Holding

The Supreme Court held that the principle of promissory estoppel applies to the hill‑development rebate granted under Section 49, rendering the corporation estopped from revoking the 33.33% concession until the Uttar Pradesh Electricity Reforms Act, 1999 came into force, after which the concession ceased.

Summary

The Uttar Pradesh Power Corporation Ltd. granted a 33.33% hill‑development rebate on electricity charges to new industrial units in hill districts through notifications issued under Section 49 of the Electricity (Supply) Act, 1948, for a period of five years. Subsequent notifications in 1998 and 1999 reduced the rebate to 17% on demand charges, prompting the affected entrepreneurs to file writ petitions alleging that the corporation was estopped from withdrawing the benefit. The Allahabad High Court held the corporation bound by the doctrine of promissory estoppel and ordered continuation of the original rebate. On appeal, the Supreme Court examined whether promissory estoppel applies to concessions created by delegated legislation, whether a public‑interest justification or the General Clauses Act permits revocation, and the effect of the Uttar Pradesh Electricity Reforms Act, 1999. The Court affirmed that the concession, being a representation on which the entrepreneurs relied, cannot be withdrawn except in a genuine public‑interest scenario or by a subsequent statute, and therefore the rebate survived until the 1999 Act came into force, after which it ceased. The appeal was dismissed, upholding the High Court's decision.

Issues considered

Whether the doctrine of promissory estoppel applies to a concession granted by a notification under Section 49 of the Electricity (Supply) Act, 1948.
Whether a State‑owned corporation may revoke such a concession in the public interest or under the General Clauses Act.
Whether the Uttar Pradesh Electricity Reforms Act, 1999, as primary legislation, overrides the earlier concession and precludes estoppel.
Whether there was sufficient public‑interest justification for the reduction of the rebate.

Legislation cited

Subjects

promissory estoppeldelegated legislationelectricity tariffhill development rebatepublic interestU.P. Electricity Reforms Act 1999administrative lawestoppel against State

Judgment

A U.P. POWER CORPORATION LTD. & ANR.
v.
SANT STEELS & ALLOYS (P) LTD. & ORS.

B
DECEMBER 10, 2007
,
[A.K. MATHUR AND MARKANDEY KAT JU, JJ.]

Electricity (Supply) Act, 1948-s. 49-Notification under-
Concession of 33.33% development rebate to new industrial units in
c hill areas for jive years from the date of commencement ofsupply of
electricity-Subsequent Notifications reducing the concession to
I 7'Yo-Principle of promissory estoppel-Applicability of-Held:
Notification was in the nature ofdelegated legislation and not an Act
.framed by State Legislature-In such delegated legislation revocation
D is permissible, iflarger public interest is involved or an Act is passed
by legislature-On facts, no evidence to make out the case ofpublic
interest to revoke the concession granted-Thus, principle of
promissory estoppel applicable-However, units entitled to such
benefits till the Act of 1999 came into force since after coming into
E force the Act of1999 no such concession was granted-Administrative
law-Delegated legislation-UP. Electricity Reforms Act, 1999-
Notifications dated 18.1.1992, 15. 7.1994, 18. 6.1998 and 25.1.1999..
Administrative law-Promissory estoppel-Applicability of,
against State or its instrumentalities-Held: Depends on the facts of
F each case-When State Government makes representation showing
benefits to entrepreneurs and entrepreneurs make investment, then
revocation ofsuch benefits by State Government would be unfair and
arbitrary-Consideration ofpublic interest and that there cannot any
estoppel against a Statute are exceptions.
G
The appellant-U.P. Power Corporation Ltd., issued Notifications
and allowed 33.33% hill development rebate in consumption of \
energy to the new industrial units for a period of five years from the
date of commencement of the supply of the electricity. The
H 1160
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1161
ALLOYS(P)LTD.
entrepreneurs established industrial units in the hill areas after A
incurring huge investments. By subsequent Notifications, the
appellant-Corporation restructured the tariffs and the concession
was reduced from 33.33% to 17%. The entrepreneurs filed writ
petitions challenging the Notifications. The Division Bench of the
High Court allowed the writ petitions holding that the appellant was B
bound by the principle of promissory estoppel and could not revoke
the benefit of the concession in consumption of energy given to the
writ petitioners for establishing industries in the hill areas. It directed
the appellant-Corporation to issue electricity bills to the writ
petitioners after allowing 33.33% hill development rebate on the c
total amount of bill for the remaining unexpired period of five years.
Hence the present appeals by the appellants-U.P. Power Corporation
Ltd.
Appellant-U.P. Power Corporation Ltd. contended that the
notifications modifying the rebate were issued in exercise of the D
statutory provisions under section 49 of the Electricity (Supply) Act,
1948; that there was large scale theft of energy in the State ofU.P.;
that the High Court failed to consider the public interest, specifically
pleaded by filing an affidavit; that by virtue of the U.P. Electricity
Reforms Act, 1999, the new tariff was fixed from August 2000-2001 E
by the Commission and no estoppel against the Statute could be
pleaded after the Act of1999 having come into force; that it was not
in public interest to continue the benefit to these industries located
in hill areas; that the entire benefit was not withdrawn, the benefit
was rationalized and as a result the energy consumption of these units F
increased to manifold; and that the whole exercise ofrestructuring
the rebate was done in the public interest only.

Respondent-writ petitioners inter alia contended that these
concessions were given to the hill areas in pursuance to the direction G
by the State Government in exercise of power under section 78A of
/ the Act; that under section 49 of the 1948 Act, there is no such
contemplation that the exemption could be revoked; that the change
in the tariff would be unconstitutional, unfair, arbitrary to the citizens
who acted on the promise made by the appellant-Corporation; that
H
1162 SUPREME COURT REPORTS [2007] 12 S.C.R.

A the State Government/Corp. is estopped from withdrawing these ..
concessions; that the concession which were given had a vested right
and it could be revoked by the same Statute; that the revocation was
not on the basis of general public interest but only on account of
losses the Corporation was trying to make up; and that there is no
B allegation of theft in the hill areas.

Disposing of the appeals, the Court

HELD: 1.1. The Court's approach in the matter of invoking the
principle of promissory estoppel depends on the facts of each case.
C But the general principle that emerges is that once a representation
has been made by one party and the other party acts on that
representation and makes investment and thereafter the other party
resiles, such act cannot be stated to be fair and reasonable. When
the State Government makes a representation and invites the
D entrepreneurs by showing various benefits for encouraging to make
investment by way of industrial development of ackvard areas or
hill areas, and the entrepreneurs on the representations so made
bonafidely make investment, and thereafter, ifthe State Government
resile from such benefits, then it certainly is an act of unfairness and
E arbitrariness. Consideration of public interest and the fact that there
cannot any estoppel against a Statute are exceptions. [Para 17)

1.2. It is true that the Authorities have a right to revoke the
benefit extended but if the other party has suffered on that account
then such representation will be against the public policy and the
F morality. Notification issued under Section 49 of the Act of1948 for
giving the benefit of exemption for the hill areas was in the nature
of delegated legislation and not an Act framed by the State
Legislature. Therefore, a distinction has to be made between the
delegated legislation and the primary legislation framed by the
G Legislature. In Section 49 there is no specific stipulation that the
notification issued under Section 49 of the Act could be revoked at
any time. So far as the primary legislation is concerned, if the Act is '
passed by State Legislature and denies the benefit by the primary
legislation then no estoppel can be applied against that Act but, so
H far as the case of delegated legislation is concerned, where delegated
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1163
ALLOYS (P) LTD.
authorities pass certain notification in exercise of their delegated A
authority there is no contemplation mentioned in the Act itself that
it is capable of being revoked at any time. Then such notifications
cannot be treated at par with the primary Act passed by the State
Legislature. The State is fully competent to pass an Act
prospectively as well as retrospectively but retrospectivity to the B
extent of aforesaid nature cannot stand. Therefore, this distinction
has to be borne in mind. (Para 18) [1192-G, H; 1193-A, B, C, DJ

1.3. It is highly against the public morality that the incumbent
who felt persuaded on account of the representation made by the
State Government that they will be given certain benefits and they C
acted on that representation, it docs not behove on the part of the
appellant-Corporation to withdraw the said benefit before expiry of
the stipulated period by issuing the notification revoking the same
which the respondents were legitimately entitled to avail. In such a
situation the principle of promissory estoppel which has been evolved D
by the Courts which is based on public morality cannot permit the
State to act in such an arbitrary fashion. [Para 18) [1193-E, F, G)
1.4. The grounds for the purpose of public interest which have
been pleaded; hardly involve any public interest. They were more E
of a nature oflosses which the Corporation suffered and in order to
make these losses, these methods were evolved to reduce and to
make good of the losses. Restructuring benefitto 17% of the Tariff
4(A) (demand charges) were the factors which were aimed atto make
the losses good for the Corporation. This was not a case in which F
serious public repercussion was involved. As regards, theft of the
energy, if it was proved by cogent datas that as a result of giving
this benefit to the entrepreneurs in the hill areas, they were misusing
it or there was theft of the energy at a large scale by these persons
to whom the concession had been given then, of course, such factors, G .
if all the datas were brought on record, could have persuaded the
1 Court to take a different view of the matter. But simply because there
was theft of energy, it cannot be held that the revocation of such
concession could be said to be in public interest. Since the benefit
was given to these units in the hill areas, there should have been
H
1164 SUPREME COURT REPORTS [2007] 12 S.C.R.

A ovenvhelming evidence to show some malajide on the part of these
consumers which persuaded the Corporation to revoke it. If there
was no misuse of the energy by these units in the hill areas to whom
the concession had been granted then in that case it cannot be taken
that there was really public interest involved which persuaded the
B Corporation to revoke the same.
[Para 18) [1193-G; 1194-A, B, C, D, EJ

1.5. No person can be permitted to misuse the concession or
benefit and invoke promissory estoppel. Promissory estoppel is not
one sided affair, it is rather two sided affair. If one party abuses the
C concession then it is always open to the other party to revoke such
concession but if one party avails the benefit and is acting on the
same representation made by the other party then the other party
who has granted the said benefit cannot revoke the same under the
garb of public interest. Therefore, the revocation Notification cannot
D be upheld on the grounds that the revocation notification was issued
in public interest and that same has the flavour of the statute.
[Para 18) (1194-E, F, GJ
1.6. It is true that a detailed statement was given in various
paragraphs of the written statement filed by the appellant-
E Corporation before the High Court and unfortunately, the High
Court did not advert to these details. But, even on examining these
details and the points raised by the appellant justifying modification
of rebate, a contrary view from that taken by the High Court cannot
be arrived at. There is no gain saying that the public interest js
F paramount and the private interest has to be sacrificed for the larger
interest. But, after a survey of all the cases *on the subject, the
judicial consensus that emerges is that whenever the State has made
a representation to the public and the public has acted on that
representation and suffered economically or othenvise, then in that
G case the State should be estopped from withdrawing such benefit to
the detriment of such people except in public interest or against the
\
Statute. So far as the public interest as involved in the instant case,
it is found that there was no ovenvhelming evidence to revoke the
benefit granted to the industrial units in the hill areas. So far as the ·
H Statute is concerned, the notification was issued under Section 49
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1165
ALLOYS (P) LTD.
of the Act of 1948 and the same was revoked under Section 49 of A
the Act of 1948 though there was no such provision contained in
Section 49 that it will be open to the Corporation to revoke the same
but that could be possible by invoking the principle of General
Clauses Act. However, in such a delegated legislation the withdrawal
could only be permitted iflarger public interest is involved or if the B
Act is passed by legislature. [Para 18J (1194-G; 1195-A, B, C, DJ

*Pawan Alloys & Casting Pvt. Ltd., Meerut v. UP.State
Electricity Board & Ors., (1997J 7 SCC 251; Kasinka Trading& Anr.
v. Union ofIndia & Anr., [1995J 1SCC274; Sales Tax Officer & Anr
v. Shrijee Sales Corporation & Anr. v. Union ofIndia, [1997J 3 SCC C
398; Shree Durga Oil Mills & Anr., [1998J 1 SCC 572; State of
Rajasthan & Anr. v. Mahaveer Oil Industries & Ors., [1999J 4 SCC
357; Mis. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar
Pradesh & Ors., [1979J 2 SCC 409; MRF Ltd., Kottayam v. Asstt.
Commissioner (Assessment) Sales Tax & Ors., [2006J 8 SCC 702; State D
ofPunjab v. Nestle India Ltd. & Anr., [2004J 6 SCC 465 and Mahabir
Vegetable Oils (P) Ltd. & Anr. v. State ofHaryana & Ors., [2006J 3
sec 620, referred to.
1. 7. There cannot be estoppel against a statute. Since the E
benefits in question have not been recognised by the Act of 1999,
therefore, upto the date of coming into force of the Act of 1999, all
the benefits which were being given to the respondent- entrepreneurs
shall be protected by invoking the principle of promissory estoppel
but after coming into force of the Act of 1999, which is a primary F
legislation enacted by the State Legislature the benefits from the
date the Act has come into force, cannot be made available to the
respondents. [Paras 18 and 19J (1195-F, G, HJ

1.8. The action taken by the appellant-Corporation in revoking
the benefits given to the entrepreneurs in the hill areas will sadly G
,, reflect their credibility and people will not take the word of the
Governme.nt. That will shake the faith of the people in the
governance. Therefore, in order to keep the faith and maintain good
governance it is necessary that whatever representation is made by
the Government or its instrumentality which induces the other party H
1166 SUPREME COURT REPORTS [2007] 12 S.C.R.

A to act, the Government should not be permitted to withdraw from
that. This is a matter of faith. [Para 20] [1196-B, C, D]
1.9. The view taken by the Court on invoking the principle of
promissory estoppel is correct and the respondent- units would be
entitled to such benefits till the U.P. Electricity Reforms Act, 1999
B came in to force. Since after coming into force the Act of 1999 no
such concession has been granted, therefore, the concession would
survive till the Act of1999 came into force. [Para 21] [1196-D, E]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1215-
C 1216 of2001.
From the Judgment and Order dated 25.05.2000 of the High Court
of Judicature at Allahabad, in Writ Petitio Nos. 15292 and 15293of1999.
Dr. AM. Singhvi and Ratnakar Dash, Pradeep Misra, Amit Bhandari,
D Daleep Dhayani, Dinesh Kumar Garg and Anuvarat Sharma for the
Appellants.
Shanti Bhushan, R.F. Nariman, S. Ganesh, M.L. Bhat, Sudhir Kumar
Gupta, Anurag Pandey, Mihir Kumar Chaudhary, M.L. Lahoty, Paban
K. Sharma, Poonam Lahoty, Ramesh Singh, RaJ·eev Sharma, R.
E Santanam, Manjula Gupta, Irshad Ahmad, R.C. Verma and Pradeep Misra
for the Respondents.
The Judgment of the Court was delivered by
A.K. MATHUR, J. 1. These appeals are directed against the order
F dated 25.5.2000 passed by the Division Bench of the Allahabad High
Court whereby the Division Bench has allowed the writ petitions and
Clause 9(a) of the notification dated 25.1.1999 (Annexure-8 to the writ
petition) and clause 8(a) of the notification dated 18.6.1998 (Annexure -
7 to the writ petition ) were struck down. It was further directed that the
G writ petitioners were entitled to get hill development rebate of33.33%
on the total amount of the bill till the period of5 years from the date of
commencement of supply of the electricity to them and the appellant-
Corporation was directed to issue electricity bills to the 'A-Tit petitioners
after allowing 33.33% hill development rebate on the total amount of bill
H
U.P.POWERCORPORATIONLTD. v. SANTSTEELS& 1167
ALLOYS(P)LTD. [A.K.MATHUR,J.]
for the remaining unexpired period of five years. Aggrieved against this A
order, the present appeals were filed by U.P. Power Corporation
Ltd.(hereinafter referred to as Corporation.)
2. In order to dispose of these appeals brief facts may be detailed
below. Pursuant to industrial policy of the State ofUttar Pradesh, U.P .State B
Electricity Board (now U.P. Power Corporation Limited) [hereinafter to
be referred to as the ''Corporation'']- the appellant herein framed its tariffs
vide notifications dated 18.1.1992 & 15.7.1994. By these notifications
33.33% hill development rebate was allowed to the new industrial units
for a period of five years from the date of commencement of the supply
of the electricity. The above concession was initial! y valid till 31.3 .1995. C
It was later on extended up to 31.3.1997. It was alleged that all the writ
petitioners established industrial units in the hill areas after huge investments
and after executing agreement with the appellant~Corporation. But
subsequently, by notifications dated 18.6.1998 and 25.1.1999 the
concession which was earlier given was reduced by the appellant- D
Corporation from 33.33% to 17% which is arbitrary and not permissible
according to principle of promissory estoppel and in that connection
reliance was placed on a decision of this Court in Pawan Alloys &
Casting Pvt. Ltd., Meerut v. UP.State Electricity Board & Ors.,
[1997) 7 SCC 251. Written statement was filed by the appellant- E
Corporation and the appellant took the stand that the impugned tariffs
were new structured tariff in respect of HV-1 category of consumers and
it was empowered to frame tariff under the provisions of Section 49 of
the Electricity (Supply) Act, 1948 (hereinafter to be referred to as the
Act of 1948). It was also contended that this restructuring was necessitated F
in order to avoid loss to the Corporation due to theft of electricity and it
was done in the public interest.
3. In order to appreciate the controversy involved in the matter, it
will be appropriate to refer to the relevant tariff notification issued from G
time to time by the appellant- Corporation. The first in point of time is
the tariff vide notification dated 18.1.1992. Relevant provisions of clauses
read as under:
"4. Rate of Charge (Energy Charges):
H
1168 SUPREME COURT REPORTS [2007] 12 S.C.R.

A All KWH consumed in the month 200 paise per KWH.
5. Extra Charge or Rebate:
:..
(i) In case of supply given at 400 volts, the consumer shall be
required to pay an extra charge of 10 per cent on the amount
B calculated at the rate of charge under item (4).
(ii) If supply is given at voltage more than 11 KV, rebate mentioned
below will be admissible on the amount calculated at the rate
of charge under item (4).
c (a) Above 11 KV upto 66 KV 5%
(b) Above 66 KV upto 132 KV 7.5%
(c) Above 132 KV 10%.
xx xx xx
D 8. Concessions:
In respect of connections as may be located in any of the eight
hill districts in U.P. whose names are given below but excluding
those existing at a height of less than 610 mts (2,000feet)
above M.S.L. in Dehradun and National districts a
E
development rebate of 33 1/3% on the amount of the bill as
computed under item 4 & 5 above will be given to new
connections for a period of five years from the date of
commencement of supply. This rebate will also be admissible
for the unexpired period of five years to those existing
F
connections which have not completed five years from the
date of commencement of supply. This development rebate
shall not be admissible to the Departments/ Corporations/
Undertaking of State/ Central Government and Local Bodies."
G 1. Name of eight Hill Districts:
2. Almora district
'
3. Chamoli district
4. Pauri Garhwal district
H
U.P.POWERCORPORATIONLTD. v. SANT STEELS& ll69
ALLOYS(P)LTD. [A.K.MATHUR,J.]
5. Pithoragarh district A
6. Uttar Pradesh district
7. Tehri Garhwal district
8. Uttarkashi district
B
9. Dehradun district.
In respect of connections as may be located in Bundelkhand
region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda
districts a development rebate of 50% on the amount of the
bill as computed under item 4 & 5 above will be given to new C
Industrial units for a period of five years from the date of
commencement of supply. This rebate will also be admissible
for the unexpired period of five years to those existing
Industrial units of the above district ofBundelkhand region who
have not completed five years from the date of commencement D
of supply. This development rebate shall however not be
allowed to the Department/ Corporations/ Undertakings of the
State/ Central Government and Local Bodies. "
Therefore, this concession was extended to the entrepreneurs in the hill
districts including Dehradun who established their industries at the height E
of610 metres (2000 feet) above M.S.L.for a period of five years. Then
on 15. 7.1994 another notification was issued. Relevant provisions of
Clauses 4,5 & 8 read as under :
"4. Rate of Charge (Energy Charges): F
All KWH consumed in 3 month 280 paise per KWH.
5.Extra Charge or Rebate:
(iii) In case of supply given at 400 volts, the consumer shall be
required to pay an extra charge of 10 per cent on the amount G
calculated at the rate of charge under item (4).
(iv) If supply is given at voltage more than 1IKV, rebates
mentioned below will be admissible on the amount calculated
at the rate of charge under item (4). H
1170 SUPREME COURT REPORTS [2007] 12 S.C.R.

A (a) Above 11 KV upto 66 KV 5% •
(b) Above 66 KV upto 132 KV 7.5%
© Above 132 KV 10%.
xx xx xx
B
8. Concessions:
(a) In respect of connections as may be located in under mentioned
areas of the hill districts in U.P., a development rebate of33 1/3
percent on the amount of the bill as computed under item 4 & 5
C above will be given to new connections for a period of five years
from the date of commencement of supply. This rebate will also
be admissible for the unexpired period of five years to those existing
connections which have not completed five years from the date of
connnencement of supply.
D
Provided that the above development rebate shall not be
admissible to the Departments/ Corporations/ Undertakings of
State/ Central Government and local bodies.
Description of Area of Hill Districts:
E
1. Almora district
2. Pithoragah district
3. Chamoli district
F 4. Uttarkashi district

5. Pauri Garhwal district excluding Nagarpalika area ofKotdwara.
6. Tehri Garhwal district excluding Muni Ki Reti and Dhalwala
Blocks.
G
7. Nainital district excluding Haldwani, Rudrapur, Gadarpur,
Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj
Block. '
8. Dehradun district excluding Doiwala, Rampur, Sahaspur and
H
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1171
ALLOYS(P)LTD. [A.K.MATHUR,l]
Vikas Nagar Blocks. A
(b) In respect of connections as may be located in Bundelkhand
region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda . ,.-
districts a development rebate of 50% on the amount of the bill as ~
computed under items 4 & 5 above will be given to new Industrial
units for a period of five years from the date of commencement of B
supply. This rebate will also be admissible for the unexpired period
of five years to those existing Industrial units of the above district
ofBundelkhand region who have not completed five years from
the date of commencement of supply. This development rebate of
50% in Bundelkhand region shall, however, not be allowed to the C
Railways and Departments/ Corporations/ Undertakings of the
State/ Central Government and Local Bodies.
The development rebates under this clause shall be allowed
subject to the condition that the net amount payable after allowing D
these rebates would not be less than the amount of minimum
consumption guarantee under item 6 above."
Meaning thereby that the energy charges were increased from 200 paise
to 280 paise and the concession granted to the hill areas continued.
Thereafter, in supercession of earlier notifications another notification was E
issued in which energy charges were increased from 280 paise to 308
paise per KW. But the concession granted earlier continued. Relevant
provision reads as u~der :
"4. Rate of Charge (Energy Charges): F
All KWH consumed in one month 308 paise per KWh.
5. Extra Charge or Rebate:
(i) In case of supply given at 400 volts, the consumer shall be
required to pay an extra charge of l 0 per cent on the amount G
calculated at the rate of charge under item (4).
(ii) If supply is given at voltage more than l lKV, rebate mentioned
below will be admissible on the amount calculated at the rate
of charge under item (4).
H
l

1172 SUPREME COURT REPORTS [2007] 12 S.C.R.

A (iii) Above 1J KV upto 66 KV 5%
(iv) Above 66 KV upto 132 KV 7.5%
(v) Above 132 KV 10%.
xx xx xx
B
8.Concessions:
The concessions mentioned hereunder shall be applicable to
consumers connected upto 31.3. 97.
(a) In respect of connections as may be located in under
c mentioned areas of the hill districts in U.P., a development
rebate of 33 1/3 % on the amount of the bill as computed
under item 4 & 5 above will be given to new connections for
a period of five years from the date of commencement of
supply. This rebate will also be admissible for the unexpired
D period of five years to those existing connections which have
not completed five years from the date of commencement of
supply.
Provided that the above development rebate shall not be
admissible to the Departments/ Corporations/ Undertakings of
E
State/ Central Government and local bodies.
Description of Area of Hill Districts:
l .Almora district

F 2.Pithoragah district
3.Chamoli district
4.Uttarkashi district
5.Pauri Garhwal district excluding Nagarpalika area of
G Kotdwara.
6.Tehri Garhwal district excluding Muni Ki Reti town area and
'
Dhalwala villae under Narendra Nagar Block.
7.Nainital district excluding Haldwani, Rudrapur, Gadarpur,
Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj
H
U.P.POWERCORPORATIONLTD. v. SANTSTEELS& 1173
ALLOYS(P)LTD. [A.K.MATHUR,J.]
Blocks. A
8.Dehradun district excluding Doiwala, Rampur, Sahaspur and
Vikas Nagar Blocks.
(b) In respect of connections as may be located in
Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur, B
Jalaun and Banda districts a development rebate of 50% on
the amount of the bill as computed under items 4 & 5 above
will be given to new Industrial units for a period of five years
from the date of commencement of supply. This rebate will
also be admissible for the unexpired period of five years to c
those existing Industrial units of the above districts of
Bundelkhand region who have not completed five years from
the date of commencement of supply. This development rebate
of 50% in Bundelkhand region shall, however, not be allowed
to the Departments/ Corporations/ Undertakings of the State/ D
Central Government and Local Bodies.
The development rebates under this clause shall be allowed
subject to the condition that the net amount payable after
allowing these rebates would not be less than the amount of
minimum consumption guarantee under item 6 above." E
Thereafter, on 18.6.1998 a new notification came to be issued, which is
relevant for our purpose. By this notification the bills were divided into
two parts, i.e. demand charge plus energy charge. Relevant provisions of
Clauses 4, 5 & 8 read as under:
F
"4. RATE OF CHARGE:
(A) Demand Charge
1. Induction Furnaces Rs.700/- per KV Al month
2. ARC Furnaces Rs.615/- per KV Al month G
3. Rolling/
Re-rolling Mills Rs.440/- per KVA/month

(b) Plus Energy Charge H
1174 SUPREME COURT REPORTS [2007] 12 S.C.R.

A All KWH consumed in 100 Paise per month.
the month
Notes:
(i) Any consumer availing the supply for more than one process
B oflnduction Furnace, ARC furnace or Rolling/ Re-rolling Mill,
will be charged at the applicable rate of demand charge
whichever is higher.
(ii) The recording of demand and energy shall be done through
static Trivector Meters.
c
5. EXTRA CHARGE OR REBATE:
(i) In case of supply given at 400 volts, the consumer shall be
required to pay an extra charge of 10 per cent on the amount
calculated at the rate of charge under item (4).
D
(ii) If supply is given at voltage more than 11 KV, rebate
mentioned below will be admissible on the amount calculated
at the rate of charge under item (4).
(a) Above 11 KV upto 66 KV 5%
E (b) Above 66 KV upto 132 KV 7.5%
(c) Above 132 KV 10%
xx xx xx
8. CONCESSION:
F
The concessions mentioned hereunder shall be applicable to
consumers connected upto 31. 03 .1997.
(a) In respect of connections as may be located in under
mentioned area of hill districts in U.P. a development rebate
G of 17% on the demand charges only as computed under item
(4) above will be given during the unexpired period of five
years to those existing connections which have not completed
'
five years from the date of commencement of supply.
H Provided that the above development rebate shall not be
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1175
ALLOYS(P)LTD. [A.K.MATHUR,J.]
available to the Department/ Corporations/ Undertaking of A
State/ Central Government and Local Bodies.
DESCRIPTION OF AREA OF HILL DISTRICTS:
1. Almora district
2. Pithoragah district B

3. Chamoli district
4. Pauri Garhwal district excluding Nagarpalika area of
Kotdwara.
5. Uttarkashi district
c
6. Tehri Garhwal district excluding Muni Ki Reti town area .
and Dhalwala villae under Narendra Nagar Block.
7. Nainital district excluding Haldwani, Rudrapur, Gadarpur,
Kashipur, Bajpur, Ram Nagar, Jaspur, Khatima and Sitarganj D
Blocks.
8. Dehradun district excluding Doiwala, Rampur, Sahaspur and
Vikas Nagar Blocks.
(b) In respect of connections as may be located in E
Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur,
Jalaun and Banda districts a development rebate of 25% on
the demand charges only as computed under item 4 above will
be given during the unexpired period of five years to those
existing industrial units of the above districts ofBundelkhand F
region who have not completed five years from the date of
commencement of supply. This development rebate shall
however not be allowed to the Departments/ Corporations/
Undertakings of the State/Central Government and Local
Bodies .. " G
Similar is the notification dated 25. l. l 999which is identical to the
notification dated 18.6.1998. But in this notification dated 25.1.1999 the
concession was not in clause 8 but the concession has been re-numbered
from clause 8 to clause 9 which is identical and as such need not be
H
1176 SUPREME COURT REPORTS [2007] 12 S.C.R.

A reproduced again. As a result of these two notifications i.e. notifications
dated 18.6.1998 & 25.1.1999 two significant things happened, that the
tariff was divided into two parts i.e. demand charge plus energy charge.
The energy charge was charged earlier at 308 paise per KV was reduced
to 100 paise KVA per month but the demand charge i.e. induction furnace,
B ARC furnace, rolling/re-rolling mills etc. which were fixed charges,
concession was given at the rate of 17 % computed under item No.4(A)
i.e. induction furnace @Rs.700/- per KV Al month, ARC furnace@
Rs.615/- per KV A/month and Rolling/ Re-rolling Mills @Rs.440/- per
KV Al month. Therefore, as a result of restructuring of tariff, the demand
C charges under item 4(A) were made fixed but the energy charges were
reduced from 308 paise to 100 paise per month. It is not the case that
the appellant has completely revoked the concession. It is the case that
appellant- Corporation has reduced the energy charges from 308 paise
per KVA to I 00 paise but the demand charges have been fixed per KV Al
D month and the concession has been re-scheduled instead of giving them
33.33% the energy charges have been reduced which is applicable to all
but in the case of demand charges for hill areas it has been reduced to
17 % in respect of demand A charges and that was allowed to be
continued for the unexpired period of five years to its existing connections
E which have not completed five years from the date of commencement of
supply. At the same time the appellant- Corporation has denied this benefit
to the State Departments/ Corporations, Undertakings of the State/
Central Government and local Bodies. Therefore, so far as the private
consumers are concerned, this has been kept in tact.
F 4. Now, in this factual controversy, we have to examine whether the
concession in the consumption of energy which has been given to the writ
petitioners for establishing the industries in the hill areas can be revoked
or modified by the appellant-corporation or not. The High Court has taken
the view that the appellant is bound on the principle of promissory estoppel
G and it cannot revoke the benefit.
5. Dr.A.M.Singhvi, learned senior counsel for the appellant has given
nine reasons that this modification of the rebate is fully justified for the
following r_easons:
H (i) That the notifications have been issued in exercise of the
U.P.POWERCORPORATIONLTD: v. SANT STEELS& 1177
ALLOYS (P)LTD. [A.K.MATHUR,J.]
statutory provisions under section 49 of the Act of 1948, A
therefore, it has statutory flavour.
(ii) That there is complete change of tariff i.e. it has two parts,
(a) demand charge and (b) energy charge.
(lii) That there has been reduction in the energy consumption B
charges i.e. from 308 paise to 100 paise per unit.
(iv) That there was large scale theft of energy in the State ofU.P.
(v) That units were closing on account of these concessions.
(vi) That there is no total withdrawal of the rebate but by C
restructuring concession at the rate of 17% continues in the
demand charges.
(vii) That the High Court has failed to consider the public interest
which was specifically pleaded by filing a detailed affidavit.
D
(viii) That no malafide is attributed.
(lx) That actual cost of energy production has shoot up to Rs.2.50.
Therefore, learned senior counsel for the appellant submitted that the
appellant-corporation is fully within its right to modify the rebate and the E
principle of promissory estoppel cannot estop. Dr.Singhvi also submitted
that the Division Bench of the High Court has relied on a decision in
Pawan Alloys & Casting Pvt. Ltd. (supra) in which no affidavit was
filed. This was not appreciated by the High Court and therefore, the whole
situation has turned on that count. Dr.Singhvi has also raised the question F
oflaches, estoppel, waiver and acquiesance and submitted that the earlier
writ petition was filed challenging the notification dated 18.6.1998 and it
was withdrawn with liberty and thereafter on 4.11.1999 application to
recall the order was filed which was rejected. Again, another writ petition
has been filed without permission of the High Court. Dr.Singhvi submitted
that by virtue of the U.P. Electricity Reforms Act, 1999, (hereinafter to G
be referred to as the Act of 1999) now the new tariff has been fixed from
August, 2000-2001 by the Commission because now the power to
determine the tariff has been given to the Commission and no estoppel
against the Statute can be pleaded after the Act of 1999 having come
H
1178 SUPREME COURT REPORTS [2007] 12 S.C.R.

A into force. Dr.Singhvi, learned senior counsel submitted that in view of
the affidavit filed by Shri C.R.Goswami, Executive Engineer, Electricity
Distribution Division, Kotdwar, Uttarakhand on behalfofthe appellant and
a comparative chart has been annexed to indicate that in fact after
introduction of two part tariff, energy consumption of these units has
B considerably increased. The chart has been filed along with the affidavit
in respect of all the writ petitioners except Shree Sidhbali Steels Ltd.
6. As against this, Mr.Shanti Bhusan, learned senior counsel for the
respondent-writ petitioners submitted that these concessions were given
c toexercise
the hill areas in pursuance to the direction by the State Government in
of power under Section 78A of the Act of 1948 and submitted
that the State Government was fully competent to do so. The State/
Corporation. has made a representation on which the private entrepreneurs
have made huge investments and therefore, the State Government-
Corporation cannot wriggle out from it and the State Government-Corp.
D is estopped from withdrawing these concessions. Mr.S.Ganesh, learned
senior counsel appearing for some of the writ petitioners has also submitted
that the concession which has been given has a vested right and it can
only be revoked by the same Statute.
E 7. Both the learned senior counsel appearing for the parties relied
on number of decisions of this Court on the subject. Since the High Court
has relied primarily on the decision of this Court in Pawan Alloys &
Casting Pvt. Ltd. (supra), therefore, it would be profitable to first
examine the said decision. In this case, the U.P.State Electricity Board
F by notifications issued in exercise of powe~ under Section 49 of the Act
of 1948 held out promises to the industrial units established in different
parts of the State ofU.P. and they were given concession in the electricity
charges to the extent of 10 per cent of rebate for a period of three years
for the first time and the same was prematurely withdrawn by subsequent
G notification which gave rise to number of writ petitions being filed in the
High Court and the principle of promissory estoppel was invoked. In the
writ petitions it was contended that when rebate was given to the new '
industrial units for a period of three years, the Board could not have
arbitrarily withdrawn the same prior to the expiry of a period of three
H years. It was contended that such withdrawal of concession is applicable
;

U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1179
ALLOYS (P) LTD. [A.K. MA THUR,J.]
prospectively and cannot have retrospective effect to the earlier existing A
industrial units. The Board contested the matter. The Allahabad High Court
framed the following three questions. (i) Whether the Board is estopped
from withdrawing the said rebate before the completion of the 3/5 year
period, by virtue of the doctrine of promissory estoppel? (ii) Whether
the agreement executed by the petitioners bars them from questioning the B
impugned notification ? (iii) Whether the impugned notification has no
application to existing consumers and does it apply to only those
consumers who receive the supply on or after 1-8-1986 ? The High Court
after hearing the contesting parties came to the conclusion that the
respondent-Board was estopped by virtue of the doctrine of promissory c
estoppel from withdrawing the development rebate before the completion
of the period of three years. On second point, the High Court came to
the conclusion that the writ petitioners were barred from questioning the
impugned notification on the express terminology found i,n the agreements
entered into by them with the Board for supply of electricity and under
D
those agreements the Board was given full play to revise the tariff rates
which included development rebate also from time to time and consequently
the impugned notification was not illegal. On the third issue, it was held
that the notification dated 31-7-1986 could not be said to be retrospective
and consequently, the High Court dismissed all the writ petitions.
E
Aggrieved against this, the matter came up before this Court by Pawan
Alloys & Casting Pvt. Ltd. This Court after review of all the earlier
decisions observed as follows :
"34.Consequently it must be held that relying upon the
representations held out by the Board in these earlier notifications F
assuring grant of incentive rebate of I 0% 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 the G
State ofU.P.
,
35. Under these circumstances when no public interest was sought
to be pressed into service by the Board for withdrawal of this
incentive rebate, as seen earlier, the equity which had arisen in
H
1180 SUPREME COURT REPORTS [2007] 12 S.C.R.

A 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
manner leaving these promises high and dry before the requisite
period of three years earlier guaranteed to them by way of
B development rebate had got exhausted. This takes us to the
consideration of the second aspect of the matter.''

8. Dr.Singhvi, learned senior counsel for the appellant-Corporation
emphasized that in fact the whole case turned on the question that no public
interest was sought to be pressed into service by the Board on the incentive
C rebate. But, in the present case, specific affidavit was filed and all the
detailed facts were disclosed pertaining to the public interest but that was
not dealt with by the High Court. Therefore, Pawan Alloys & Casting
Pvt. Ltd. (supra) case stands distinguished. Learned senior counsel
submitted that if proper public interest had been pleaded in Pawan Alloys
D & Casting Pvt. Ltd.(supra) then perhaps the situation would have been
different. In this connection, learned senior counsel for the appellant-
Corporation invited our attention to the question of public interest which
was pleaded before the High Court and which was not considered by
the High Court. Learned senior counsel for the appellant-corporation
E submitted that all the nine points which have been mentioned above were
mentioned in the counter affidavit filed by the appellant-corporation before
the High Court and in that connection, he invited our attention to paragraphs
5, 6, 7, 10, 40, 42, 44, 48 of the counter affidavit and specifically invited
our attention to paragraph 53 that the Corporation is incurring a loss of
F Rs.15 to 20 crores. Learned senior counsel also invited our attention to
paragraphs 56, 58 & 60 of the counter affidavit filed before the High
Court and submitted that it was not in public interest to continue this benefit
to these industries located in hill areas and further submitted that the entire
benefit was not withdrawn. This benefit has been rationalized and as a
G result of this rationalization an affidavit was filed to show that the energy
consumption of these units has increased to manifold. Therefore, this
restructuring of the rebate has not proved disadvantageous to these
industries but for the larger public interest this was done and it not a case
that the appellant has totally revoked the concession but the concession
H still exists in modified fonn. Therefore, the whole exercise was done in
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1181
ALLOYS(P)LTD. [A.K.MATHUR,J.]
the public interest only. Learned senior counsel stressed that in fact all A
this public interest was not disclosed in Pawan Alloys & Casting Pvt.
Ltd. (supra). Therefore, this turned against the Board on that count. In
the present case all the nine points raised by him were raised before the
High Court of Allahabad but the High Court has totally ignored the same.
B
9. Learned senior counsel for the appellant- Corporation also invited
our attention to another decision of this Court in Kasinka Trading & Anr.
v. Union ofIndia & Anr., [1995] 1 SCC 274. In this case, a notification
was issued under Section 25 (1) of the Customs Act in public interest
exempting from basic duty and specific date to which it will remain in force. C
Prior to expiry of that date another notification was issued in exercise of
same power in public interest withdrawing the exemption on excise duty
on the materials imported. Public interest was explained by the
Government and in that context, it was held that Government being satisfied
about the public interest in withdrawing the exemption no unequivocal
representation or promise extended by merely specifying the period of D
operation of the exemption notification so as to attract the doctrine of
promissory estoppel. It was pointed out that exemption under Section 25
was not in the nature of any incentive and has the effect of only suspending
levy and collection of customs duty and can be revoked or withdrawn in
public interest. It was further observed that when exemption is granted in E
exercise of statutory powers, it is implicit that it can also be rescinded or
modified at any time in exercise of the same power and it was observed
that withdrawal of exemption is a matter of Government policy with which
the Court would not in the absence of any manifest injustice, ma/a fides
or fraud interfere. It was observed as follows : F
"The doctrine of promissory estoppel is applicable against the
Government also particularly 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 G
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 authority to make". 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. Bald
H
1182 SUPREME COURT REPORTS [2007] 12 S.C.R.

A expressions, without any supporting material, to t'l_e effect that the
doctrine is attracted because the party invoking ti\: doctrine has
altered its position relying on the assurance of the Government
would not be sufficient to press into aid the doctrine. The doctrine
of promissory estoppel cannot be invoked in the abstract and the
B courts are bound to consider all aspects including the results sought
to be achieved and the public good at large, because while
considering the applicability of the doctrine, the courts have to do
equity and the fundamental principles of equity must for ever be
present in the mind of the court, while considering the applicability
c 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 the public authority to its promise, assurance or
representation."
D However, it was also observed as follows:
"The reasons given by the Union oflndia justifying withdrawal of
the exemption notification are not irrelevant to the exercise of the
power in "public interest'', nor are the same shown to be
E insufficient to support the exercise of that power. The exemption
notification was not issued as a potential source of extra profit for
the importer. Again, at the same time when the notification was
withdraVln by the Government there was no scope for any loss to
be suffered by the importers. The exemptioo notification did not
F hold out to the appellants any enforceable promise. Neither the
notification was of an executive character nor did it represent a
scheme designed to achieve a particular purpose. It was a
notification issued in public interest and again withdrawn in public
interest."
G 10. Our attention was also invited to a decision of this Court in
Shry·ee Sales Corporation & Anr. v. Union of India, [1997] 3 SCC
398. In this case it was observed as follows :
"Moreover, the Government is competent to resile from a
promise even if there is no manifest public interest involved,
H
U.P. POWER CORPORATION LTD. v. SANT STEELS& 1183
ALLOYS (P) LTD. [A.K. MATHUR,].)
provided, of course, no one is put in any adverse situation which A
cannot be rectified. Even where there is no such overriding public
interest, it may still be within the competence of the Government
to resile from the promise on giving reasonable notice which need
not be a formal notice, giving the promise a reasonable opportunity
of resuming his position, provided, of course, it is possible for the B
promise to restore the status quo ante. If, however, the promise
cannot resume his position, the promise would become final and
irrevocable."

This case in tum followed Kasinka Trading (supra).
c
11. Our attention was invited to a decision of this Court in Sales
Tax Officer & Anr. v. Shree Durga Oil Mills & Anr., [1998) 1 SCC
572. In this case it was held that the Government was competent to change
its policy in public interest on the basis of resource crunch and that would
be sufficient for non-applicability of the rule of promissory estoppel. Their D
Lordships held that public interest can override consideration of private
loss or gain. Any Industrial Policy Resolution (IPR) can be changed by
the State looking to its severe economic crunch and in this case the.
respondent sought to invoke this IPR which was issued on 18.7.1979
and was effective for the period 1979-83. The respondent.established E
its industry on 28.11.1979. Therefore, on factual aspect also this Court
found that within four months of establishment of industry, the respondent
was not likely to suffer any loss. But at the same time, their Lordships
observed as follows :
"Any IPR can be changed ifthere is an overriding public interest F
involved. In the instant case, it has been stated on behalf of the
State that various notifications granting sales tax exemptions to the
dealers resulted in severe resource crunch. On reconsideration of
the financial position, it was decided to limit the scope of the earlier
exemption notifications issued under Section 6 of the Orissa Sales G
Tax Act. Because of this new perception of the economic scenario
of the State, the scope of the earlier notifications had to be
restricted. Withdrawal of notification was done in public interest.
The Court will not interfere with any action taken by the
Government in public interest. Public interest must override any H
1184 SUPREME COURT REPORTS (2007] 12 S.C.R.

A consideration of private loss or gain. Thus the plea of change of
policy trade on the basis ofresource crunch should have been
sufficient for dismissing the respondent's case based on the doctrine
of promissory estoppel."

12. Our attention was invited to another decision of this Court in
B
State of Rajasthan & Anr. v. Mahaveer Oil Industries & Ors., (1999]
4 SCC 357. In this case also Government ofRajasthan gave sales tax
incentive scheme for industries in 1987 exempting new industrial units from
the tax on sale of goods manufactured by them for sale within the State
C for a specified period i.e. from 5.3.1987 to 31.3.1997. Oil extraction and
manufacturing was one of the industries eligible to the benefit of the scheme
but the same was revoked. On facts it was found that the Scheme had
failed to achieve its object and had rather adversely affected the oil
industry. In this situation, it was held that the Government can in public
interest revoke the policy and the doctrine of promissory estoppel cannot
D preclude the Government from issuing such notification and on facts it was
found that the respondent had not taken any effective steps for starting a
new unit prior to the issuance of the notification. It was observed as
follows:
E "Public interest requires that the State be held bound by the
promise held out by it in such a situation. But this does not
preclude the State from withdrawing the benefit prospectively even
during the period of the Scheme, if public interest so requires. Even
in a case where a party has acted on the promise, if there is any
F supervening public interest which requires that the benefit be
withdrawn or the Scheme be modified, that supervening pubic
interest would prevail over any promissory estoppel."

13. As against this, Mr. Shanti Bhushan, learned senior counsel
appearing for the respondents has submitted that in view of Section 78-
G A of the Act of 1948 a direction was issued by the State Government
for giving this development concession and the State was competent to
give such direction and in pursuance of that the hill development rebate
was given. Mr. Shanti Bhushan submitted that it will be arbitrary and unfair
if those entrepreneurs who have established their industries on the
H representation made by the State that they will be given certain
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1185
ALLOYS(P)LTD. [A.K.MATHUR,J.]
concessions and in pursuance of that they have made huge investments A
and now that the concession has been withdrawn it will ruin those
entrepreneurs and therefore, the appellant- Corporation is estopped from
going back from their representation. In this connection, he principally
relied on a decision of this Court in Mis. Motilal Padampat Sugar Mills
Co.Ltd. v. State of Uttar Pradesh & Ors., [1979) 2 SCC 409 and B
specially invited our attention to paragraph 24 of the judgment. In
paragraph 24, their Lordships have summed up the ratio of the earlier
decisions given by this Court as follows :
"Under our jurisprudence the Government is not exempt from
liability to carry out the representation made by it as to its future C
conduct and it cannot on some undefined and undisclosed ground
of necessity or expediency fail to carry6 out the promise solemnly
made by it, nor claim to be the judge of its own obligation to the
citizen on an ex parte appraisement of the circumstances in which
the obligation has arisen. D
The law may, therefore, now be taken to be settled as a result of
this decision, that where the Government makes a promise knowing
or intending that it would be acted on by the promise and, in fact,
the promise, acting in reliance on it, alters his position, the E
Government would be held bound by the promise and the promise
would be enforceable against the Government at the instance of
the promise, notwithstanding 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. It is F
elementary that in a republic governed by the rule oflaw, no one
howsoever high or low, is above the law. Everyone is subject to
the law as fully and completely as any other and the Government
is no exception. It is indeed the prides of constitutional democracy
and rule oflaw that the Government stands on the same footing G
as a private individual so far as the obligation of the law is
concerned; the former is equally bound as the latter. It is indeed
difficult to see on what principle can a Government, committed to
the rule oflaw, claim immunity from the doctrine of promissory
estoppel. Can the Government say that it is under no obligation to H
1186 SUPREME COURT REPORTS [2007] 12 S.C.R.

A act in a manner that is fair and just or that it is not bound by
considerations of "honesty and good faith"? Why should the
Government not be held to a high'' standard of rectangular rectitude
while dealing with its citizens''? There was a time when the doctrine
of executive necessity was regarded as sufficient justification for
B the Government to repudiate even its contractual obligations; but,
let it be said to the eternal glory of this Court, this doctrine was
emphatically negatived in the Inda-Afghan Agencies case and the
supremacy of the rule of law was established. It was laid down
by this Court that the Government cannot claim t be immune from
c the applicability of the rule of promissory estoppel and repudiate
a promise made by it on the ground that such promise may fetter
its future executive action. If the Government does not want its
freedom of executive action to be hampered or restricted, the
Government need not make a promise knowing or intending that
D it would be acted on by the promise and the promise would after
his position relying upon it. But ifthe Government makes such a
promise and the promise acts in reliance upon it and alters his
position, there is no reason why the Government should not be
compelled to make good such promise like any other private
E individual. The law cannot acquire legitimacy and gain social
acceptance unless it accords with the moral values of the society
and the constant endeavour of the Courts and the legislature most,
therefore, be to close the gap between law and morality and bring
about as near an approximation between the two as possible. The
doctrine of promissory estoppel is a significant judicial contribution
F
in that direction. But it is necessary to point out that since the
doctrine of promissory estoppel is an equitable doctrine, it must
yield when the equity so requires ..."
Mr.Shanti Bhushan emphasized on the basis of this observation made in
G this case that benevolent Government has to act with equity and the Court
should yield in favour of the equity whenever case arises of a citizen who
has acted bonafidely on the basis of the representation made by the '
Government or by the instrumentality of the State. Mr. Shanti Bhushan
submitted that since representation was made by the appellant-
H Corporation, therefore, industries were established in the hill areas and
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1187
ALLOYS (P) LTD. [A.K. MATHUR, J.]
now the appellant-corporation wanted to change the tariff that will be A
unconstitutional, unfair and arbitrary to the citizens who have acted on
the promise made by the appellant-corporation. In this connection,
Mr.Shanti Bhushan also submitted that this is violative of Article 14 of
the Constitution as held in MRF Ltd, Kottayam v. Asstt. Commissioner
(Assessment) Sales Tax & Ors., [2006] 8 SCC 702. In that case, the B
Court held that revocation of such notification is arbitrary ~d one of us
(Hon'ble Katju.J) was a party to the judgment. In this case the concept
of doctrine oflegitimate expectation was invoked. In this case, the State
of Kerala issued notification granting exemption for expansion in the
manufacture of certain products including rubber-based goods. The C
assessee manufacturer relying on that introduction of exemption
commenced commercial production after investing huge amount. This
concession was granted for a fixed period of seven years. But during the
currency of the period of exemption the State Government issued another
notification excluding the formation of a compound rubber from the D
definition of "manufacture" for the purpose of the original exemption
notification. Therefore, this premature deprivement of the exemption to
the assessee manufacturer was held by the Court arbitrary, urJust and
unreasonable. Their Lordships invoked the doctrine of legitimate
expectation. It was contended before the Court that the notification was E
a statutory one and no plea of estoppel would lie against the statute. But
their Lordships held that the principle of underlying legitimate expectation
was based on Article 14 of the Constitution and any action taken by the
State which went against the rule of fairness was liable to be struck down.
Finally this Court after review of the cases on the subject, invoked the F
principle of promissory estoppel and also the legitimate expectation and
found that the revocation of the exemption granted for a period of seven
years by the State Government was arbitrary, unjust and unreasonable
and was liable to be quashed. It was observed as follows :
'This Court in E.P.Royappa v. State o/T.N., [1974] 4 SCC G
3 observed that where an act is arbitrary, it is implicit in it that it is
unequal both according to political logic and constitutional law and
is therefore violative of Article 14. Equity that arises in favour of a
party as a result of a representation made by the State is founded
on the basic concept of' 'justice and fair play''. The attempt to H
1188 SUPREME COURT REPORTS [2007] 12 S.C.R.

A take away the said 'benefit of exemption with effect from 15-1-
1998 and thereby deprive MRF of the benefit of exemption for
more than 5 years out of a total period of7 years, in our opinion,
is highly arbitrary, unjust and unreasonable and deserves to be
quashed..... "
B
14. Mr.Shanti Bhushan, learned senior counsel invited our attention
to paragraph 33 of the judgment in Pawan Alloys & Casting Pvt.
Ltd.(supra) and submitted that in fact an argument was made at the Bar
that the high-powered Tariff Realisation Committee advised the Board for
C withdrawing this rebate and the Board acted in the light of the said report
submitted to it in the year 1986. It was submitted that the genesis of the
notification 'Was the recommendation of the Tariff Realisation Committee.
Therefore, the Court concluded that the rebate was revoked not on the
ground of general public interest but solely on the ground of commercial
interest of the Board. Therefore, it was observed as follows :
D
"Consequently it must be held on the facts of these cases that
the impugned withdrawal notification was not backed up by any
demands of public interest which would outweigh the individual
interests of the appellant-promisees who had acted upon the
E same."
Mr.Shanti Bhushan, learned senior counsel submitted that in the present
case also, the revocation is not on the basis of general public interest but
it is only on account oflosses the Corporation trying to make up the losses
revoked this concession. Therefore, learned senior counsel submitted that
F it is not the consideration of general public interest but based on the
commercial angle. Learned senior counsel invited our attention to the
decision in Kasinka Trading & Anr. (supra), specially to paragraph 21
of the judgment and submitted that, that case is distinguishable on the
ground that it only suspended the levy and collection of customs duty
G wholly or partially and there was no promise for benefit to public at large.
Thus, the exemption notification issued under Section 25(1) of the
Customs Act is an exercise of the statutory power of the State under the
law itself and the State can revoke the same as per General Clauses Act.
Therefore, Mr.Shanti Bhushan distinguished the case of Kasinka Trading
H (supra) that the said case was not the case in which any promise was
),

U.P. POWER CORPORATION LTD. v. SANT STEELS & 1189
ALLOYS (P) LTD. [A.K. MATHUR,J.]
~
made and on which the assessee has acted and invoked certain benefits. A
It was a general notification giving certain benefits and it was revoked
back in public interest. Learned senior counsel invited our attention to a
decision of this Court in ShriJee Sales Corporation & Anr. (supra) and
submitted that it was not an inducement but a case of promissory estoppel
when a promise is made and citizen is induced to act on those B
-' representation, then in that case, once the party has suffered on account
of so called inducement, then in that case it cannot be revoked to the
disadvantage of the other party. Learned senior counsel submitted that in
Shrijee Sales Corporation & Anr. (supra) and Shree Durga Oil Mills
& Anr. (supra) certain tax exemption was given and subsequently it was c
revoked and learned senior counsel submitted that those cases are
distinguishable, that there were not the cases in which inducement was
made, and the party acted on that inducement. 'Those were the cases where
exemption was given on customs and sales tax but it was not in the nature
of inducement or any representation or promise on the part of the other
D
party to encourage the entrepreneurs to come and make their investments.
15. Learned senior counsel invited our attention to a decision of this
Court in State of Punjab v. Nestle India Ltd. & Anr., [2004] 6 SCC
465 in which a representation was made by the Government in the manner
de hors the Rules but a statement was made by the Finance Minister in E
his Budget speech for 1996-97 making representation to the effect that
the State Government had abolished purchase tax on milk. The
manufacturers of milk products, therefore, were not paying the purchase
tax on milk for the assessment year 1996-97 and mentioned this fact in
their returns. The taxing authority entertained such returns. The F
manufacturers passed on the benefit of exemption to the dairy farmers
and milk producers. However, after expiry of the said assessment year,
the Government took a decision not to abolish purchase tax on milk and
the taxing authority therefore raised a demand for the assessment year
1996-97. On these facts, the Court held that in absence of proof of any G
,, overriding public interest rendering the enforcement of estoppel against
the Government was inequitable, notwithstanding that no exemption
notification as required by the statute was issued. It was held that the State
Government cannot resile from its decision to exempt milk and raise a
demand for the aforesaid assessment year. However, the same principle H
l

1190 SUPREME COURT REPORTS [2007] 12 S.C.R.

A of estoppel was not invoked after assessment year 1996-97. The Court
enforced the principle of estoppel. All the earlier cases on the subject were
reviewed by the Court and ultimately it was concluded as follows :
"47. The appellant has been unable to establish any overriding
public interest which would make it inequitable to enforce the
B estoppel against the State Government. The representation was
made by the highest authorities including the Finance Minister in
his Budget speech after considering the financial implications of the
grant of the exemption to milk. It was found that the overall benefit
to the State's economy and the public would be greater ifthe
c exemption were allowed. The respondents have passed on the
benefit of that exemption by providing various facilities and
concessions for the upliftment of the milk producers. This has not
been denied. It would, in the circumstances, be inequitable to allow
the State Government now to resile from its decision to exempt
D milk and demand the purchase tax with retrospective effect from
1-4-1996 so that the respondents cannot in any event readjust the
expenditure already made. The High Court was also right when it
held that the operation of the estoppel would come to an end with
the 1997 decision of the Cabinet."
E
Similarly, our attention was invited to paragraph 16 of the judgment in
Shree Durga Oil Mills & Anr. (supra). Mr.Shanti Bhushan submitted that
in the aforesaid case Section 6 of the Orissa Sales Tax Act clearly
contemplated that the State Government can grant exemption from sales
F tax and likewise withdraw any such exemption. Learned senior counsel
submitted that so far as Section 49 of the Act of 1948 is concerned, there
is no such contemplation that it can also revoke the same. It is only
because of the provisions of the General Clauses Act it can be revoked
but not once granted under Section 49(3) of the Act of 1948, there is no
provision for any revocation of the exemption granted to certain class of
G persons having regard to the geographical condition of the area, the nature
of supply and the purpose for which supply is required and other relevant
factors. Mr.Shanti Bhushan also submitted that there is no allegation of

H
theft in the hill area by the persons to whom the power had been granted
at a concessional rate. and all the circumstances which have been taken
-
U.P.POWERCORPORATIONLTD. v. SANT STEELS& 1191
ALLOYS(P)LTD. [A.K.MATHUR,J.]
into consideration for revocation of the exemption notification show that A
there was no overwhelming consideration for revoking such exemption in
public interest.
16. Mr.S.Ganesh, learned senior counsel appearing for some of the
respondents invited our attention to a decision of this Court in Mahabir B
Vegetable Oils (P) Ltd. & Anr. v. State of Haryana & Ors., [2006] 3
SCC 620. In this case, the appellants were the owner of solvent extraction
plants. Industrial policy for the period 1.4.1988 to 31.3.1997 granted
incentive by way of sales tax exemption to the industries set up in
backward areas in the State. Solvent at that time was not included in the
negative list in the Rules. In August, 1995 the appellants purchased land
c
to set up a net unit and they made huge amount in construct work, erection
of plant and that investment constituted 45% of the total investment. They
started trial production on 26.3 .1997 and commercial production on
29.3.1997 and then they applied for grant of exemption for payment of
sales tax. Meanwhile, the State Government notified its intention to amend D
the Haryana General Sales Tax Rules and invited objections and thereafter
they issued notification on 16.12.1996 which included solvent extraction
plants in the negative list but Note 2 appended to that list provided that
the industrial units which had made investment upto 25% of the anticipated
cost oftbe project and which had been included in the negative list for E
the first time would be entitled to the sales tax benefits related to the extent
of investment made upto 3.1.1996. On 28.5.1997 Note 2 was omitted.
As a result of this, the appellants were deprived of the benefit and
consequently, the Department rejected the application for exemption. This
was challenged unsuccessfully before the High Court and ultimately the F
matter reached this Court and this Court held that the incumbents had
made huge investment pursuant to and in furtherance of the representation
made by the State Government and the State Government without
assigning any reason withdrew the exemption with retrospective effect at
the end of the operative period. The retrospective withdrawal of the G
exemption was found to be bad in law. In this context, their Lordships
observed as follows:
"Undisputedly, when the appellants started making investments,
Rule 28-A was operative. Representation indisputably was made
H
1192 SUPREME COURT REPORTS [2007] 12 S.C.R.

A in tenns of the said Rules, The relevant provisions of the Act and
the Rules framed thereunder indisputably were made keeping in
view the industrial policy of the State."

Their Lordships held that the doctrine of promissory estoppel will operate
B even in the legislative field. Learned senior counsel submitted that such
concession which has been granted cannot be revoked as the beneficiary
acquired a vested right and the same can only be revoked by the Statute.
17. in this background, in view of various decisions noticed above,
it will appear that the Court's approach in the matter of invoking the
C principle of promissory estoppel depends on the facts of each case. But
the general principle that emerges is that once a representation has been
made by one party and the other party acts on that representation and
makes investment and thereafter the other party resiles, such act cannot
stated to be fair and reasonable. When the State Government makes a
D representation and invites the entrepreneurs by showing various benefits
for encouraging to make investment by way of industrial development of
the backward areas or the hill areas, and thereafter the entrepreneurs on
the representations so made bona jidely make investment and thereafter
if the State Government resile from such benefits, then it certainly is an
E act of unfairness and arbitrariness. Consideration of public interest and
the fact that there cannot any estoppel against a Statute are exceptions.
18. Learned senior counsel for the appellant has cited nine instances
which can be loosely categorised into two i.e. (i) that there cannot be
any estoppel against the statute and (ii) overriding public interest. So far
F as the first part is concerned i.e. the revocation has the statute flavour i.e.
the benefit which was extended under Section 49 of the Act of 1948 and
the notification had been issued revoking the same benefit under Section
49 of the Act of 1948 by invoking the provisions of the General Clauses
Act that an authority granting exemption has a right to revoke the same
G also. It is true that it has a right to revoke the same but if the other party
has suffered on that account then such representation will be against the
public policy and the morality. Notification issued under Section 49 of
the Act of 1948 for giving the benefit of exemption for the hill areas was
in the nature of delegated legislation and not an Act framed by the State
H Legislature. Therefore, a distinction has to be made between the delegated
>

U.P.POWERCORPORATIONLTD. v. SANTSTEELS& 1193
ALLOYS(P)LTD. [A.K.MATHUR,J.]
legislation and the primary legislation framed by the Legislature. In Section A
49 there is no specific stipulation that the notification issued under Section
49 of the Act of 1948 can be revoked at any time as was in the case of
Shree Durga Oil Mills & Anr. (supra) where Section 6 of the Orissa
Sales Tax Act itself provided that the notification is capable of being
revoked at any time. Therefore, a distinction has to be made between B
the delegated legislation and the primary legislation. So far as the primary
legislation is concerned, ifthe Act is passed by State Legislature and denies
the benefit by the primary legislation then no estoppel can be applied against
that Act but so far as the case of delegated legislation is concerned, where
delegated authorities passes certain notification in exercise of his delegated C
authority there is no contemplation mentioned in the act itself that it is
capable of being revoked at any time. Then such acts cannot be treated
at par with the primary Act passed by the State Legislature. The State is
fully competent to pass an Act prospectively as well as retrospectively
but retrospectivity to the extent of aforesaid nature cannot stand. Therefore, D
this distinction has to be borne in mind. In the present case, the U.P.
Electricity Reforms Act, 1999 came into force with effect from 2000.
Therefore, if such benefit has not been extended then a different stand
will follow but so far as the delegated legislation is concerned, this kind
of revocation cannot be sustained. It is highly against the public morality E
that the incumbent who have felt persuaded on account of the
representation made by the State Government that they will be given
certain benefits and they acted on that representation, it does not behove
on the part of the appellant-corporation to withdraw the said benefit before
expii:y of the stipulated period by issuing the notification revoking the same F
which the respondents were legitimately entitled to avail. We fail to
understand why the appellant-corporation which made a representation
and allowed the other party to act upon such representation could resile
and leave the citizens in a lurch. In such a situation the principle of
promissory estoppel which has been evolved by the Courts which is based G
on public morality cannot permit the State to act in such an arbitrary
fashion. Other grounds for the purpose of public interest which have been
pleaded; namely that there are two methods of tariff provided by the
amendment and the actual consumption has been reduced based on the
calculation of energy charges per KV from 308 paise to I 00 paise and
H
1194 SUPREME COURT REPORTS [2007] 12 S.C.R.

A there was large scale theft or that units were closing down and there was ·-
no mala fide intention in the matter of revocation of the notification and
the cost of production of power has gone up to Rs.2.50 per unit, are
considerations which hardly involve any public interest. They were more
of a nature oflosses which has been suffered by the Corporation and in
B order to make these losses, these methods were evolved to reduce and
to make good of the losses. Restructuring benefit to 17% of the Tariff
4(A) (demand chages )are the factors which are aimed at to make.the
losses good for the Corporation. This is not case in which serious public
repercussion was involved. These are not the factors which put together
c can constitute a public interest. Theftof the energy if it was proved by
cogent datas that as a result of giving this benefit to the entrepreneurs in
the hill areas, they were misusing it or there was theft of the energy at a
large scale by these persons to whom the concession had been given then
of course such factors, if all the datas were brought on record of course
D could have persuaded the Court to take a different view of the matter.
But simply because there was theft of energy allow the State cannot
persuade us to hold that the revocation of such concession can be said
to be in public interest. Since the benefit was given to these units in the
hill areas, there should have been overwhelming evidence to show some
E mala fide on the part of these consumers which have persuaded the
Corporation to revoke it. If there was no misuse of the energy by these
units in the hill areas to whom the concession had been granted then in
that case it cannot be taken that there was really public interest involved
which persuaded the Corporation to revoke the same. No person can
be permitted to misuse the concession or benefit and invoke promissory
F
estoppel. Promissory estoppel is not one sided affair, it is rather two sided
affair. If one party abuses the concession then it is always open to the
other party to revoke such concession but if one party avails the benefit
and is acting on the same representation made by the other party then
the other party who has granted the said benefit cannot revoke the same
G
under the garb of public interest. Therefore the grounds that the revocation
notification was issued in public interest and that same has the flavour of '
the statute, cannot persuade us to uphold it. sustained. It is true that a
detailed statement was given in various paragraphs of the written statement
filed by the appellant-corporation before the Allahabad High Court and
H
U.P.POWERCORPORATIONLTD. v. SANTSTEELS& 1195
ALLOYS(P)LTD. [A.K.MATHUR,J.]
unfortunately, the High Court did not advert to these details but we have A
examined alt these details and found that all the nine points raised by
Dr.Singhvi does not pers.iade us to take a contrary view from the view
taken by the High Court. There is no gain saying that the public interest
is paramount and the private interest has to be sacrificed for the larger
interest. But, after survey of all these cases on the subject, the judicial B
consensus that emerges is that whenever the State has made a
representation to the public and the public has acted on that representation
and suffered economically or otherwise, then in that case the State should
be estopped from withdrawing such benefit to the detriment of the such
people except in public interest or against the Statute. So far as the public C
interest as involved in the present case is concerned, we have found that
there was no overwhelming evidence to revoke the benefit granted to the
industrial units in the hill areas. So far as the Statute is concerned, the
notification was issued under Section 49 of the Act of 1948 and the same
was revoked under Section 49 of the Act of 1948 though there was no D
such provision contained in Section 49 that it will be open to the
Corporation to revoke the same but could be possible by invoking the
principle of General Clauses Act. But in such delegated legislation such
withdrawal could only be permitted iflarger public interest is involved or
ifthe Act is passed by legislature. E
19. Dr.Singhvi, learned senior counsel for the appellant-Corporation
submitted that now the Act of 1999 has come into force and that Act
does not recognize the concessions given to the hill areas and that this is
a primary legislation i.e. Act passed by the State Legislature. Therefore,
to this extent we can accept the submission of Dr. Singhvi that since the F
Act of 1999 does not recognize such hill developmental benefits, therefore,
from the date of passing of the Act of 1999 the said benefit cannot be
accepted. We have stated above that there cannot be estoppel against a
statute. Since such benefits have not been recognised by the Act of 1999,
therefore, upto the date of coming into force of the Act of 1999, all the G
benefits which were being given to the respondent-entrepreneurs shall be
protected by invoking the principle of promissory estoppel but after coming
into force of the Act of 1999, which is a primary legislation enacted by
the State Legislature the benefits from the date the Act has come into
force, cannot be made available to the respondents. H
1196 SUPREME COURT REPORTS [2007] 12 S.C.R.

A 20. In this 21st century, when there is global economy, the question
of faith is very important. Government offers certain benefits to attract
the entrepreneurs and the entrepreneurs act on those beneficial offers.
Thereafter, the Government withdraws those benefits. This will seriously
affect the credibility of the Government and would show the
B shortsightedness of the governance. Therefore, in order to keep the faith
of the people, the Government or its instrumentality should abide by their
commitments. In this context, the action taken by the appellant-
Corporation in revoking the benefits given to the entrepreneurs in the hill
areas will sadly reflect their credibility and people will not take the word
c of the Government. That will shake the faith of the people in the
governance. Therefore, in order to keep the faith and maintain good
governance it is necessary that whatever representation is made by the
Government or its instrumentality which induces the other party to act,
the Government should not be permitted to withdraw from that. This is a
D matter of faith.
21. Therefore, as a result of our above discussion, we hold that the
view taken by the Allahabad High Court on revoking the principle of
promissory estoppel is correct and the respondent- units will be entitled
to such benefits till the U.P. Electricity Reforms Act, 1999 came in to
E force. Since after coming into force the Act of 1999 no such concession
has been granted, therefore, the concession shall survive till the Act of
1999 came into force. The appeals are accordingly disposed of with no
order as to costs.
F N.J. Appeals disposed 0£