante and to
walk out midstream if the development rebate incentive was withdrawn for
the unexpired period out of the three years' guaranteed period of currency
of development rebate incentive. [299-A-C]

B 2.1. The High Court erred in holding that the appellants were barred
from challenging the impugned notification on account of agreement
entered into by them with the Board while taking electricity supply. The new
industrial units while signing the written agreements and agreeing to
Clause 7(a), (b) and (c) found in the standard contract forms had only
C undergone a formality of signing such agreements before the electric supply
could commence at their new units and such clauses only re-affirm the
statutory power of the Board under Section 49(1) of the Act and had no
thing to do with the scheme of incentive development rebate. They had not
voluntarily or by even remotest chance agreed to give up the benefit given
to them by clear representation held out by the Board as per Item 8 of the
D rate schedule in the light of the earlier three notifications promulgated by
the Board in exercise of its powers under Section 49 read with Section 78A
of the Act. They have neither expressly nor impliedly agreed that the Board
will have absolute power and discretion to withdraw this incentive of
development rebate at any time prior to the expiry of three years for which
E it was guaranteed to them by the earlier representation held out by the
Board and which representation resulted into promissory estoppel against
the Board and in favour of the appellants. As per clause 7(c) the Board
could revise upwards the general rates of electricity charges at any time it
liked. This had nothing to do with the scheme of incentive rebate. This
authority was clearly available to the Board as per clause 7(c) of the
F agreement read with Section 49 of the Act. But this increase of general tariff
0 rate would not adversely affect incentive available to new and infant in-
dustries. [314-E-F; G-H; 315-A-B; CJ

D. C.M. Ltd. and Anr. v. Assistant Engineer HMT Sub-Division, Rajas-
G than State Electricity Board, Kota andAnr., AIR (1988) Raj. 64, approved.

Chitty 011 Contracts 27th Ed. Vol. I 1994; Cheshire's Law of Contract,
12th Ed. 'Use of Standard f01m contracts' p. 21;Anson's Law of Contract 26th
Ed. page 136, referred to.

H 2.2. It would be totally absurd and incogruous to accept that the
PAWAN ALLOYS AND CASTING PVT. LTD. v. U.P. STATEELECTRICITYBD.271

Board on the one hand had given incentive to new industries by guaran· A
teeing development rebate of 10% on the total bill of consumption for a
period of three years and on the other hand the Board as per the agree·
ment with the appellant would be withdrawing immediately and simul·
taneously the said development rebate in exercise of its contractual powers
under clause 7(c) of the agreement. No businessman in his senses would B
ever agree voluntarily to such an absurd, incongruous and inconsistent
predicament. Consequently the provision of revision of general rates under
clause 7(c) of the agreement cannot be treated to be conferring any further
power on the Board to tinker with the development rebate provision within
the guaranteed period of three years. [313-E; G-H; 315-G·H]
c
3. The Notification dated 31st July 1986 was not retrospective in
nature. The said notification had resulted into two consequences; (i) any
new industry which entered into an agreement with the Board for supply
of electricity for the first time on and after 1st August, 1986 could not get
the benefit of incentive of 10% development rebate; and (ii) all existing new D
industries 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 lost the benefit for that une.xpired period which otherwise
would have beer. available to them from 1st August, 1986 onwards till the
entire three years' period would have been over. Both these effects of the
notification were purely prospective in character and had no retrospective E
effect. Consequently it cannot be said that the said notification was liable
to be struck down on the score of being retrospective in nature.
[316-H; 317-A-C]

4. The appellants who were not granted stay on recovery of develop· F
ment rebate charges and who have paid the disputed amount would be
entitled to the claim of refund from the Board. In case of applicants whose
industries are still running and continue to be consumers of electricity
from the Board, the amount of refund will be credited to their accounts
and their future bills of electricity may be adjusted by the Board from this G
credited account. But so far as those appellants who are no longer con·
somers of electricity from the Board, the Board will refund the disputed
development rebate charges collected from them within a period of three
,. months. However, on the peculiar facts and circumstances of the case the
claim of interest on the development rebate charges is rejected in exercise
of power under Article 142 of the Constitution of India. [319-E; 320-G] H
272 SUPREME COURT REPORTS [1997] SUPP. 3S.C.R.

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1710 of
1991 Etc. Etc.

From the Judgment and Order dated 26.11.90 of the Allahabad High
Court in C.M.W.P. No. 15380 of 1986.

B Rajiv Dhawan, Dushyant Dave, B. Sen, Rajiv Dutta, Vineet Mahesh-
wari, Ms. Naina, Anil Kumar Sangal, (Sunil Kumar Jain, Jatindra Kumar
Bhatia) for M/s. Jain Hansaria & Co., R. Santhanam, P. Venugopal, K.J.
John, Ms. Sandhya Goswami, Sunil Kumar Gupta, H.K. Puri, M.G.
Ramachandran, Sashi Bhushan, Anand Padmanabhan, Pramod Dayal,
C V.N. Koura, Paramjeet Binipal, (A. Mariarputham, Ms. Aruna Mathur) for
M/s. Aruna, Arputham & Co., T. Mahipal and Pradeep Misra for the
appearing parties.

The Judgment of the Court was delivered by

D S.B. MAJMUDAR, J. Leave granted in S.L.P. (C) No. 5355 of 1991.

In this group of appeals identical grievance is made by the appellants
who are consumers of electricity supplied by the respondent U.P. State
Electricity Board ('the Board' in short). Their grievance is that though by
notifications dated 29th October 1982, 13th July 1984 and 28th January
E 1986 the respondent-Board in exercise of its powers under Section 49 of
the Electricity (Supply) Act, 1948 (hereinafter referred to as 'the Act') had
held out a promise to new industrialists seeking to establish industries in
different parts of the State of Uttar Pradesh, that on the charges of
electricity consumed by them they will be given 10% rebate for a period
F of three years from the date of commencement of supply of electricity to
them for the first time, the respondent-Board had arbitrarily and prema-
turely withdrawn concession of the said rebate by a latter notification dated
31st July 1986 which is impugned in these proceedings. Various writ
petitions were filed in the High Court of Judicature at Allahabad challeng-
ing the said impugned notification. They were heard together by a Division
G Bench consisting of B.P. Jeevan Reddy, CJ (as he then was) and V.N.
Mehrotra, J. Diverse contentions were canvassed in support of the writ
petitions. In the forefront it was submitted that Board was bound on the
principle of promissory estoppel to continue the development rebate to
these new industries for a period of three years as indicated in the earlier
H notifications and consequently the Board could not have arbitrarily
PAWAN ALLOYS AND CASTING PVT. LTD. " U.P. STAIB ELECTRICITY BD. [S.B. MAJMUDAR. J.] 273

withdrawn the said development rebate prior to the expiry of three years' A
period available to the industries concerned under these earlier notifica-
tions. It was also contended .that in any case the impugned notification
applied prospectively and could not have any retrospective effect on earlier
existing new industries.

The respondent-Board on the other hand· opposed these contentions B
and submitted that all the writ petitioners-consumers had entered into
contracts by way of written agreements with the Board before taking
electricity supply at their premises and as per the terms of the said
agreements they had already subjected themselves to all future actions of
the Board by which the electricity tariff could be revised by the Board at C
any time and that would include even the development rebate which could
be withdrawn at any time at the Board's discretion as agreed to by all of
them. The Division Bench of the High Court in the impugned judgment
speaking through B.P. Jeevan Reddy, CJ., framed three common issues
covering these controversies between the parties as under :
D
"(a) Whether the Board i~ estopped from withdrawing the said
rebate before the completion of the 3/5 year period, by virtue of
the doctrine of promissory estoppel?

(b) Whether the agreement executed by the petitioners bars them E
from questioning the impugned notification?

(c) Whether the impugned notification has no application to ex-
isting consumers and does it apply to only those consumers who
receive the supply on or after 1.8.1986?"
F
After hearing the contesting parties through their advocates the High
Court on the first point came to the conclusion that the respondent-Board
was estopped by virtue of the doctrine of promissory estoppel from
withdrawing the development rebate before the completion of the period
of three years, however on the second point the Court came to the
conclusion that the writ petitioners were barred from questioning the G
impugned notification on the express terminology found in the agreements
entered into by them with the Board for supply of electricity and under
those agreements the Board was given full play to revise the tariff rates
which included development rebate also from time to time and consequent-
ly the impugned notification was not illegal. On the third issue it was held H
274 SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.

A that the notification dated 31st July 1986 could not be said to be retrospec-
tive. In the result the High Court by the impugned common judgment
dismissed all the writ petitions with the result that interim reliefs granted
earlier stood vacated.

While issuing notices in the Special Leave Petitions by an order dated
B 6th February 1991 a Bench of two learned Judges of this Court court
consisting of K.N. Singh and P.B. Sawant, JJ., stayed the recovery of late
payment surcharge dues but declined stay of recovery of development
rebate charges. Subsequently after hearing the contesting parties special
leave to appeal was granted in these matters and the stay of recovery of
C late payment surcharge was made absolute. We are informed that most of
the appellants have already, therefore, paid up disputed development
rebate charges to the respondent-Board. But the late payment surcharge
demand has remained stayed. It is also brought to our notice that in some
of the matters stay of recovery of development rebate charges has also
enured for their benefit as this Court granted stay of disconnection of
D electric supply due to non-payment of these charges.

At the final hearing of this group of appeals we heard Dr. Rajiv
Dhawan, learned senior counsel for the appellants and other counsel for
the appellants as well as Shri Dushyant Dave, learned· senior counsel for
E the respundent-Board in common as the question involved are identical in
all these matters. Accordingly all these appeals are being disposed of by
this common judgment.

Rival Contentions

F Dr. Dhawan, learned senior counsel appearing in Civil Appeal No.
1710 of 1991 for the appellant, learned counsel Shri Sunil Gupta appearing
in Civil Appeal Nos. 10186 and 10187 of 1995, learned counsel Shri R.
Santhanam appearing in Civil Appeal No. 2183 of 1991 and other learned
counsel appearing for remaining appellants who supported the contentions
G of the aforesaid counsel in support of the appeals before us submitted as
under:

That even though the High Court rightly held that the Board was
bound by principle of promissory estoppel in the light of the
diverse notifications issued by it from time to time granting incen-
H tive development rebate to the riew industries covered by these
•

. PAWAN ALLOYS AND CASTING PYr. LTD.'· U.P. STATEELEC!RJCITYBD. [S.B.MAJMUDAR,J.] 275
~·

notifications and consequently the impugned notification was hit A
by the principle of promissory estoppel, High Court erred on Issue
No. 2 when it took the view that the appellants could not derive

- ·any benefit from the decision on Issue No. 1 on the ground of
promissory estoppel as by the contractual obligations flowing from
the agreements entered into by them with the Board while getting B
electric supply for their industries, their challenge to the impugned
notification got barred. They also contended that the High Court
had also erred in taking the view that the impugned notification
was only prospective in nature and was not trying to withdraw the
development rebate in a retrospective manner.
c
Shri Dave, learned senior counsel appearing for the Board on the
other hand tried to support the final decision rendered by the High Court
dismissing the writ petitions, on the additional ground that the High Court
had erred in deciding Issue No. 1 against the Board. It was contended by
Shri Dave that there was no promise held out by the Board to any of the D
new industrialists by issuing earlier notification under Section 49 of the Act.
That the Board had exercised its statutory and quasi-legislative powers and
there could not be any promissory estoppel against such an exercise of
power and consequently nothing further survived in these proceedings. It
was alternatively contended by Shri Dave that in any case the High Court
was right when it took the view that the impugned notification could not E
be challenged by the appellants as they were bound by the contractual
obligations flowing from the agreements entered into by them with the
Board while taking electric supply for their industries and consequently
these appeals were liable to be dismissed also on that score. He further
submitted that whatever benefits might have accrued to the appellants prior F
to 1st August 1986, those benefits were prospectively withdrawn by the
Board by issuing the impugned notification and to that extent decision of
the High Court on Issued No. 3 could not be faulted. Shri Dave also
submitted that so far as the question of surcharge on late payment of
impugned development rebate is concerned it is not germane to the present G
controversy as the demand for late payment was raised by the Board after
the decision of the High Court and, therefore, strictly speaking the said
question would not arise from the judgment of the High Court and,
therefore, if the appellants have no case on merits regarding development
rebate, the question regarding payment of surcharge may be kept open.
Alternatively he contended that on the principle of restitution once the H
276 SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.
A appellants fail on merits, if his contentions on behalf of the Board on the
issue of promissory estoppel and contractual obligations of the appellants
are accepted, then the demand for surcharge should be permitted to be
effectuated with appropriate rate of interest as the Board could not recover
the same pending these appeals because of the interim relief granted by
B this Court. His argument on this aspect also covered the question of
restitution regarding payment of development rebate the recovery of which
had remained stayed in some of these appeals by an interim order of this
Court.

Learned counsel for the respective parties in support of their con-
C tentions pressed in service a series of decisions of this Court. Learned
counsel for the appellants Shri Gupta also relied upon observations found
in standard text books pertaining to Law of Contracts and also on a
decision of Rajasthan High Court in the case of D.C.M. Ltd. and Another
v.Assistant Engineer (HMT Sub-Division), Rajasthan State Electricity Board,
Kota and Another, AIR (1988) Rajasthan 64. We shall refer to these
D judgments and the relevant observations found in standard. text books on
Law of Contracts at an appropriate stage in latter part of this judgment.

Points For Consideration

In the light of the aforesaid rival contentions the following points
E arise for our consideration :
1. Whether the respondent-Board on the doctrine of promissory
estoppel was liable to be restrained from enforcing the im-
pugned notification dated 31st July 1986 against the appel-
lants so far as the unexpired period of three years available
F
to them under earlier notifications granting development
rebate was concerned.

2. Whether the appellants on account of agreements entered
into by them with the Board while taking supply of electricity
G for their industries were barred from challenging the im-
pugned notification of 31st July 1986.

3. Whether the impugned notification was having any retrospec~
tive effect.

H 4. If the appellants fail on merits, whether this Court in exercise
PAWAN ALLOYS AND CASTING PVT. LTD.,. U.P. STATEELECTR!Cf!YBD. [S.S. MAJMUDAR,J.] 277

of its powers under Article 142 of the Constitution of India A
on the peculiar facts and circumstances of these cases would
relieve the appellants of their obligation to pay the late
payment surcharge dues to the Board.

We shall deal with these points seriatim.
B
Point No. 1

It is now well settled by a series of decisions of this Court that the
State authorities as well as its limbs like. the Board covered by the sweep
of Article 12 of the Constitution of India being treated as 'State' within the C
meaning of the said Article, can be made subject to the equitable doctrine
of promissory estoppel in cases where because of their representation the
party claiming estoppel has changed the position and if such an estoppel
does not fly in the face of any statutory prohibition, absence of power and
authority of the promisor, is otherwise not opposed to public interest, and
also when equity in favour of the promisee does not outweigh equity in D
favour of the promisor entitling the latter to legally get out of the promise.

In this connection we may usefully refer to a decision of this Court
rendered in the case of State of H.P. and Others v. Ganesh Wood Products
and Others, (1995] 6 SCC 363. B.P. Jeevan Reddy, J. speaking for a Bench E
of two learned Judges of this Court made the following pertinent observa-
tions in this connection in paragraphs 54 and 55 of the Report :

"The doctrine of promissory estoppel is by now well recognised
in this country. Even so it should be noticed that it is an evolving
doctrine, the contours of which are not yet fully and finally demar- F
cated. It would be instructive to bear in mind what Viscount
Hailsham said in Woodhouse Ltd. v. Nigerian Produce Ltd., (1972)
AC 741 : (1972) 2 All ER 271 : (1972) 2 WLR 1090 -

'I desire to add that the time may soon come when the whole G
sequence of cases based upon promissory estoppel since the
war, beginning with Central London PropeTty Trust Ltd. v.
High Trees House Ltd. (1947) KB 130 : 62 TLR 557 : (1947)
UR 77 may need to be reviewed and reduced to a coherent
body of doctrine by the courts. I do not mean to say that they
are to be regarded with suspicion. But as is common with an H
278 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A expanding doctrine, they do raise problems of coherent ex-
position which have never been systematically explored."

Though the above view was expressed as far back as 1972, it is
no less valid today. The dissonance in the views expressed by this
Court in some of its decisions on the subject emphasises such a
B
need. The views expounded in Motila/ Padampat Sugar Mills Co.
Ltd. v. State of U.P., [1979] 2 SCC 409 : [1979] SCC (Tax) 144 was
departed from in certain respects in lit Ram Shiv Kumar v. State
of Haryana, [1981] l SCC 11 which was in turn criticised in Union
of India v. Godfrey Philips Indian Ltd.,[1985] 4 SCC 369 : [1986]
c SCC (Tax) 11. The divergence in approach adopted in Shri Baku/
Oil Industries v. State of Gujarat, [1987] 1 SCC 31 : [1987] SCC
(Tax) 74 and Poumami Oil Mills v. State of Kera/a, [1986] Supp.
SCC 728: [1987] SCC(Tax) 134 is another instance. The fact that
the recent decision in Kasinka Trading v. Union of India [1995] 1
D SCC 274 is being reconsidered by larger Bench is yet another
affirmation of the need stressed by lord Hailsham for enunciating
'a coherent body of doctrine by the courts'. An aspect needing a
clear exposition - and which is of immediate relevance herein - is
what is the precise meaning of the words 'the promisee ... alters
E his position', in the statement of the doctrine. The doctrine has
been formulated in the following words in Motilal padampat sugar
mills co. ltd. [1979] 2 sec 409 :

'The law may, therefore, now be taken to be settled as a
result of this decision, that where the Government makes a
F
promise knowing or intending th.at it would be acted on by
the promisee and, in fact, the promisee, acting in reliance on
it, alters· his position, the Government would be held bound
by the promise and the promise would be enforceable against
the Government at the instance of the promisee, not-
G withstanding that there is no consideration for the promise
and the promise is not recorded in the form of a formal
contract as required by Article 299 of the Constitution."

We may say at this ·stage that at the time the aforesaid decision was
H rendered, judgment of this Court in the case of Kasinka Trading and
PAWANALLOYSANDCASTING Pvr. LTD. v. U.P. STATEELECTRICITYBD. (S.B. MAJMUDAR,J.j 279

Another v. Union of India and Another, [1995] 1 SCC 274 was pending A
scrutiny before a larger Bench. Subsequently, the said decision came to be
confirmed by the decision of a Bench of three learned Judges of this Court
speaking through A.M. Ahmadi, CJ. in the case of Shrijee Sales Corporation
and Another v. Union of India, [1997] 3 SCC 398. We will refer to these
decisions in the latter part of this judgpient. Suffice it to say at this stage B
that if a statutory authority or an executive authority of the State function-
ing on behalf of the State in exercise of its legally permissible powers, has
held out any promise to a party who relying on th~ same bas changed its
position not necessarily to its detriment and if this promise does not offend
any provision of law or does not fetter any legislative or quasi-legislative
power inhering in the promisor then on the principle of promissory estop- C
pel the promisor can be pinned down to the promise offered by it by way
of representation containing such promise for the benefit of the promisee.

In order to decide whether the High Court in the impugned
judgment had rightly decided Issue No. 1 about promissory estoppel D
against the Board it is necessary to keep in view the nature of the claim
put forward by the learned counsel for the petitioners before the High
Court in support of their writ petitions. The same is noted in the impugned
common judgment. It will be profitable to extract the summary of the
contentions of the petitioners' counsel on their behalf before the High
Court as found from the judgement as under : E

"(1) That the three notifications dated 29.10.1982, 13.7.84 and
28.1.1986 amounted to representations by the Electricity Board to
the public at large, including the intending entrepreneurs. The
representation by the said notifications was meant to be acted F
upon. It held out a concession and an inducement. Believing and
acting upon the said representation, the petitioners established
new industries and obtained connections from the Electricity
Board. They were availing of the concession in terms of the said
notifications. The sudden withdrawal of the said concession under G
the impugned notification even before the completion of the three
year period (or the appropriate period, as the case may be) caused
grave prejudice to the petitioners. It increases the cost of produc-
tion and to that extent their products become less competitive. This
is a case where the doctrine of promissory estoppel is attracted H
280 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A and precludes the respondent Board from withdrawing the said
concession."

Shri Dave, learned senior counsel for the respondent- Board was, there-
fore, justified in saying that the representation alleged to have been held
B out by the Board to the new industries was sought to be culled out only
from the three notifications of 29th October 1982, 13th July 1984 and 28th
January 1986 and that it was not the case of the petitioners before the High
Court that any other representations by way of correspondence or
brochure or any handbills were held out by the Board to attract new
industries to establish themselves in the State of U .P. and to get electric
C power from the Board at concessional rates earning rebates as mentioned
in these notifications. It is, therefore, obvious that the appellants' case of
promissory estoppel must stand or fall on the basis of these notifications.

Learned senior counsel for the appellants joined issued on this point
D and submitted that in the writ petitions it was clearly averred by them that
the State of U.P. had taken a decision to attract new industries in the State
and, therefore, the State saw to it that appropriate incentives were being
offered as a package to these new industries. That consequently the State
Government in exercise of its statutory powers under Section 78A of the
Act had issued appropriate instructions to the Board and that is how the
E Board had come out with the scheme of rebates on the electricity bills
pertaining to electricity consumed by the new industries. In this connection
our attention was invited to a package of incentives and concessions offered
by the State to new industries, a copy of which was found annexed to S.L.P.
(C) No. 13827 of 1991 out of which Civil Appeal No. 3203 of 1991 arises.
F
Shri Dave, learned senior counsel for the Board in this connection
submitted that whatever might have been alleged by the writ petitioners in
their writ petitions before the High Court their clear case at the stage of
arguments before the High Court was confined to the ground of promissory
estoppel only against t.he Board and not against the State Government and
G that too based on the recitals in the three notifications mentioned earlier
and not dehors them. Therefore it is too late for the appellants to contend
as aforesaid before us in these appeals and they cannot be permitted to
make out such a new case which would require fresh investigation of facts
especially when the State is not a party to these proceedings in large
H number of appeals.
PAWANALWYSANDCASrlNGPVf.LTD.v. U.P.SfATEELECTRIClIYBD.(S.B.MAJMUDAR,J.] 281

Prima facie we find some' force i~ the aforesaid objection put forward A
by Shri Dave, learned senior counsel for the Board. However on a closer
scrutiny this objection falls through. It is of course true that whatever might
have been the wide canvass tried to be spread by the appellants before the
High Court in their pleadings at the stage of arguments as noted by the
High Court in the impugned judgment they confined their challenge to the B
impugned notification only on the solitary ground that the Board had held
out promise by way of representation to the new industrialists on the basis
of the clear recitals in the three notifications of 29th October 1982, 13th
July 1984 and 28th January 1986. They did not think it fit to support their
cases of promissory estoppel against the Board on any other material.
However it cannot be forgotten that the Board .is a supplier of electricity C
to consumers on charging appropriate sale price. It is thus a commercial
entity. It is not concerned with development of industries in the State. That
task is entrusted to the State concerned. If the latter with a view to giving
a fillip to new industries puts forward a scheme of incentives to new
industries, as a part of this package it can issue appropriate directions to D
the Board, its limb, under Section 78A of the Act to make this incentive
available to new industries to be established in the region covered by
Board's supply network of electric power. It is precisely what is done by
the Board at the behest of State Government. No estoppel is required to
be pleaded against the State as the latter has· not issued any notification
holding out such a promise. Nor ~as the State gone back upon it. We must, E
therefore, examine the challenge of the appellants on the question of
promissory estoppel against the Board only from this aspect. We will now,
therefore, address ourselves to this moot question.

It is true that all the three notifications dated 29tn October 1982, 13th F
July 1984 and 28th January 1986 were issued by the Board in exercise of
its statutory power under Section 49 of the Act. The said Section reads as
under:

"49. Provision for the sale for electricity by the Board to persons other G
than licencees. - (1) Subject to the provisions of this Act and of
regulations, if any, made in this behalf, the Board may supply
electricity to any person not being a licensee upon such terms and
conditions as the Board thinks fit and may for the purposes of such
supply frame uniform tariffs. H
282 SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.

A (2) In fixing the uniform tariffs, the Board shall have regard to all
or any of the following factors namely :

(a) the nature of the supply and the purposes for which it is
required;

B (b) the co-ordinated development of the supply and distribu-
tion of electricity within the State in the most efficient and
economical manner, with particular reference to such
development in areas not for the time being served or ade-
quately served by the licensee;

c (c) the simplification and standardisation of methods and
rates of charges for such supplies;

(d) the extension and cheapening of supplies of electricity to
sparsely developed areas.

D (3) Nothing in the forgoing provisions of this section shall derogate
from the power of the Board, if it considers it necessary or
expedient to fix different tariffs for the supply of electricity to any
person not being a licensee, having regard to the geographical
position of any area, the nature of the supply and purpose for
E which supply is required and any other relevant factors.

· (4) In fixing the tariff and terms and conditions for 'the supply of
electricity, the Board shall not show undue preference to any
person."

p These notifications are identically worded. We will, therefore, refer to the
relevant clauses thereof which have a direct bearing on this controversy.
The said notifications are issued by the Board in exercise of powers under
Section 49 of the Act notifying revised rate schedule appended to the
notifications and they are to apply to all persons in respect of supply of
electricity throughout the State of U .P. directly served by the Board. It is
G mentioned in the said notifications that the revised rate schedule will come
into force from the respective dates mentioned in the said notifications.
The rate schedules which are incorporated in these notifications, amongst
others, contain an item pertaining to incentives to new industries. This item
is mentioned as item No. 9 in the earlier notifications, but in the last
H notification dated 28th January 1986 which was issued in partial modifica-
PAWAN ALLOYSANDCAS11NG PVI'. LTD.'· U.P. STATE ELECTRICITY BO. [S.B. MAJMUDAR,l.] 283

tion of earlier notifications it is mentionM as item No. 8 as part and parcel A
of rate schedule. The first part thereof which is relevant for our present
purpose reads as under :

"8. Incentive to New Industry - A development rebate of 10 percent
on the amount of the bill pertaining to the energy charges as
computed under item 4 and 7, above, will be given to a new B
industrial unit for a period of three years from the date of com-
mencement of supply. This rebate will also be admissible for the
unexpired period of three years to these existing industrial units
which have not completed three years on Feb. 1, 1986 from the
date of comme11cement of supply. This development rebate, how- C
ever, shall not be allowed to the Central/State Govt. departments."

It is this item 8 which stood deleted by the impugned notification of 31st
July 1986. The relevant part of the said impugned notification .reads as
under:
D
· "In partial modification of their Notification (Amendment) No.
225-HC/SEB-V-1974-1204-C-86, dated January 28, 1986, regarding
rates and tariffs for supply of electrical energy by the Board, as
published in U.P. Gazette extraordinary, dated January 29, 1986
and as amended from time to time, the U.P.S.E.B. in exercise of
the powers under Section 49 of the Electricity (Supply) Act, 1948 E
(Act No. 54 of 1948) and all other powers in this behalf hereby
make the following amendment in rate schedules LMV-6, LMV-8,
HV-1 and HV-2 annexed thereto, which shall be deemed to have
come into force w.e.f. August 1, 1986 :
F
(1) .. .

(2) .. .

(3) Rate Schedule HV-1
G
(a) The first para of item 8 under the heading "Incentive to
New Industry" be deleted."

A mere look at this item shows that all the aforesaid three notifications
which held the field from 29th October 1982 to 28th January 1986 clearly
contained a representation by the Board to the consumers, who were to H
284 SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.

A establish new industrial units in the territories of the State in which the
Board was to supply electricity, that on the total bill of electricity consuined
by them during' the period of first three years of their taking supply they
will be getting a rebate of 10% on the total amount of such bills for
electricity consumption. It was also assured that this rebate would be
available not only to new industrial units which may get established and
B
which may take electric supply from the Board on and from the date on
which the said last notification of 28th January 1986 came into force, but
rebate would be permissible even to those new industries who had earlier
established their industries and taken electricity supply from the Board and
three years' period earlier granted to them for earning development rebate
c had remained unexpired on 1st February 1986 and for that entire unex-
pired period also the said development rebate was guaranteed by the
Board. This obviously can be said to have been an incentive offered by the
Board in exercise of its statutory powers under Section 49 of the Act read
with Section 78A of the Act under which the State was entitled to issued
D suitable directions for effectuating such an incentive package for new
industries to enable these new and infant industries to get attracted to the
area where the Board was to supply electric energy so that these prospec-
tive consumers of electricity to be supplied by the respondent-Board could
not only establish their industries in these areas but could withstand the
competition with old industrial units as the concession in the payment of
E electricity charges would obviously reduce their cost structure and conse-
quently the price of their man~factured articles, so that these new in-
dustries during their infancy could effectively stand in the competition with
old industries whic~ may be well settled in the market. This was certainly
an infancy benefit made av.ailable as an incentive by the Board to these
F new industries. This package of infancy benefit made available by the
Board was obviously in compliance with State's directive under Section
78A of the Act as it was a part and parcel of the package of incentives
made available to new industries as seen from the Annexure 'A' (Copy of
eXtracts specifying various incentives and concessions dated 12th Novem-
ber 1981) to the Special Leave Petition (C) No. 13827 of 1991 out of which
G Civil Appeal No. 3203 of 1991 has arisen, filed by the appellant. It is not
the case of the Board that such an incentive scheme was not quoted by the
State. It must, therefore, be held that the earlier three notifications issued
by the Board under Section 49 read with Section 78A of the Act were a
part and parcel of this incentive scheme. This scheme of rebate of 10% for
H new industries to be established in plains of the State had remained
PAWAN ALLOYS AND CASTING PVT. LTD.'· U.P. STATE I;LECTRICITY BD. [S.B.,MAJMl/DAR, J.] 285

operative since 29th October· 1982 fer almost four years and even by the A
latest notification dated 28th January 1986 the Board had continued the
said package of incentives and made it available also to the new industries
which could come up even after 28th January i986 in the area of the State
where the Board was supplying electricity and selling it to its consumers.

It is also obvious that when new industries are attracted in the region,
B
the Board would be able to find more and more customers for the
electricity sought to be sold by it to these consumers of electricity who
would be taking high voltage electric power and, therefore, would be
paying higher tariff by way of HVI and HV2. Thus such an incentive
scheme would benefit not only the entire State but also the Board itself. C

It is, therefore, not possible to agree with the contention of learned
senior counsel for the Board that these three notifications did not hold out
any promise or any representation to the general public enabling the new
industries to get established acting on the said representation. It Is obvious D
that after the expiry of this three years' period the Board would be able
to charge full rate for electricity supplied to these new customers who
would then become sufficiently old and mature and would not need any
more rebate. It cannot, therefore, be s.aid that the Board had no interest
in these new industries, their prospective customers, and was not interested
in attracting them to the territory catered to by it by the supply of E
electricity. It may be that the Board exercised its statutory powers under
Section 49 of the Act for that purpose but all the same it in its wisdom and
acting on the direction under Section 78A of the Act pursu'ant to the
package of incentives offered by the State of U.P. to these new industries,
had issued the said notifications holding out these promises.. But even F
assuming that the State had no role to pay in this connection as submitted
by Shri Dave for the respondents, these three notifications on their own
wordings leave no room for doubt that they did contain offers of incentives
to new industries who would. be the prospective new consumers of
electricity and, therefore, the Board's future customers.
G
In this connection we may usefully refer to two decisions of this
Court. In the case of State of Madhya Pradesh & Ors. v. Orient Paper Mills
Ltd., [1990] 1 SCC 176 a Bench of two learned Judges of this Court
consisting of S. Ranganathan and M.M. Punchhi, JJ., upheld the electricity
duty package made available to industrialists who were themselves general- H
286 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A ing power through their own generating sets on the doctrine of promissory
estoppel. It is of course true that in that case State of Madhya Pradesh had
offered this package but it was obviously through its own limb, M.P. State
Electricity Board. Any exemption from electricity duty could be granted
only by the Board exercising powers under Section 49 of the Act and that
B coul.d be at the behest of the State.

In the present case even leaving aside the promissory estoppel
against the State of U .P. it can clearly be visualised that by the mere
wordings of the aforesaid three notifications the Board acting as a limb of
the State of U.P. had offered these concessions by way of rebate in
C electricity duty to the new industries so as to attract them to the State to
enable the Board to take them in its fold as prospective consumers of
electricity to be sold by it to them.

It the case of Amrit Banaspati Co. Ltd. and Another v. State of Punjab
and Another, [1992] 2 SCC 411 another Bench of this Court consisting of
D two learned Judges speaking through R.M. Sahai, J., considered the ques-
tion whether any promissory estoppel was available against the State of
Punjab when it promised new industries refund of sales tax collected by It
earlier from its consumers.

E In connection with the doctrine of promissory estoppel the follow-
ing pertinent observations, relying on a number of decisions of this Court,
are found in paragraph 4 of the Report :

"The law of promissory estoppel furnishes a cause of action to
a citizen, enforceable in a court of law, against govt. if it or its
F officials in course of their authority extend any promise which
creates or is capable of creating legal relationship, and it is acted
upon, by the promisee irrespective of any prejudice. What, there-
fore, requires to be examined, is if any promise was made by the
Government or its officials to the appellants that sales tax shall be
refunded to it and if the appellant acting on it altered its position?
G
In this case a promise or representation promise was made on
behalf of the Government by its officials in pursuance of and in
' line with the declaration of policy by the Government that a new
unit shall be entitled to concession. Acting on the assurance, both
H express and implied, the appellant invested substantial amount in
PAWANALLOYSANDCASTINC'PVT.LTD.,. U.P.STATEELECJ'RJCITYBD.[S.B.MAJMUDAR,J.J 'lJ!.7

setting up the unit requesting, in the meanwhile, for grant of written A
sanction from the Government which, too, came. The equity arose
in favour of appellant by having altered its position on the as-
surance given by the authorities. Thus basic ingredients of promise
by the Government, belief of the appellant that it was true and if
acted upon shall entitle it to refund of sales tax, and finally altering B
its position by investing substantial amount were established to
invoke promissory estoppel against the government. n

However on facts it was found that no promissory estoppel was available
to the appellant in that case which enabled it to require the State of Punjab
to refund the sales tax already collected by it from its consumers by way C
of incentive. In this connection relevant observations are found in para-
graph 11 of the Report as under :

"Exemption from tax to encourage industrialisation should not
be confused with refund of tax. They are two different 11\gal and D
distinct concepts. An exemption is a concession allowed to a class
or individual from general burden for valid and justifiable reason.
For instance tax holiday or concession to new or expanding in-
dustries is well known to be one of the methods to grant incentive
to encourage industrialisation. Avowed objective is to enable the
industry to stand up and compete in the market. Sales tax is an E
indirect tax which is ultimately passed on to the consumer. If an
industry is exempt from tax the ultimate beneficiary is the con-
sumer. The industry is allowed to overcome its teething period by
selling its products at comparatively cheaper rate as compared to
others. Therefore, both the manufacturer and consumer gain, one p
by concession of non-levy and other by non-payment. Such
provisions in an Act or Notification or orders issued by Govern-
ment are neither illegal nor against public policy."

It was, therefore, held that incentive to new industries by way of tax holiday G
or tax exemption could validly form the subject-matter of promissory
estoppel as it wo'uld not be against public policy but in so far as any
representation seeks to enable the promisee to get refund of the collected
sales tax it would remain unconstitutional being violative of the taxation
scheme of the Constitution and, therefore, would be contrary to public
policy and would get voided under Section 23 of the Contact Act. H
288 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A Consequently it cannot be held on the clear recitals found in the '
aforesaid three notifications issued by the Board that no representation
whatsoever guaranteeing 10% rebate on electricity consumption bills could
be culled out from these notifications. We, therefore, agree with the finding
of the High Court on Issue No. 1 that by these notifications the Board had
clearly held out a promise to these new industries and as these new
B industries had admittedly got established in the region where the Board
was operating, acting on such promise, the same in equity would bind the
Board. Such a promise was not contrary to any statutory provision but on
the contrary was in compliance with the directions issued under Section
78A of the Act. These new industries which got attracted to this region
C relying upon the promise had altered their position irretrievably. They had
spent large amounts of money for establishing the infrastructure, had
entered into agreements with the Board for supply of electricity and,
therefore, had necessarily altered their position reJYiilg on these repre-
sentations thinking that they would be assured of at least three years'
D period guaranteeing rebate of 10% on the total bill of electricity to be
consumed by them as infancy benefit so that they could effectively compete
with the old industries operating in the field and their products could
effectively compete with their products. On these well established facts the
Board can certainly be pinned down to its promise on the doctrine of
promissory estoppel.
E
However Shri Dave, learned senior counsel appearing for the Board
vehemently pressed in service a decision of a three Judge Bench of this
Court in the case of M/s. Ashok Soap Factory and Another v. Municipal
Corporation of Delhi and Others, [1993) 2 SCC 37. In that case the Court
p was concerned with the power exercised by Delhi Municipal Corporation .
under Section 283 of the Delhi Municipal Corporation Act, 1957 to levy
charges for the supply of electricity at such rates as may be fixed from time
to time by Delhi Municipal Corporation in accordance with law. The
dispute centered round the question of levying minimum consumption
guarantee charges for large industrial power consumers and tariff revision
Q is connection therewith. The Court upheld the revision of minimum
demand charge,s but while doing so in paragraph 29 of the Report observed
that apart from that, the fixation of tariff was a legislative function and the
only challenge to the fixation of such levy could be on the ground of
unreasonableness or arbitrariness and not on demonstrative grounds in the
H sense that the reasons for the levy of charge must be disclosed in the order
PAWAfl"ALLOYSANDCASTINGPVf.LID.Y. U.P.STAIBELECnuCITYBD.(S.B.MAJMUDAR.J.] 289

imposing the levy or disclosed to the court, so long as it was based on A
· objective criteria.

We fail to appreciate how those observations made in connection
with entirely a. different challenge based on different statutory scheme can
be straightaway pressed in service for contending that even grant of rebate B
of electricity charges as a part of permissible incentive scheme would also
be a legislative function. It has to be kept in view that the Board exercises
its statutory powers under Section 49(1) of .the Act by fixing uniform rates
of tariff for electricity charges..When it fixes general tariffs, it may be. said
to be exercising delegated legislative power. {Jut while <loing so, it also in
exercise of its statutory power can grant· rebate to a given class of con- C
sumers under Section 49 sub-Sections (2) and (3) read with Section 78A
of the Act. Once the uniform tariffs a~e fixed the statutory function of
quasi-legislative nature gets fructified. Dehors such rates if some concession
· by way of rebates is to be given the samewould still remain in the field of
statutory exercise of power. On this aspect we may usefully refer to a D
decision of this Court in the case of Bihar State Electricity Board and
Another v. Usha Martin Industries and Another, (1997) 5 SCC 289 rendered
by a Bench of two learned Judges wherein 'one of us (K.T. Thomas, J.) was
a member. Dealing with the very same Section 49(1) the following pertinent
observations were made by Sen, J. speaking for the Bench:
E
"Moreover, the tariff is fixed by exerci:Se of statutory power. It
is not fixed as a result of any bargaining by and between the Board
and the consumers. It is a uniform tariff which every consumer will
have to pay for the electricity consumed by him. In fact, the
consumer has no option but to pay the tariff fixed by the Board in F
exercise of power conferred by Section 49."

For the purpose of the.present' discussion we may proceed on the basis
that while fixing general tariffs and making them subject to schemes of
rebate, the Board exercises delegated legislative function flowing fro.m the G
Statute. However once incentive rebate is granted in the general rate of
tariffs on directions by State ,under Section 78A, the said incentive rebate
offered by the Board would remain in the realm of exercise of statutory
power-cum-duty. In .the exercise of the same power the Board in its
discretion can grant rebate in appropriate cases within the forecorners of
Sections 49 and 78A of the Act. Of course this exercise will be subject to H
290 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A legally permissible limits and subject to the said concessional rates being
found reasonable on the touchstone of Article 14 of the Constitution of
India. It is, therefore, not possible to countenance the submission of Shri
Dave that there cannot be any promissory estoppel against the Board when
it exercises its powers under Section 49(1) of the Act whatever may be the
B settings for exercise of this power and even if it is exercised as a part of a
scheme of incentive package required to be offered to new industries as
enjoined on the Board as per statutorily binding directions issued by the
State to the Board under Section 78A of the Act.

Shri Dave, learned senior counsel for the Board next contended that
C the Board in exercise of its statutory powers had earlier decided to grant
rebate of 10% on the bills of electricity consumed 'by new industries. In the
exercise of the same statutory power it was open to the Board to withdraw
the said concession or rebate on the ground of public policy and doctrine
of promissory estoppel cannot be pressed in service for thwarting such an
D exercise 'by the Board. For supporting this contention he vehemently
pressed in service two decisions of this Court in the case of Kasinka Trading
and Another v. Union of India and Another, [1995] 1 SCC 274 and in the
case of Shrijee Sales Corporation and Another v. Union of India, [1997] 3
SCC 398. In fact these two decisions were the sheet anchor of the challenge
mounted by Shri Dave for the Board against the finding of the High Court
E on Issue No. 1. We, therefore, now proceed to deal with these decisions.

In the case of Kasinka Trading (supra) a Bench of two learned Judges
of this Court consisting of M.N. Venkatachaliah, CJ. and Dr. A.S. Anand,
J., had to consider the question whether a notification issued under Section
F 25 of the Customs Act, 1962 granting complete exemption from payment
of customs duty to PVC resin imported into India by manufacturers of
certain products requiring the said resin as one of the raw materials, which
was issued in public interest and which had stated that it would remain in
force upto and inclusive of 31st March 1981 could be withdrawn before the
G expiry of the said period by fresh notification issued by the Government in
exercise of the very same power under Section 25 of the Customs Act. This
Court speaking through Dr. Anand, J,, took the view that as the said
notification was issued in public interest it could be withdrawn even before
the time fixed therein for its operation also in public interest and while
issuing such a notification no promise can be said to have been held out
H or any representation made to the importers in general on the basis of
PAWAN ALLOYS AND CASTING PYr. LTD.'· U.P. STATE ELECTRICITY SD. (S.S. MAJMUDAR,J.) 291

~hich they could insist on the doctrine of promissory estoppel that the A
customs duty exemption granted earlier by the first notification could not
be reduced by the second one. The following pertinent observations are
found in paragraphs 11 and 12 of the Report :

''fhe doctrine of promissory estoppel or equitable estoppel is B
well established in the administrative law of the country. To put it
simply, the doctrine represents a principle evolved by equity to
avoid injustice. The basis of the doctrine is that where any party
has by his word or conduct made to the other party an unequivocal
promise or representation by word or conduct, which is intended
to create legal relations or effect a legal relationship to arise in the C
future, knowing as well as intending that the representation, as-
surance or the promise would be acted upon by the other party to
whom it has been made and has in fact been so acted upon by the
other party, the promise, assurance or representation should be
binding on the party making it and that party should not be D
permitted 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
or are intended to take place between the parties.

It has been settled by this Court that the doctrine of promissory
estoppel is applicable against the Government also particularly E
where it is necessary to prevent fraud or manifest injustice. The
doctrine, however, cannot be pressed into aid to compel the
Government or the public authority 'to carry out a representation
or promise which is contrary to law or which was outside the
authority or power of the officer of the government or of the public F
authority to make'. 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 sup-
porting material, to the effect that the doctrine is attracted because G
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. In our opinion, the doctrine of promissory
estoppel cannot be invoked in the abstract and the courts are
bound to consider all aspects including the results sought to be
achieved and the public good at large, because while considering H
292 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A the applicability of the doctrine, the courts have to do equity and
the fundamental principles of equity must for ever be present to
the mind of the court, while considering the applicability of the
· doctrine. The doctrine must yield when the equity so demands if
it can be shown having regard to the facts and circumstances of
.. the case that it would be inequitable to hold the Government or
B the public authority to its promise, assurance or representation.

It may, however, be mentioned that in paragraph 21 of the Report the
Court has observed that the notification which was impugned before it was
not designed or issued to induce the appellants to import PVC resin. ·
C Admittedly, the said notification was not even intended as an incentive for
import. The notification on the plain language of it was conceived and
issued by the Central Government 'being satisfied that it was necessary in
the public interest so to do'. Strictly speaking, therefore, the notification
could not be said to have extended any 'representation' much less a
D 'promise' to a party getting the. benefit of it to enable it to invoke the
doctrine of promissory estoppel against the State. It must, therefore, be
held that the aforesaid decision had clearly proceeded on the basis that by
issuing the earlier notification under Section 25 of the Customs Act no
promise was held out to any of the importers that the notification's life will
not be curtailed earlier. Nor was the issuance of the notification based on
E any claim of incentives to be offered to anyone. It was issued in exercise
of statutory powers vested in the Government which could be exercised
from time to time in public interest. Earlier the public interest might have
required issuance of such a notification granting cent per cent exemption
from customs duty on import of PVC resin. Under changed circumstances
p public interest itself required reduction of such an exemption and as no
promise was held out that this could not be done at any time the Court on
the facts of that case justifiably rejected the plea of promissory estoppel.
It is also. to be observed that the said notification was issued in exercise of
sovereign taxing power and had created no legal relationship between the
authority issuing the notification on the one hand and the prospective
G importers of PVC resin on the other. The said decision is not an authority
for the proposition that even if a claim of exemption from import duty was
resorted to in public interest by way of an incentive for a class of importers
and even though such public interest continued to subsist during the
currency of such an exemption notification and that prornisees for whose
H benefit such exemption was granted had changed their position relying on
PAWAN ALLOYS ANDCAS11NG PVI'. LTD. v. U.P. STATE ELEC!RICITYBD. [S.B. MA.JMUDAR,J.) 293

the said exemption notification, it could still be withdrawn before the time A
mentioned therein even though public interest did not require the said
exercise to be undertaken and even though there were subsisting equities
in favour of the promisee-importers. As such a situation had not arisen in
that case it was not adjudicated upon.

The said decision, therefore, cannot be of any .real. assistance to
B
learned senior counsel Shri Dave for the respondent-Board on the facts of
the present group of matters. In the present cases, as we have seen earlier
a clear-cut scheme of incentives for new industries was put forward bythe ·
Board presumably at the behest of the U.P. Government so that more and
more industries could be attracted to State of U .P. The Board also in its C
wisdom adopted the said scheme of incentives while fixing schedule of tariff
rates as tha:t Was also in the interest of the Board for the obvious reason
that thereby more and more new industries as consumers of high power
electricity would be attracted to the region and would be paying higher
electricity rates/charges to the Board. D

Shri Dave next invited our attention to a three Judge Bench judgment
of this Court in the case of Shrijee Sales Corporation (supra) wherein A.M.
Ahmadi, CJ., speaking for the Bench considered the correctness of the
aforesaid decision in Kasinka Trading (supra). As the decision in Shrijee E
Sales Corporation (supra) has laid down the parameters of the field in
which the doctrine of promissory estoppel can apply it is necessary to
closely refer to the relevant observations found in t.he said judgment. It may
be mentioned that the very sa:me customs exemption notification which was
considered by the Bench of two learned Judges in Kasinka Trading (supra)
was considered by a three Judge Bench in Shrijee Sales Corporation
F
(supra). While upholding the said notification Ahmadi, CJ., in paragraphs
3 and 4 of the Report observed as under :

"It is not necessary for us to go into a histori~al analysis of the
case-law relating to promissory estoppel against the Government. G
Suffice it to say that the principle of pr,omissory estoppel is ap-
plicable against the Government but in case there is a supervening
public equity, the Government would be allowed to change its
stand; it would then be able to withdraw from representation made
by it which induced persons to take certain steps which may have H
294 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A gone adverse to the interest of such persons on account of such
withdrawal. However, the Court must satisfy itself that such a ·
public interest exists. The law on this aspect has been emphatically
laid down in the case of Motilal Padampat Sugar Mills Co. Ltd. v.
State of U.P., [1979] 2 SCC 409. The portion relevant for our
purpose is extracted below :
B
"It is only if the Court is. satisfied, on proper and adequate
material placed by the Government, that overriding public interest
requires that the Government should not be held bound by the
promise but should be free to act unfettered by it, that the Court
c would refuse to enforce the promise against the Government. The
Court would not act on th~ mere ipse dixit of the Government, for
it is the Court which has to decide and not the Government
whether the Government should be held exempt from liability. This
is the essence of the rule of law. The burden would be upon the
D Government to show that public interest in the Government acting
otherwise than in accordance with the promise is so overwhelming
that it would be inequitable to hold the Government bound by the
promise and the Court would insist on a highly rigorous standard
of proof in the discharge of this burden. But even where there is
no such overriding public interest, it may still be comptent to the
E
Government to resile from the promise 'on giving reasonable
notice, which need not be a formal notice, giving the promisee a
reasonable opportunity of resuming his position' provided of
course it is possible for the promisee to restore status quo ante. If,
however, the promisee cannot resume his position, the promise
F would become final and irrevocable. Vide Emmanuel Ayodeji Ajayi
v. Briscoe, (1964) 3 All ER 556."

Two propositions follow from the above analysis :

(1) The determination of applicability of promissory estoppel
G
against public authority/Government hinges upon balance of
equity or 'public interest'.

(2) It is the Court which has to determine whether the
Government should be held exempt from the liability of the
H 'promise' or 'representation'.
PAWAN ALLOYS AND CASTING PVT. LID. v. U.P. STAT!! l!LllCI'RICITY BD. [S.B. MAJMUDAR, J.] 295

"In the present case, the first notification exempting the customs A
duty on PVC itself recites ' ...... Central Government being satisfied
that it is necessary in public interest to do so..... .'. In the notification
issued later which gave rise to the present cause of action, the same
recitation is present."
B
It is, therefore, obvious' that even though it may be found that the Govern-
ment or any other competent authority had held out any promise on the
basis of which the promisee might have acted, if public interest required
recall of such a promise and such a public interest outweighed the interest
of. the promisee then the doctrine of promissory estoppel against the
Government would lose its rigour and cannot be of any avail to such C
promisee. In the aforesai.d decision the furth~r contention canvassed on
behalf of the appellant-promisee was also examined. That centered round
the question whether the notification having fixed a time limit for its
operation could be rescinded prior to the expiry of the said period.
Rejecting the said contention and upholding the right of the authorities to D
recall such a notification even earlier it was observed in paragraph 7 of the
Report that once public interest is accepted as the superior equity which
can override individual equity, the principle should be applicable even in
cases where a period has been indicated. It was further observed that the
Government is competent to resile from ·a promise even if there is no E
manifest public interest involved, provided, of course, no one is put in any
adverse situation which cannot be rectified. To adopt the line of reasoning
in Emmanuel Ayodeji Ajayi v. Briscoe quoted in .M.P. Sugar Mills even
where there is no such overriding public interest, it may still be within the
competence 9f the Government to resile from the promise on giving F
reasonable notice which need not ·be a formal notice, giving the promisee
a reasonable opportunity of resuming his position, provided, of course, it
is possible for the promisee to restore the status quo ante. If, however, the
promisee cannot resume his position, the promise .would become final and
irrevocable.
G
In the light of this settled legal position we, therefore, hold that even
though the appellants have succeeded in convincing us that the earlier
three notifications dated 29th October 1982, 13th July 1984 and 28th
January 1986, did contain a clear promise and representation by the Board
to the prospective new industrialists that once they established their in- H
296 SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.

A dustries in the region within the territorial limits of. the operation of the
Board, they would be assured 10% rebate on the total bills regarding
consumption of electricity by their industries for a period of three years
from the initial supply of electric power to their concerns, the appellants
will not be able to enforce the equity by way of promissory estoppel against
B the Board if it is shown by the Board that public interest required it to
withdraw this rebate even prior to the expiry of three years as available to
the appellants concerned. It has also to be held that even if such withdrawal
of development rebate prior to three years is not based on any overriding
public interest, if it is shown that by such premature withdrawal the
appellant-promisees would be restored to status quo ante and would be
C placed in the same position in which they were prior to the grant of such
rebate by earlier notifications the appellants would Iiot be entitled to
succeed. We, therefore, now proceed to examine these twin aspects of the
controversy.

D So far as. the question of public interest is concerned it must at once
be stated that it is not the case of the respondent-Board that it sought to
withdraw the incentive development rebate made available earlier by it to
the new industries on the ground of any public interest. In this connection
by way of illustration we my refer to one of the identical counters filed by
the respondent-Board in this group of matters. In Civil Appeal No. 1710
E of 1991 the counter affidavit of the Board is found at page 154. Though
the counter is sought to be filed in Civil Appeal No. 5318 of 1997 (Arising
out of S.L.P.(C) No. 5355 of 1991) it is sought to be treated as a counter
affidavit in this Civil Appeal. One B.S. Sharma, Executive Engineer (Com-
mercial) of the respondent- Board has staked the claim of the Board for
F supporting the impugned notification for withdrawal of development rebate
only on the twin grounds. Firstly it was contended that the grant of rebate
could be withdrawn by the Board at any time it thought fit and for that
purpose Section 49 of the Act was pressed in service. And the second
ground is that the appellants themselves have executed agreements with
the Board which empowered the Board to withdraw the development
0 rebate earlier granted to them. Nowhere it is even whispered that the
Board had to withdraw this development rebate incentive midstream on
account of some overriding public interest.

Shri Dave, learned senior counsel for the Board, however, submitted
H in this connection that there was a felt necessity for the Board to recall this
PAWAN ALLOYS AND CASTING PVf. LTD.'· U.P. STATE ELECTRICITY BO. [S.B. MAlMUDAR, J.) 297

development rebate as a high power Tariff Realisation Committee advised A
the Board for maintaining its profits, to withdraw this rebate and the Board
had acted in the light of the said Report submitted to it in the year 1986.
In short genesis of this impugned notification is the advice given to the
Board by the Tariff Realisation Committee which was a
high power
committee. It, therefore, becomes clear that not on the gr9imd of general B
public interest but solely on the ground of commercial interest of the Board
which had earlier held out the promise that the aforesaid withdrawal was
effected. Consequently it must be held on the facts of these cases t~at the
impugned withdrawal notification was not backed up by any demands of
public interest which would outweigh the individual interests of the c
appellant-promisees who' acted upon the same. It is also pertinent to note
in this connection that it is no longer in dispute between the parties that
relying upon the earlier notifications holding out promise by the Board .to
give development rebate by way of incentive to new industries for three
years from the date of initial supply of electricity to them, all the appellants
as new industrialists. had walked in the territory catered to by the .Board D
and had established their industries in State. of Uttar Pradesh by spending
huge amounts of moneys for constructing the factories wherein their
industrial activities could commence. On this aspect we may usefully refer
by way of a specimen the averments contained in S.L.P.(C) No. 4561 of
1991 out of which Civil Appeal No. 10187 of 1991 arises. At page 51 of the E
Paper Book is found relevant factual data mentioned in the said Special
Leave Petition. In para 3(i) and 3(ii) the following averments were made :

"(i) That on 29.10.1982/13.7.1984 the U.P. State Electricity Board
(an instrumentality of the State subject to the mandate of F
fairness and reasonableness under Article 14 of the Constitu-
tion) made representations and promises to the effect that an
incentive in the form of 10% development rebate on the
amount of electricity bills shall be given to all new industrial
units in the State for a period of three years from the date Of
commencement of supply of electricity to. them. G

(ii) That the petitioner established a new industrial unit (relying
on the aforesaid representations and promises of the Board)."

The counter affidavit filed on behalf of the Board in reply to the said H
298 SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.

A averments makes an interesting reading. At page 70 is the counter affidavit
filed by the same deponent Shri Sharma, Executive Engineer (Commercial)
wh9se counter in other case is referred to earlier. In the said counter he
had stated that he relies upon the counter affidavit in Civil Appeal No.
1713 of 1991 for the purpose of the aforesaid Civil Appeal also. The said
B counter is annexed by way of Annexure '1' at page 72 of the Paper Book.
So far as the recitals in the S.L.P. at paragraphs 3(i) and 3(ii) are con-
cerned the reply thereto in the said counter is found at page 80 by way of
parawise reply. In paragraphs 3(i) to 3(iii) it is mentioned that the contents
in these paragraphs need no comments. Identical is the stand taken ·by the
respondent-Board in this group of matters trying to deal with the identical
C averments made by all the&e appellants that relying upon the representation
of the Board as found in the earlier notifications they had spent large
amounts and established their factories.

Consequently it must be held that relying upon the representations
D held out by the Board in these earlier notifications assuring grant of
incentive rebate of 10% on the total bill of electricity consumption charges
these new industries being assured that for three years this concession will
be available had burnt their boats and spent large amounts and had
established their industries in the area falling in the operative jurisdiction
of the Board in State of U.P.
E
Under these circumstances when no public interest was sought to be
pressed in service by the Board for withdrawal of this incentive rebate, as
seen earlier, the equity which had arisen in favour of the appellants
remained untouched and undisturbed by any overwhelming and superior
F equity in favour of the Board entitling it to withdraw this development
rebate in a premature manner leaving these promisees high and dry before
the requisite period of three years earlier guaranteed to them by way of
development rebate had got exhausted. This takes us to the consideration
of the second aspect of the matter.

G As observed by this Court in Shrijee Sales Corporation (supra) even
where there is no such overriding public interest it might still be open to
the promisor-State or its delegate to rcsile from the promise on giving
reasonable notice which need not be a formal notice giving the promisee
a reasonable opportunity of resuming his position, provided it is possible
H for the promisee to restore the status quo ante. Even on this aspect the
PAWAN ALLOYS AND CASTING PVf. LTD. v. U.P. SfATE ELECTRICITY BD. [S.B. MAJMUDAR, J.] 299

respondent-Board has no case. It has not given any reasonable opportunity A
to the appellants to resume their earlier position. Nor is it shown by the
Board that it is possible for the appellant-promisees to restores the status
quo ante. The reason is obvious. Once the new industries were lured into
t-stablishing their factories in the region catered to by the Board on being
assured three years guaranteed incentive of development rebate of 10% on B
their total bills of electricity charges and acting on the same once they had
established their industries and spent large amounts for constructing the
infrastructure and for employing nece,ssary labour and for purchasing raw
materials etc., it would be almost impossible for them to restore the status
quo ante and to walk out midstream if the development rebate incentive C
was withdrawn for the unexpired period out of the three years' guaranteed
period of currency of development rebate incentive. In fairness even it was
not suggested by learned senior counsel for the respondents that on such
withdrawal of development rebate the appellants would be ab:e to restore
the status quo ante and walk out. He simply relied upon the ratio of the
decision of this Court in the case of Shrijee Sales Corporation (supra) for D
contending that it is the power of the Board to grant the rebate and it is
equally the power of the Board to withdraw the same in its own discretion.

Consequently it must be held that the twin aspects highlighted by this
Court in Shrijee Sales Corporation (supra) on the basis of which the E
authority promising a particular course of conduct on its part to the
prospective promisee can resile from the promise even prematurely are not
found established on the facts of these cases. Consequently the ratio of the
said decision cannot be of any avail to the respondent-Board.

F
Shri Dave, learned senior counsel for the 'Board next pinned his faith
on another decision of this Court in the case of Ester Industries Ltd. v. U.P.
State Electricity Board _and Others, [1996] 11 SCC 199. In that q1se this
Court was concerned with a converse situation wherein the Government of
U.P. had decided to grant 10% development rebate to. new industries
which could be attracted to the State. However, the respondent-Board had G
not acted upon the said suggestion of the Government of U.P. and had not
changed its tariff rates by adopting the same scheme of incentive benefits '
for its consumers, Question was whether the Court could compel the Board
to grant such an incentive rebate to its consumers in exercise of statutory
power of the Board under Section 49 of the Act when the Board itself had H
300 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R

A not thought it fit to do so. The. High Court had rejected such a request of
the writ petitioners for enforcing the aforesaid scheme on the Board. Said
decision was upheld by a Bench of this Court consisting of K. Ramaswamy
and G.B. Pattanaik, JJ., by the aforesaid judgment. The Court obs.erved
that the State Electricity Board had a statutory function to discharge in
B determination of the rates of tariff and this being a legislative policy while
exercising the power under Section 78A of the Act policy directions issued
by the Government may also be taken into consideration by the. Board
which had a statutory duty. to perform and that . it was for the State .
Government to consider whether the Board had laid down the policy or
whether the direction issued by the s'tate Government had not been
C properly implemented. The Court could n~t give a direction to the Board .
to implement the directions issued by the· State Government. Thus it was
held that no mandamus could be issued to the Board to. grant such
incentive rebate to the new industries~ The Court also noted that in the
agreements entered intci by the consumers with the Board. full. tariff r~tes
D without any rebate were agreed to be 'paid. Consequently it was observed
that promissory estoppel would apply only in a· case where there was no
contract executed between the parties and in that case there existed a
contract duly executed under law between the petitioner and the Board
which bound them and unless the same was revised question of promissory
E estoppel did not arise,

We fail to appreciate how the aforesaid decision can advance the
case of respondent-Board in the peculiar facts of this group of matters. As
we have ,noted earlier here is a converse pd'sition where the Board
p presumably appears to have accepted the guidelines .and the directions
given by the State of U.P. under Section 78A of the Act and its adopted
the scheme of incentive rebates for new industFies by promulgating it own
tariffs in exercise of its powers under Section 49 read with Sectioq 78A of
the Act and it was the Board itself which had given such a promise and
held out such representations to the newcomer industries by the first three
G notifications as seen above. Once that was so the question of compelling
the Board to promulgate such policy would not survive for consideration
in the present cases. It is obvious that if the Board had not promulgated
such a policy the Court could not have compelled the Board to give such
concession. Here the question is having itself promulgated such a policy
H whether the Board can go back upon it prematurely. The aforesaid decision
· PAWAN ALLOYSANDCASTIJ'1G PVf. LTD.v. U.P.STATl!ELECTRICITYBD. jS.B. MAJMUDAR,J.J 301

of this Court had no occasion to consider this aspect of the matter. A
However Shri Dave was very ianguine about the observation in this
judgment that promissory estoppel would not apply where there existed a
contract executed between the consumer and the Board. As we have noted
earlier the aforesaid observations in the said Report were made in the light B
of the fact situation -before the Court. There the consumer had entered into
an agreement to be bound by the tariff rates notifications by the Board
from time to time. Those tariff rates were devoid of any scheme of incentive
development rebate. In other words t4ey were full-fledged tariff rates
without any development rebate component. Under these circumstances
the Court justifiably observed that the consumer was bound by the contract C
and when the Board itself had not promulgated any policy of development
rebate for new industries Board could not be compelled on the doctrine
of promissory estoppel to do something which it had never promised to do.
Consequently the decision in Ester Industries Ltd. (supra) also is of no avail
to the respondent-Board. D
Before parting with this discussion it must be stated that in the light
of the observations made in Ester Industries Ltd. (supra) by this Court to
the effect that the fixation of tariff including incentive rebate is a legislative
function, the observations of the High Court that it is not a legislative or E
delegated legislative function, cannot be sustained. It must be held that
such a function is quasi-legislative in character reflecting an exercise of
delegated legislative power.

As a result of the aforesaid discussion it must.be held that the finding
reached on the question of promissory estoppel by the High Court on Issue F
No. 1 is well sustained. The respondent-Board must be treated to be
estopped from prematurely withdrawing the incentive development rebate
made available to these. appellant-industries by issuing the impugned
notificaticm. Point No. 1 is accordingly ~nswered in the affirmative in favour
of the appellants and against the Board. This takes us to the consideration G
of the main question on which the High Court held against the appell~nts.

Point No. 2

In the view of the High Court despite the equity by way of promissory
estoppel being available to the appellants against the Board, as the H
302 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A appellants themselves had agreed by entering into written agreements and
contracts with the Board when they took electric connections for their
industries, that the Board had power to change the rate schedules from
time to time and to revise them, the appellants were barred frpm
challenging the impugned notification. Now it must be kept in view that as
per the incentives offered to the new industries the Board had promised
B
these new industrialists that for three years from the date on which they
took electric supply for the first time for their industries they would be
given 10% rebate on the total bill of electricity consumption charges for
their industries. It is not in dispute that before electric supply could be
C made available to these new industri~s who would be new consumers to be
enrolled by the Board these consumers had to enter into standard
agreements. Such agreements had to be signed and entered into by all the
prospective consumers whether they were covered by any incentive scheme
or not. It is also an admitted position that all the appellants while taking
electric connections for the first time for their new industries established
D by them in the region relying upon the incentives offered by the Board,
entered into such written agreements in standard forms. The relevant
clauses of these agreements on which strong reliance was placed by the
High Court of non-suiting the appellants, deserve to be extracted in extenso
at this stage :
E
"7. (a). The consumer shall pay for the supply of electric energy
at the rates enforced by the supplier from time to time as may be
applicable to the consumer.

(b) The Rate Schedule applicable to the consumer at the time of
F
execution of this agreement is annexed hereto as Annexure-2.

(c) The Rate Schedule above mentioned, may, at the discretion of
the supplier, be revised by the supplier from time to time and in
the case of revision, the Rate Schedule so revised shall be ap-
G plicable to the consumer."

According to the High Court once the consumers agreed to the authority
of the Board to revise earlier rate schedule which was existing at the time
of the agreement and as item 8 was a part and parcel of the said rate
H schedule implicit in Clause 7(c) was the agreement by the appellant-con-
PAWAN ALLOYS AND CASTING PV!'. LTD.'· U.P. STATEELECTRICITYBD. [S.B. MAJMUDAR,l.J 303

sumers that the Board will be able to tinker with or even wholly withdraw A
the development rebate earlier made available as per the said item 8 of the
rate schedule.

Shri Dave, learned senior counsel for the respondent-Board also
vehemently supported the said line of reasoning adopted by the High Court
for non-suiting the appellants. Learned counsel for the appellants on the B
other hand submitted that any such standard- form contracts between the
Board, a monopolist supplier of electricity and the consumers were one
sided and the latter had no option but to sign such standard agreements.
Hence the terminology employed in such agreement has to be strictly
construed and nothing should be implied so as to foist upon the consumer C
a disability which would not have been even remotely intended by him. We
may refer to some of the passages from standard books on contracts.

In Chitty on Contracts 27th Edition Vol. I 1994 the following passage
in connection with the standard form contracts being paragraph No. 12.007
is required to be noted : D
"Contacts in sta11dard form. - A different problem may arise in
proving the terms of the agreement where it is sought to show that
they are contained in a contract in standard form, i.e., in some
ticket, receipt, or standard form document. The other party may E
have signed the document, in which case he is bound by its terms.
More often, however, it is simply handed to him at the time of
making the contract, and the question will then arise whether the
printed conditions which it contains have become terms of the
contract. The party receiving the document will probably not
trouble to read it, and may even be ignorant that it contains any F
conditions at all. Yet standard form contracts very frequently
embody clauses which purport fo impose obligations on him or to
exclude or restrict the liability of the person supplying the docu-
ment. Thus it becomes important to determine whether these
clauses should be given contractual effect." G
In paragraph 12.013 at page 566 of the book the learned author has made
following observations regarding the onerous or unusual terms :

"Onerous or unusual terms. - Although the party receiving the
document knows it contains conditions, if the particular condition H
304 SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.

A relied on is one which is a particularly onerous or unusual ten~,
or is one which involves the abrogation of a right given by statute,
the party tendering the document must show that it has been
brought fairly and reasonably to the other's attention. 'Some
ciauses which I have seen', said D~nning L.J., 'would need to be
B printed in red ink on the face of the document with a red hand ·
pointing to it before the notice could be held to be sufficient'."

Dealing with the topic of Construction of Terms in a Written Contract the
learned author at paragraph 12.040 has observed as under :

c "Intention of the parties. - The cardinal presumption is that the
parties have intended what they have in fact said, so that their
words must be construed as they stand. That is to say, the meaning
of the document or of a particular part of it is to be sought in the
document itself : 'One must consider the meaning of the words
D used, not what one may guess to be the intention of the parties.'
However, no contract is made in a vacuum. In construing the
document, the court may resolve an ambiguity by looking at its
commercial purpose and the factual background against which it
was made.
E
Further, the law does not approach the task of construction
with too nice a concentration on individual words."

The learned author has also dealt with the topic of Absurdity and Incon-
sistency resulting from the Construction of plain words in the contract
F which should be avoided. Dealing with the topic in paragraph 12.046 it is
observed as under :

"Absurdity, inconsistency, etc. - The rule that words must be con-
strued in their ordinary sense is liable to be departed from where
G that meaning would involve an absurdity or would create some
inconsistency with the rest of the instrument, or where, if they were
so construed, they would lead to a very unreasonable result or
impose upon the contractor a responsibility which it could not ·
reasonably be supposed he meant to assume. Thus a covenant to
H pay money at such time as should be appointed by the creditor 'by
I •.
if

. PAWAN ALLOYSANDCASl'ING Pvr, LTD.'· U.P. STATl!ELECTRICITYBD:[s.e. MAJMUDAR,J.] 305

notice in writing sent by post, or delivered to or left at the house A
or last known· place of abode'. of the debtor, has been held to
impose on the creditor the necessity of allowing a reasonable titne
to elapse between the givirig. of a n_otice and the time of payment.
And where a: person covenants. to pay money to do any other. act
'immediateJY' or 'on. demand', he has a reasonable time to do the B
act, according to the nature of the thing to be done."

Dealing with Mercantile Contracts the learned author at paragraph 12.048
states as under :

"Mercantile Contracts. - Although it has been stated that there is C
not in law any difference of construction between mercantile
contracts and other instruments, commercial documents 'must be
construed in a business fashion', and 'there must be ascribed to
the words a meaning that would make good commercial sense'.
Indeed, in The Antaios Lord Diplock said that 'if detailed semantic D
and syntactical analysis of words in a commercial contract is going
to lead to a conclusion that flouts business commonsense, it must
yield to business coinmonsense'. Moreover, in mercantile con-
tracts, the words employed may have acquired a special meaning,
and this may be a different meaning from their natural one. Hence
it is that mercantile contra(.;ts are to be construed according to the E
usage and custom of merchants, provided that the custom is not
inconsistent with the agreement. When such contracts contain
peculiar expressions which have in particular places or trades a
known meaning attached to them, the meaning of these expressions
is a question of fact, although the meaning of the contract still F
remains a question of law..... "

In Cheshire's Law of Contract; 12th Edition 'Use of standard form
contracts' is dealt with at page 21 in following terms :

"The use of standardfonn contracts. G
The process or mass production and distribution, which has
largely supplemented if it has not supplanted individual effort, has
introduced the mass contract ' uniform documents which must be
accepted by all who deal with large-scale organisations. Such
documents are not in themselves novelties; the classical lawyer of H
306 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A the mid-Victorian years found himself struggling to adjust his
simple conceptions of contract to the demands of such powerful
bodies as the railway companies. But in the present century many
corporations, pubic and private, have found it useful to adopt, as
the basis of their transactions, a series of standard forms with which
their customers can do little but comply.
B
Lord Diplock has recently pointed out that

Standard forms of contracts are of.two kinds. The first of very
ancient origin, are those which set out the ter.ms on which
c mercantile transactions of common occurrence are to be
carried out. Examples are bills of lading, charterparties,
policies of insurance, contracts of sale in the commodity
markets. The standard clauses in these contracts have been
settled over the years by negotiation by representatives of the
commercial interests involved and have been widely adopted
D
because experience has shown that they facilitate the conduct
of trade. Contracts of these kinds affect not only the actual
parties to them but also others who may have a commercial
interest in the transactions to which they relate, as buyers or
sellers, charterers or shipowners, insurers or bankers. If fair-
E ness or reasonableness were relevant to their enforceability
the fact that they are widely used by parties whose bargaining
power is fairly matched would raise a strong presumption
that their terms are fair and reasonable.

F The same presumption, however, does not apply to the other
kind of standard form of contract. This is of comparatively
modern origin. It is the result of the concentration of par-
ticular kinds of business in relatively few hands. The ticket
cases in the 19th century provide what are probably the first
examples. The terms of this kind of standard form of contract
G have not been the subject of negotiation between the parties
to it, or approved by any organisation representing the inter-
ests of the weaker party. They have been dictated by that
party whose bargaining power, either exercised alone or in
conjunction with others providing similar goods or services,
H enables him to say; 'If you want these goods or services at all,
PA WAN ALLOYS ANO CASTING PVT. LTD. '· U.P. STATE ELECTRICITY BO. [S.B. MAJMUOAR, J.] 307
these are the only terms on which they are obtainable. Take A
it or leave it'.

It is fair to add that even in Lord Diplock's second class there
are good as well as bad reasons for the adoption of standard form
contracts. In many cases the actual conclusion of the contract is
in the hands of relatively junior persons who are not trained in B
contract negotiation and drafting and there are enormous
economies to be· effected if the company only employs one (or at
most a few) standard forms of agreement. As regards the frrst class,
we should note that whole areas of English commercial practice
are governed by the prevalent standard forms which exist in a C
symbiotic relationship with the courts, so that an historical analysis
of the development of a particular form would show that the clause
represented a response to a decision in the past.

In the•complex structure of modern society the device of the
standard form contract has become prevalent and pervasive. The D
French, though not the English, lawyers have a name for it.

The term contract d' adhesion is employed to denote the type
of contract of which the conditions are fixed by one of the
parties in advance and are open to acceptance by anyone. E
The contract, which frequently contains many conditions is
presented for acceptance en bloc and is not open to discus-
sion. n

Similar observations are found in Anson's Law of Contract, 26th Edn. at
page 136 the learned author has dealt with the question pertaining to F
construction of terms in a written contract as under :

"3. 'An agreement ought to receive that construction which its
language will admit, which will best effectuate the intention of the
parties, to be collected from the whole of the agreement, and
greater regard is to be had to the clear intent of the parties than G
to any particular words which they may have used in the expression
of their intent.' The proper mode of construction is to take the
instrument as a whole, to collect the meaning of words and phrases
from their general context, and to try and give effect to every part
of it. However, if the words of the particular clause are clear and H
308 SUPREME COURT REPORTS [1997) SUPP. 3S.C.R:

A unambiguous, they cannot be modified by reference to the other ·
clauses in the agreement."

Dealing with the Construction of Exemption Clause found in standard form
contracts t~e learned author at page 144 has made the following pertinent
observations :
B
"Assuming that reasonably sufficient notice of a standard form
contract has been. given to the person who receives the printed
document, we must now consider the way in which the terms of
the document are to be construed. Such is the disparity between
c the bargaining power of large enterprises (both private and public)
and the consumer that terms have often been imposed upon him
which are onerous or unfair in their application and which exempt
the party putting forward the document, either wholly or in part,
from his just liability under the contract. This may be one of the
reasons why, at common law, the Courts evolved "certain ca~ons of
D
construction which normally work in favour of the party seeking
to establish liability and against the party seeking to claim the
benefit of the exemption. The impression should not be given,
however, that appliqtion of these canons of construction render
exemption clauses generally ineffective. If the clause is ap-
E propriately drafted so as to exclude or limit the liability in question,
then the Courts must (subject to the powers now conferred on
them by the Unfair Contract Terms Act 1977) give effect to the
clause. Moreover, as between businessmen, exemption clauses can
perform a useful function in that they may, for example, anticipate
F future contingencies which hinder or prevent performance, estab-
lish procedures for the making of claims and provide for the
allocation of risks as between the parties to the contract. In a
business transaction, the effect of an exemption Clause may simply
be to determine which of the parties is to insure against a particular
risk. Exemption clauses in business transactions are not necessarily
G unfair or inequitable. But even in business transactions the Courts
must be satisfied that the clause, on its wording, does have the
effect contended for by the person relying on it, that is, the party
seeking to exclude or restrict his liability.

H (a) Strict interpretation of the clause.
·.
PAWAN ALLffl'.SANDCASTING P.vr. LTD.>. U.P. STATE EL~CTRICITYBD. [S.B. MAJMUDAR, l.J 309

'If a person is under a legal liability and wishes to get rid of it, . A
he ·can only do so by using clear words.' The words of the exemp-
tion clause must, therefore, exactly cover the liability which it is
sought to exclude. S9 an exemption clause in a contract excluding·
liability for 'latent' defects' will not exclude the condition as to
fitness for purpose implied by the Sale of Goods Act; ... " ·B

·Our attention was also invited to a decision of a Division Bench of the
Rajasthan High Court in the case of D.C.M. Ltd. and Another v. Assistant
Engineer (HMT Sub-Division), Rajasth.an State Electricity Board, Kota and
Another, AIR (1988) Rajasthan 64. In that. case a Division Bench speaking
through J.S<Verma, CJ. (as His Lordship then was) h~d to consider the C
question whether the Rajasthan State Electricity Board functioning under
th~ Electricity Act of 1910 and the Electricity (Supply) Act, 1948 could in
· exercise 9f its powers under Section 49 of the Supply Ai:t require .the
consuiner- ·appellant before them to pay by way of minimum charges at ·
nearly-three times the normal rate charged from other ·consumers being D
heavy industries consuming heavy demand of 25 M;W. Even though the
appellant before them, D.C.M. Ltd., had entered into su_ch an agreement
with the Board it was held that the said term in the agreement was
unreasonable and consequently the demand of such excessive minimum
consumption charges was not justified and could not be countenanced on
the touchstone of Article 14 of the Constitution of Indil! as the Electricity E
Board was an instrumentality of the State. The Court in this connection
had to consider the nature of the written agreements entered intci by the
consumers of the electricity with. the Board which was a monopolist and
the further question whether an appar.ently inconceivable and unjust term·
in the written ·cont(act could be enforced by the Board against the con-
sumer. Frowning upon impugned clause 16(c) in the written agreement got F
executed by the Board· from the c~nsumer the following pertinent .obser.-
vations were made by J.S. Verma CJ. in paragraph 24 of the Report : ·

": .. We may further add that for. the reasons already given it is
obvious that the giving of such an undertaking by execution of the G
agreement was no doubt a conscious act of the petitioner, but in
the circumstances it cannot be held to indicate the petitioner's
willingness to be bound by such an onerous condition, if it had the
option. It is obvious that there was no option to the petitioner
and, therefore, it cannot be said that the petitioner voluntarily and
willingly chose and accepted the more onerous condition of a H
310 SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A higher rate instead of the normal rate for payment of minimum
charges. The willingness to accept such an onerous term with free
consent can be assumed only where a consumer has an option or
in other words he can get the supply of electricity he wants even
without agreeing to any such term specified by the Board for being
incorporated in the written contract without execution of which
B the consumer cannot insist on supply of electricity to him. It is not
the Board's case that it was willing to honour the petitioner's
requisition and m~e the supply even without the petitioner un-
dertaking in writing to pay minimum charges according to Cl.
16(c). How can it then be said that the petitioner willingly accepted
c this term when the fact is that it had no option in the matter ....."

We are of the view that the aforesaid observations of the Rajasthan High
C:ourt are in accordance with the correct legal position. In the light of the
above legal position, we have to appreciate the express terms found in the
written agreements of identical nature entered into by the appelfa,,c-new
D industrialists when they were supplied electric connections for the first time
at their factory premises by the Board. When we turn to the express
terminology of these written agreements as found in Clause 7(a) extracted
earlier, it becomes at once clear that the consumer had agreed to pay for
the supply .· of electric energy at the rates enforced by the supplier from
E time to time as may be applicable to the consumer. So for as this clause is
concerned it runs parallel to Section 49( 1) which entitles the Board to fix
the tariff for sale of electricity to the consumers. Therefore, in absence of
such a clause the requirement of Section 49(1) would have called upon the
consumer to pay for the supplied electricity at the rates fixed from time to
time by the Board. It would, however be a uniform tariff fixed by t!1e Board
F for such class of consumers. So far as Clause 7(b) is concerned it deals
with the existing rate schedule annexed to the agreement. Moment we turn
to the rate schedule annexed to the agreement we find diverse items
dealing with the computation of electricity bill as found in Items 1 to 7.
The Board would be entitled to bill the consumer in the light of the rates
G mentioned and the procedure prescribed for billing them as laid down in
these items 1 to 7. The 5th item at page 94 as found in the rate schedule
annexed to the agreement is worth nothing. It deals with 'Extra charge of
rebate'. It contemplates a type of general rebate. It reads as under :

H "5. Extra charge of rebate.
PAWAN ALLOYS AND CASTING PVT. LTD. v. U.P. STATE ELECTRICITY SD. (S.S. MAJMUDAR, J.] 311

(a) In case of supply given at 400 volts the consumer shall be A
required to pay an extra charge of 7.5 per cent on the amount
calculated at the rate of charge.

(b) A rebate of 5 percent on the amount calculated at the rate of
charge will be admissible if supply is taken at voltage above 11 KV B
and upto 66 KV."

The said clause in the rate schedule leaves no room for doubt that while
computing the bill of electricity consumed by the consumer the Board will
be entitled to require the consumer to pay extra charge as contemplated
by Item 5(a). Converse is the situation found in Item 5(b) which deals with C
giving a rebate of 5% under circumstances contemplated therein. This
rebate clause has nothing to do with incentives. It is not an incentive rebate
but it is a rebate available to all consumers of electricity if circumstances
mentioned in Item 5 are satisfied. Then follows Item 6 which deals with
'Minimum consumption guarantee'. Next is Item 7 dealing with 'Deter- D
mination of demand'. It refers to the procedure for preparation of bill. And
then follows Item 8 dealing with 'Incentive to new industries', first para-
graph whereof stood deleted as noted earlier by the impugned notification
with effect from 1st August 1986. When these relevant items and the rate
schedule which is an annexure to the agreement are read in a comprehen-
sive manner it becomes obvious that what the signatory to the agreement E
was trying to agree as per Clause 7(b) was that the rates of electricity
charges as computed in the light of diverse items 1 to 7 in the rate schedule
would be paid by the consumer. Item 8, though part and parcel of the rate
schedule, does not deal with the computation of bill for consumption of
electricity in the light of the general tariff. rates as fixed by the Board·. It F
deals with entirely a different topic of an.incentive rebate. A close look at
Item 8 of the rate schedule clearly indicates that this development rebate '
of 10% was to be paid on the amount of the bill pertaining to the energy
charge as computed under Items 4 and 7 which were mentioned earlier in
the rate schedule. Once the stage of Item 7 was readied the ·total bill
regarding consumption of electricity would be ready for being delivered to G
the consumer and on that total amount of bill incentive development rebate
of 10% would be available as per Item 8.

Therefore, it cannot be said that when Clause 7(b) referred to rate
schedule applicable to the consumer it contemplated even the scheme of H
'
I
312. SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
. . .
A devel~pment .rebate. The rate schedule flicing the general rates of charges
·of electricity would, as mentioned in. Items 4. and 7, result in preparation
of the bill. At that st~ge fixed schedule rates for charge of electricity would
.complete their task and would get exhausted as the bill would be prepared
in that light after following the procedure laid down by these items. Ad· hoc
B lumpsum·10% development rebate on the total bill which was treated as
an incentive to new. industries in Ite.m 8, therefore, would obviously go
beyond the scope of computation of electricity consumption bills as pe·r the
rate schedule. ·

· It must, therefore, be held that. Clause '7(b} of the agreement was not
C even remotely connected with the question of development rebate which
stood on its own and had no part to play i.n the computation and prepara-
. tion of the bill for electricity consumption charges. Item 8 operated at a
stage posterior to the computation of electricity charges bill in the light of
the rate schedule. Tl:erefore, when the term 'rate. schedule' is employed in
D Clause. 7(b) of the agreement it only deals with the general rates for the
charge.of electricity as fixed by the Board from time to time under Section.
49(1). On the same line of reasoning the words 'rate schedule' as employed
by Clause 7(c) have to be understood. Consequently what the consumer as
a contracting party agreed under Clause 7(b) ·Was to the effect that the
general rate schedule as mentioned in Annexure 2 at the time of the
E execution of the agreement could be .revised and that the general rates of
electricity charges could be either increased or decreased by the supplier
from time to time and to that exercise undertaken by the. Board, that is the
supplier of the electricity, the consumer would have no objection as a
contracting party. The term 'revis~on of rate schedule' as employed by
F Clause 7(c) itself indicates that the rate.s of charges of electricity .being
general .tariff could be either increased or decreased. That has nothing to
do with the scheme of incentive· development rebate which is entirely a
different concept and withdrawal of development rebate cannot be said to
be an upward revision of the general rate schedule for charging the
consu~er while being supplied the electricity. These types of standard
G contracts have to be examined in the light of the express language found
therein and by implication nothing can be read which obviously would be
miles away from the real intention of the persons signing such contracts in
standard forms.

H It is difficult to appreciate how the High Court could persuade itself
PAWAN ALLOYS AND CASTING PVT. LTD.'· U.P. STATE ELECTRICITY BD. [S.B. MAJMUDAR,l.J 313

to hold in the light of Clause 7(c) that thb appellants while signing such A
agreements for taking electricity supply for the first time for their new
industries as if by sidewind agreed of give up their right to claim
development rebate by handing over. on a platter an absolute right to the
Board to totally withdraw such development rebate at any time it liked
before the three years' period, for which incentive was meant to be B
guaranteed, would have expired. On the express language of Clause 7(a),
(b) and (c) such a conclusion is impossible to be arrived at.

It is also necessary to visualize that under the incentive to new
industries scheme as offered by the Board as per Item 8 found in the rate
schedule annexed as Annexure 2 to tl>e agreement, the Board had agreed c
that the new industrial units will be given for a period of three years from
the date of commencement of supply, 10% development rebate on the
amount of the bill pertaining to the energy charges incurred by the
concerned consumers. It is also obvious that before any new industrial unit
can get commencement of supply of electricity it has to enter into such D
standard form agreement which included Clause 7(a), (b) and (c). For the
very purpose of the incentive to new industries the starting point would be
entering into such a written agreement on the basis of which the electric
energy supply would commence at these new industrial units.
E
It would be totally absurd and incongruous to suggest on behalf of
the Board that on the one hand it guaranteed to the new industrial units
for a period of three years from the date of commencement of supply 10%
development rebate of the total amount of the bill and on the other hand
moment such supply started pursuant to the written agreement the very F
incentive could be withdrawn by it from its inception as new industrial unit
had to sign a written agreement containing Clause 7 (a), (b) and ( c). If that
submission on behalf of the Board which appealed to the High Court is
accepted a most incongruous, unreasonable and absurd result would
follow. It can then be said that the Board on the one hand had given
incentive to new industries by guaranteeing development rebate of 10% on G
the total bill of consumption of electricity for a period of three years from
the date of commencement of supply but from the very inception of that
period the Board on the other han<l as per the very agreement with the
promisee was enabled to immediately withdraw the very same development
rebate in exercise of its contractual powers as per clause 7(c) of that very H
314 SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.
A agreement. If that happens the Board would be giving on the one hand
incentive to new industries by way of development rebate of 10% and by
another hand would immediately and almost simultaneously be
withdrawing the said incentive by pinning down the consumer to the terms
· of the agreement as found at clause 7(a), (b) and (c). This would result in
B a total exercise in futility. The incentive development rebate scheme would
in such an eventuality be still-born. It is also easy to visualize that a new
industrial unit which spends large amounts for establishing its
infrastructure and gets lured in the light of the representation held out by
the Board and establishes its plant and machinery in the new unit, would
C not simultaneously and voluntarily agree by signing such an agreement with
the Board to give up the very same benefit of incentive by permitting the
latter to withdraw it at any time it likes. That would be doing violence to
common sense and business approach of an ordinarily prudent
businessman. No businessman in his senses would ever voluntarily to such
an absurd, incongruous and inconsistent predicament.
D
It is, therefore, too much to imply any written consent on the part of
a prudent consumer who established new industrial units to at once give
up the incentive of development rebate guaranteed in his favour by the
Board. Consequently it is not possible for us to endorse the reasoning
E which appealed to the High Court which decided Issue No. 2 against the
appellants.

We, therefore, hold that the new industrial units while signing the
written agreements and agreeing .to Clause 7(a), (b) and (c) found in the
standard contract forms had only undergone. a formality of signing such
F agreements before the electric supply could commence at their new units
and such clauses only re-affirm the statutory power of the_ Board under
Section 49(1) of the Act and had nothing to do with the scheme of incentive
development rebate. They had not voluntarily or by even remotest chance
agreed to give up the benefit given to them by clear representation held
G out by the Board as per Item 8 of the rate schedule in the light of the
earlier three notifications promulgated by the Bard in exercise of its powers
under Section 49 read with Section 78A of the Act.

It must also be held that they have neither expressly nor impliedly
agreed that the Board will have absolute power and discretion to withdraw
H thi~ incentive of development rebate at any time prior to the expiry of three
PAWAN ALLOYS AND CASTING PVT. LTD." U.P. STATE ELECTRICITY BO. [S.S. MAJMUDAR, l.J 315
years for which it was guaranteed to them by the earlier representation A
held out by the Board and which representation resulted into promissory
estoppel against the Board and in favour of the appellants ..

In this connection we may note one aspect of the matter. As per
Clause 7( c) the Board could revise upwards the general rates of electricity B
charges at any time it liked. This had nothing to do with the scheme of
incentive rebate. Learned advocates for the appellants conceded this
·authority of the Board. This authority was clearly available to the Board as
per Clause 7(c) of the agreement read with Section 49 of the Act. But this
increase of general tariff rate would not adversely affect incentive available
to new and infant industries. C

Let us take an example to clarify this aspect. If a general rate of
electricity tariff for a given class of industries is Rs. 100 per KW and if 10%
rebate by way of development incentive is given to new industries, the latter
will pay Rs. 90 per KW while other well established industries will pay Rs. D
100 per KW. Thus the goods manufactured by new industries would be
cheaper costwise as compared to goods manufactured by well established
industries in the region. That will enable the newly established industries
to compete more effectively with their senior counterparts. Now if the
general rate is increased by the Board even within the three years of the
currency of the incentive scheme, to Rs. 200 per KW all the well established E
industries will have to pay Rs: 200 per KW for the electricity consumed
while the new industries which were earlier getting infancy benefit will ·pay
Rs. 180 per KW as 10% rebate will still be available to them by way of
development rebate. Thus benefit of infancy protection will remain avail-
able to the new industries for competing with the old ones even if general F
tariff rate gets revised upwards for a given class of consumers comprising
of new as well as old industries in the field. New industries will, therefore,
despite such increase in general tariff rate will be able to sell their products
in the same manner as compared to the old established industries as they
were doing earlier. Thus the cloak of protection available to them against G
old competitors in the field will still be available despite any upward
revision of the general tariff by the Board in exercise of its powers under
Clause 7( c) of the agreement read with Section 49 of the Act. Consequently
the provision of revision of general rates under Clause 7( c) of the agree-
ment cannot be treated to be conferring any further power on the Board
to tinker with the development rebate provision within the guaianteed H
316 SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A period of three years as wrongly assumed by the High Court. Point No. 2
is decided accordingly in the negative in favour of the appellants and
against the Board.

Point No. 3
B
So far as Point No. 3 is concerned the appellants are on a weaker
footing. It is true that by earlier notifications dated 29th October 1982, 13th
July 1984 and 28th January 1986 the scheme of incentives by way of
development rebate of 10% was continued to be offered to new industries
to be established in the plains of State of U.P. Identically worded item 9
C in the earlier notifications and item 8 in the last notification dated 28th
January 1986 had continued the said incentive scheme. By virtue of the last
notification of 28th January 1986 it was clearly laid down by the Board that
all new industries which might be established on and after 28th January
1986 will earn this development rebate for the three years period from the
D date of commencement of supply of electricity. It was also provided that
all the existing new industries which might have earlier been established
before 28th January 1986 and which had still some part of unexpired period
of three years of development rebate available with them also were given
the continued benefit of the development rebate for the unexpired period
from 1st February 1986. What the impugned notification of 31st July 1986
E sought to do was to delete this first paragraph of item 8 of the notification
of 28th January 1986. The result was that from 1st August 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 respon-
F dent-B?ard that in the light of the notification of 31st July 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% was
G available to the existing new industries on 31st July 1986, they would lose
that benefit of development rebate for the rest of the unexpired period with
effect from 1st August 1986 onwards. Hence it is not possible to agree with
the contention of learned counsel for the appellants that the said notifica-
tion had any retrospective effect. It was purely prospective and had
resulted into two consequences - (i) any new industry which entered into
H an agreement with the Board for supply of electricity for the first time on
PAWAN ALLOYS AND CASTING PVT. LID.'· U.P. STATE ELECTRICITY BD. (S.B. MAJMUDAR, J.) 317

and after 1st August 1986 could not get the benefit of incentive of 10% A
development rebate and (ii) all existing new industries which were armed
with the guarantee of 10% development rebate under the earlier notifica-
tions and had unexpired period out of the three years from the date of
earlier commencement of supply of electricity to their concerns lost the
benefit for that unexpired period which otherwise would have been avail- B
able to them from 1st August 1986 onwards till the entire three years'
period which had already commenced would have been over. Both these
effects of the notification of 31st July 1986 were purely prospective in
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 C
answered in the negative.

Point No. 4

In view of our answer to the aforesaid three points, Point No. 4 does D
not survive for consideration.

As a result of the aforesaid discussion on these points the conclusion
becomes· inevitable that the appellants are entitled to succeed. It must be
held that the impugned notification of 31st July 1986 will have no adverse E
effect on the right of the appellant-new industries to get the development
rebate of 10% for the unexpired period of three years from the respective
dates of commencement of electricity supply at their units from the Board
with effect from 1st August 1986 onwards till the entire three years period
for each of them got exhausted. This result logically follows for the F
appellants who have admittedly entered into supply agreements with the
Board as new industries prior to 1st August 1986. However those
appellants who entered into such agreement after 1st August 1986 cannot
get benefit of development rebate any longer after 1st August 1986. This
conclusion of ours pertains to the question which is no longer res integra.
It is already so held by this Court in S.L.P. (C) No. 11906 of 1994 and G
others decided by a Bench of this Court consisting of A.M. Ahmadi, CJ.
(as His Lordship then was) and S.P. Bharucha, J., in the case of Hotz Hotel
Pvt. Ltd. Etc. Etc./Vaidya Ply Board & Anr. v. U.P.S.E.B. & Anr. Etc. Etc.
on 3rd October 1994. We find that the appellant in Civil Appeal No. 1713
of 1991 executed agreement with the Board for the first time on 5th May H
318 SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A 1987. Similarly appellant in Civil Appeal No. 3534 of 1991 executed
agreement with the Board for the first time after 1.8.1986. These appellants,
therefore, will not be entitled to get out of the sweep of the impugned
notification. These appeals will, therefore, have to be dismissed.

B It is obvious that after the expiry of the aforesaid three years' period
available to them under the earlier notifications the appellants would be
liable to pay full electricity charges billed to them by the Board without
any development rebate as after the expiry of the said period they would
not be protected under any promise by the Board. On the contrary from
31st July 1986 the Board made it very clear to all concerned that no new
C industry thenceforth would be entitled to any development rebate on
getting new supply connections. Thus the appellants also will stand at par
with all other industries and will not get benefit of any further development
rebate incentive after the aforesaid three years' period in case of each of
them had worked itself out. In fairness to the appellants it must be stated
D that even they did not claim any such extra benefit. It is also true that the
present proceedings are confined only to the claim of 10% development
rebate on the bills of consumption of electricity _which according to the
appellants is available to them for the unexpired period of three years from
1st August 1986 onwards and which development rebate according to the
E Board was not available to them.

However before parting with the present appeals we have to clarify
two ancillary aspects pertaining to the controversy in these proceedings. At
the time of issuing notice in the SLPs as noted earlier the recovery of
F development rebate charges was not stayed in most of the matters, though
as we are informed in some of the matter even that stay came to be
indirectly granted. Those appellants who were protected by the grant of
stay of recovery of the impugned development rebate charges naturally will
not be entitled to claim any refund from the Board even though they
succeed in these appeals and the respondent-Board will be permanently
G restrained from recovering the disputed development rebate charges from
them.

However so far as the appellants who were not granted stay by this
Court and who have already paid up the disputed development rebate
H charges to the Board in the light of the High Court's common decision are
PAWAN ALLOYS AND CASTING PVf. LTD.'· U.P. STATEELECTR!Cfrv BD. [S.B. MAJMUDAR.J.] 319

concerned, it must be stated that they represent two types of industries • A
(i) those appellants whose industries are still running and who continue to
be enrolled as consumers of electricity by the Board; and (ii) those of the
appellants who had established their industries but by now who might have
ceased to be consumers of electricity from the respondents in any of the
areas ~thin.the jurisdiction of the Board on account of closure of their B
industries in the State ofU.P. So far as the first category of such appellants
is concerned, instead of directing refund of the amount of disputed
development rebate charges which they might have paid to the Board it
will be in the fitness of things to direct the Board to credit this amount to
the respective running accounts of such appellants concerned and the
future bills of electricity which the appellants may be required to pay to C
the Board may be adjusted from thi~ credited account so that the appel-
lants as consumers may not have to pay all future bills of electricity
consumed by their industries till the entire credit out standing in their
respective accounts in this connection gets exh.austed. The Board shall give
written intimation to the appellants concerned regarding posting of such D
credit entries in their respective accounts.

So far as the second category of appellants are concerned as they are
no longer consumers of electridty from the Board in any part of the State
of U.P. appropriate order will be to direct the Board to return the disputed
development rebate charges collected from them from 1st August 1986 E
onwards for the unexpired period of three years within three months of the
receipt of a copy of this order at its end.

Now remains the question of interest to be payable to the appellants
on the disputed amount which is either to be credited to their accounts or F
refunded to them as per the aforesaid directions. Shri Dave, learned senior
counsel for the Board was right when he contended that all these appel-
lants are commercial concerns and when they purchase electricity the cost
of electricity would normally not be borne by these industrialists but they
would see to it that the said expenditure enters their cost structure and
pricing so that ultimately the burden would be passed on to the purchasers G
of the items manufactured by them by utilising the electric supply pur-
chased from the Board. Even though the appellants might have paid these
disputed amounts to the Board as stay was refused by this Court so far as
development rebate charges are concerned, they would in all probability
have spread the said burden in a phased manner by including it in the cost H
320 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A structure on the basis of which they would have worked out their future
pricing for the goods manufactured by them and sold to consumers or
outside wholesale dealers. Consequently, according to Shri Dave, on the
principle of unjust enrichment even they would not be entitled to get refund
of the amount, much less any interest thereon.

B So far as the refund question is concerned, on the basic principle of
restitution and in the absence of any clear evidence or even averment on
this aspect it is not possible for us to come to any definite finding that all
the disputed amounts of development rebate charges would have entered
the cost structure of the appellants after the earlier three years period had
C run out. As we have seen earlier, the dispute centered round only the
unexpired period of three years from the commencement of electric supply
for t!i.ese new industries as was available to them after 1st August 1986.

Even assuming about two and a half years period would have been
D available to some of them at the highest, that period would have been over
by the beginning of year 1989 and the stay was refused by this Court on
6th February 1991. Till that time all the appellants were protected by the
interim relief earlier granted by the High Court. Consequently it would not
be possible to clearly visualize with any degree of certainty that for the
goods which the appellants might have manufactured after February 1991
E they would have spread over in a phased manner burden of the past
disputed development rebate charges for a period which already got ex-
hausted at least two years before 1991.

However this aspect may have some relevance from the practical
p viewpoint when we have to deal with the claim for interest on disputed
amounts raised by worldly businessmen like the appellant-industrialists
carrying on commercial transactions. Their claim for interest, in our view,
deserves to be rejected in exercise of our powers under Article 142 of the
Constitution of India on the peculiar facts and circumstances of these cases
as indicated earlier when at least the possibility cannot be ruled out that
G while pricing the manufactured goods in future the appellants, as shrewd
businessmen and men of commercial world, would have seen to it that
ultimately the burden borne by them by way of recovery of development
rebate charges gets passed on to their consumers in long run and their
profits would remain in tact. Keeping in view this possibility we deem it fit
H in interest of justice and in exercise of our powers under Article 142 of the
PAWAN ALLOYS AND CASTING PVT. L'ID. '· U.P. STATl!ELECTRICITYBD. (S.B. MAJMUDAR,J.) 321

Constitution of India to desist from mulcting the Board with interest on A ,
the refund of development rebate charges which the Board has to make
available to them pursuant to the present order.

We, however, make it clear that the Board shall, within a period of
three months, for appellants falling in category (i) above give full credit in
their respective running accounts for the disputed amount of development B
rebate charges which the Board recovered from them after this Court
denied interim relief to them on 6th February 1991 and within the same
period of three months it will refund the principal amount of recovered
disputed development rebate charges without any interest to the appellants
falling in category (ii) who might have ceased to be consumers of electricity C
from the Board in any part of the Stat'e of U.P. It is further directed that
in case such credit is. not given within that period or refund is not made
available within that period to the appellants falling in these respective two
categories then on the expiry of the period of three months' such amount
shall start earning interest at the rate of 12% p.a. for the benefit of the
appellants concerned till actual effecting of credit entries in their respective D
accounts or till actual payment to the appellants concerned, as the case
maybe.

All appeals (except Civil Appea!Nos.1713of1991and3534of1991)
are allowed accordingly. The common judgment of the High Court in these E
appeals is sci aside. Writ petitions filed by these appellants will stand
allowed in the aforesaid terms. However Civil Appeal Nos. 1713 and 3534
of 1991 will stand dismissed. In the facts and circumstances of the cases
there will be no order as to costs in each of these appeals.

S.V.K.I. Appeals allowed. p