Page 1

1

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL  NO. 9748 OF 2003

M/s. Kothari Industrial Corporation Ltd. Appellant (s)

VERSUS

Tamil Nadu Electricity Board & Anr. Respondent (s)

WITH

CIVIL APPEAL NO.9749 OF 2003 CIVIL APPEAL NO.9750 OF 2003

J U D G M E N T

RANJAN GOGOI, J.

1. These cases have been referred by a two-Judges Bench of  

this Court on the question as to whether, in the facts of the  

case, the principles of promissory estoppel can be invoked in

Page 2

2

favour of the appellants so as to entitle them to the benefit of  

concessional tariff of electricity.  

2. Civil Appeal No.9748 of 2003 and Civil Appeal No. 9750 of  

2003 have identical facts. In fact the appellant in Civil Appeal  

No. 9750 of 2003 is the successor-in-interest of the appellant  

in  Civil  Appeal  No.  9748  of  2003.  The  facts  in  the  third  

appeal  i.e.  Civil  Appeal  No.  9749 of  2003 are  also  largely  

similar.  

3. The  appellant  in  C.A.No.9748  of  2003  M/s.  Kothari  

Industrial Corporation Ltd. had proposed to set up a caustic  

soda  manufacturing  unit  at  Manali  in  the  State  of  Tamil  

Nadu.  As  the  manufacturing  process  involved  high  

consumption  of  electrical  power,  the  appellant  applied  for  

concessional tariff which was promised to it by a Government  

Letter  dated  29.6.1976  for  first  five  years  after  

commencement  of  production.  In  the  said  letter  it  was

Page 3

3

specifically mentioned that the rate at which the appellants  

were required to pay tariff would be below the rate applicable  

to the other two established caustic soda units in the State  

for the first three years and thereafter the rates will be at par  

with that of the other two units in the State.    

4. Admittedly the unit of the appellant had started commercial  

production with effect from January, 1979. On 23.2.1979 the  

Tamil Nadu Revision of Tariff  Rates on supply of Electrical  

Energy Act, 1978 (hereinafter referred to as the “Act”) came  

into force.  

5. Section 2(b) of the Act defines tariff in the following terms:

“Tariff”  means the rate  of  tariff  leviable  upon  

the consumption of any electrical energy in this  

State  supplied  by  the  Tamil  Nadu  Electricity  

Board and as specified in the Schedule to this  

Act.”

Page 4

4

Section 3 of the Act provides that the tariff  rates for  

consumption of electrical energy shall be as specified in the  

Schedule to the Act.  

Under Section 4 the State Government is empowered to  

amend the provisions of the Schedule to the Act after taking  

into  account  the  cost  of  production  of  energy  and  such  

other matter as may be prescribed.

The schedule to the Act, inter alia, provides that in  the  

case of new industries, concessional tariff would be charged  

after  commencement  of  the  production  in  the  following  

manner–

“For the first  Three years       .....   66-2/3   Per cent of the High Tension

                                             rates under 1(A) (B) as the                                                case may be.

For the fourth year  ......  80 Per cent of the High  Tension  rates  under  1(A),  1(B) as the case may be.

Page 5

5

For the firth year    ......   90 Per cent of the High Tension rates under 1(A) (B) as the case may be.

For the sixth year  ...... Full Tariff.”

6. In exercise of the power conferred by Section 4 of the Act,  

the  Schedule  thereto  was  amended  by  G.O.  No.861  dated  

30.4.1982. While maintaining the concessional tariff as noticed  

above,  the  Amendment  provided  that  the  same  will  not  be  

available from the year when the industry starts earning profits.  

It  is also an admitted fact that the appellants had furnished  

undertakings  that  it  will  be  bound  by  amendment  to  the  

Schedule as affected by G.O. No.861 dated 30.4.1982.

7. On  the  above  basis,  a  demand  was  raised  on  the  

appellants for consumption of electricity at the normal rate of  

tariff applicable on the ground that the industries had started  

earning profits. The said demand insofar as the appellant, M/s.  

Kothari  Industrial  Corporation  Ltd.  and  Southern  Petro

Page 6

6

Chemical  Industries  Corporation Ltd.  is  concerned is  for  the  

period  from  May  1982  to  November,  1983,  while  for  the  

appellant National Oxygen Ltd. the period is May 1982 to April,  

1984.

8. The  appellants  protested  against  the  said  demand  and  

eventually moved the High Court contending that under the Act  

the  respondent  State  had  promised  concessional  tariff  for  a  

period of five years starting from the date of commencement of  

commercial production. The said position could not have been  

revisited by any contrary action as has been done. Alternatively,  

it was contended that the appellants had not made any profits  

as claimed by the State. Therefore, even if the amendment in  

the  Schedule  to  the  Act  is  to  be  construed  to  be  legally  

permissible,  the  same  would  have  no  application  to  the  

appellants  which were loss making concerns.  The said claim  

was negatived by the High Court leading to the appeals before  

us.  

Page 7

7

9. We  have  heard  Shri  Pravin  H.  Parekh  and  Ms.  Nalini  

Chidambaram,  learned  senior  counsels  for  the  appellants  in  

C.A.  No  9748  of  2003  and  C.A.  No  9750  of  2003  and  Shri  

Krishnamurthi  Swami,  learned  counsel  for  the  appellant  in  

C.A.No.9749 of 2003. We have also heard Shri Subramonium  

Prasad, learned counsel for the respondents.  

10. The question referred to this bench, as noticed, is whether  

the State would be estopped from altering/modifying the benefit  

of concessional tariff by means of the impugned G.O No. 861  

dated 30.4.1982 on the principle of promissory estoppel. In fact,  

insofar  as  the  caustic  soda  unit  of  M/s.  Kothari  Industrial  

Corporation Ltd.,  subsequently taken over by Southern Petro  

Chemical  Industrial  Corporation  Ltd.,  is  concerned,  strictly  

speaking, the above question would not even arise inasmuch as  

at  the  time  when  the  unit  was  set  up  and  had  started  

commercial production, the Act had not yet come into force. The  

promise, if any, was made by the letter dated 29.6.1976 on the  

terms noticed above, namely, the tariff payable by the industry

Page 8

8

was to be at a rate less than what was applicable to the other  

two units of the State for the first three years and thereafter at  

the  rate  equivalent  to  what  was  being  paid  by  the  said  two  

units.  

11. Be that as it may, the question referred has been squarely  

answered by this Court in Shree Sidhbali Steels Limited vs.  

State  of  Uttar  Pradesh  &  Ors.  1   wherein  this  Court  has  

considered a similar question with regard to the withdrawal of  

concessional  tariff/rebate  to  an  industrial  unit  carrying  on  

business in the hill areas of the State of U.P. (now the State of  

Uttarakhand). After an indepth consideration of the provisions  

of  Section  48/49  of  the  Electricity  Supply  Act,  1948  under  

which  the  concessional  tariff/rebate  was  granted  and  the  

provisions of Section 21 of the General Clauses Act as well as  

the provisions of the U.P. Electricity Reforms Act, 1999 under  

which the concessional tariff/rebate was later withdrawn this  

Court in para 51 came to the following conclusion –

1

2011 (3) SC 193

Page 9

9

“From the above discussion, it is clear that  

the petitioners cannot raise plea of estoppel  

against  the  Notification  dated  7.8.2000  

reducing  hill  development  rebate  to  0% as  

there  can  be  no  estoppel  against  the  

statute.”

12. In Para 47 of the report this Court has considered and had  

thought  it  appropriate  to  extract  the  views  expressed  in  an  

earlier  decision  i.e.  State  of  Rajasthan  vs.  J.K.  Udaipur  

Udyog Ltd. 2 :

“25. An exemption is by definition a freedom  from  an  obligation  which  the  exemptee  is  otherwise liable to discharge. It is a privilege  granting  an  advantage  not  available  to  others.  An  exemption  granted  under  a  statutory  provision  in  a  fiscal  statute  has  been held to be a concession granted by the  State Government so that the beneficiaries of  such concession are not required to pay the  tax or duty they are otherwise liable to pay  under  such  statute.  The  recipient  of  a  

2

2004 (7) SCC 673

Page 10

10

concession has no  legally  enforceable  right  against  the  Government  to  grant  of  a  concession except to enjoy the benefits of the  concession  during  the  period  of  its  grant.  This right to enjoy is a defeasible one in the  sense that it may be taken away in exercise  of the very power under which the exemption  was granted. (See Shri Bakul Oil Industries v.  State of Gujarat, Kasinka Trading v. Union of  India and  Shrijee  Sales  Corpn. v.  Union  of  India.)”

13. On the aforesaid basis in Para 48 of the report in  Shree  

Sidhbali Steels Ltd. (supra) it was concluded as follows :

“48. From the principle enunciated in the  abovementioned decision in  Udaipur Udyog  case there is no manner of doubt that the  rebate which was granted to the petitioners,  was,  by  definition,  a  freedom  from  an  obligation  which  the  appellants  otherwise  were liable to discharge. The rebate was a  privilege granting an advantage which was  not  made  available  to  others.  The  rebate  granted under Section 49 of the Electricity  (Supply)  Act  of  1948  was,  therefore,  a  concession  granted  by  the  State  Government  so  that  the  beneficiaries  of  such concessions were not required to pay  the  electricity  tariff  they  were  otherwise  liable to pay under the said Act during the  period  of  its  grant.  The  petitioners,  as  recipients of a concession, accepted to enjoy

Page 11

11

the  benefits  of  the  concession  during  the  period of its grant. This right to enjoy was a  defeasible one in the sense that it was liable  to be taken away or withdrawn in exercise of  the very power under which the exemption  was granted.”

14. In the light of the above discussion and the earlier views of  

this Court, as set out above, it has to be held that the principle  

of promissory estoppel would have no application to the case of  

the appellants so as to entitle the applellants any right to the  

continuation of the concessional tariff earlier granted.

15. The  appellants  have  urged  certain  other  issues  to  

persuade the court to strike down the impugned action of the  

respondents  in  withdrawing  the  concessional  tariff,  the  

foremost being that the industries in question had earned no  

profits  so  as  to  attract  the  withdrawal/disabling  condition  

introduced  in  the  Amended  Schedule.  In  this  regard  it  is  

pointed  out  that  Kothari  Industrial  Corporation  Ltd.  had  

incurred  losses  as  a  whole  though  its  caustic  soda  unit,  to

Page 12

12

whom concessional tariff was promised and granted, may have  

earned a profit. The concessional tariff having been granted to  

the industry by the Act in question,  though in respect of  its  

caustic soda unit, the assessment of  profit/loss made by the  

industry as a whole and not by the unit alone, cannot be said to  

be  an  arbitrary  or  irrational  basis  for  determining  the  

application  of  the  impugned  G.O.  to  the  appellants  in  

C.A.Nos.9748 and 9750 of 2003. Similarly in the case of  the  

appellant National Oxygen Ltd. the refusal of the respondent to  

compute the issue of profit/loss by distributing the depreciation  

of cylinders for a period of five years instead of the first year in  

which  the  depreciation  was  allowed,  as  claimed,  cannot  be  

termed as an unjustified basis for holding the industry to be a  

profit  making  enterprise.  The  contention  on  the  above  score  

made on behalf of the appellant National Oxygen, therefore, is of  

no consequence. Similarly the withdrawal of the G.O. 861 dated  

30.4.1982  in  the  year  1988  and  a  reversal  to  the  situation  

prevailing  earlier  cannot  invalidate  the  G.O.  (No.  861  dated  

30.4.1982)  inasmuch as it is for the State and not for the court

Page 13

13

to  determine  what  should  be  the  policy  for  grant/refusal  of  

concessional power  at  different  points  of  time.  These  are  

questions that must be left to the State and not to the Courts to  

decide.

16. In  the  light  of  the  above,  even  the  contentions  on  the  

merits of  the decision as advanced by the appellants are not  

tenable so as to invalidate the action(s) impugned in the present  

cases.

17. For the aforesaid reasons all the appeals are without any  

merit and are accordingly dismissed.  

…….…………………………...J.                             [RANJAN GOGOI]

…….…………………………...J.                              [ARUN MISHRA]

Page 14

14

         …………………………….……J.        [PRAFULLA C. PANT]

NEW DELHI; JANUARY 29, 2016.