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REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 10103-10106 OF 2010  

M/s S.V.A. Steel Re-rolling Mills Ltd. etc. etc. .....Appellants.

        Versus

State of Kerala & Ors. etc. etc.         …..Respondents.      

WITH

C.A.NOS.10107-10108, 10110-10114, 10116-10121, 10123 OF  2010 AND C.A.NO.4035 OF 2007.

J U D G M E N T

ANIL R. DAVE, J.

1. Being  aggrieved  by  the  common  Judgment  dated  24th  

February,  2005  delivered  by  the  High  Court  of  Kerala  at  

Ernakulam  in  W.P.(C)  No.5795/2004,  W.P.(C)  

No.5877/2004,  W.P.(C)  No.5984/2004  and  O.P.  

No.9816/2001, the appellants,  original petitioners before the  

High  Court  have  approached  this  Court  by  way  of  these  

appeals.

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2. The facts giving rise to the present appeals, in a nut-shell, are  

as under:

The appellants  are  businessmen having their  manufacturing  

units  in  the  State  of  Kerala  and  they  are  manufacturing  

different  articles  with  the  help  of  electricity,  which  is  

generated/supplied  by  the  Kerala  State  Electricity  Board  

(hereinafter  referred  to  as  ‘the  Board’).   The  respondent-

Government was desirous of having industrial development in  

the  State  of  Kerala  and  therefore,  it  had  framed  certain  

policies so as to encourage and invite businessmen for setting  

up their manufacturing units in the State of Kerala.  Due to  

shortage of electricity supply in the State of Kerala, interested  

entrepreneurs were not  inclined to  set  up their  units  in  the  

State of Kerala.  In view of the aforestated circumstances, the  

State Government had laid down a policy whereby it declared  

to  give  continuous  electricity  supply  at  a  particular  rate  to  

certain new manufacturing units.  

3. So as to put the aforestated policy in practice, the respondent-

State had issued a Government Order dated 21st May, 1990  

which read as under:

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“Government have been considering the question of giving  

some incentives to new industries in the matter of power  

connection.  Taking into consideration the announcements  

made  by  the  Minister  (Finance)  in  the  current  year’s  

budget  speech  and  after  discussions  with  all  concerned,  

Government are now pleased to issue the following orders  

in this context which will have effect from 1-4-1990.

1. Power  connection  will  be  given on completion  of  any project irrespective of whether a general power cut  is in force or not. 2. New units commencing industrial production will be  exempted from power cut for a period of 5 years from  the date of commercial production. 3. Exemption from payment  of  electricity  duty  for  a  period of 5 years from the date of commencement of  commercial production will be given to the new units. 4. In future the electricity  duty will  not  be collected  from the industries if they are eligible for exemption. 5. Service connection charges will not be levied if no  extension  is  required  or  if  the  additional  line  to  be  provided is less than 500 meters in length.”

The aforestated State Government Order had been adopted by  

the Board by its Order dated 19th June, 1990.

4. By virtue of the aforestated policy declared under the order  

dated 21st May,  1990, the respondent-State had assured the  

manufacturing units to be set up in the State of Kerala that  

electricity connection would be given to the projects which  

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might be set up and they would be exempted from power cut  

for a period of 5 years from the date of commencement of  

commercial  production.   Such  new  units  were  also  given  

certain exemption in relation to payment of electricity duty for  

a period of five years.

5. It is not in dispute that in pursuance of the aforestated policy  

the  appellants  had  established  their  manufacturing  units  

(hereinafter referred to as ‘the new units’) in the respondent-

State.  It is also not in dispute that the requisite conditions,  

which had been imposed upon such new units, had been fully  

complied with by the appellants and therefore, the appellants  

were  entitled  to  an  uninterrupted  electricity  supply  for  a  

period of 5 years from the date on which they had commenced  

their commercial production.

6. The respondent-State had thereafter passed a further order on  

6th February, 1992, whereby the new units were exempted for  

5 years from the payment of enhanced power tariff on certain  

conditions.   According  to  the  appellants,  they  were  also  

entitled  to  benefit  under  the  aforestated  G.O.  dated  6th  

February, 1992.

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7. In spite of the assurance given by the respondent-State to the  

new units that they would not suffer any power cut, because  

of certain difficulties faced by the Board with regard to supply  

of electricity to new units, there used to be power cuts which  

adversely affected the new units.  In view of the said fact, to  

alleviate  the  difficulties  of  the  units  set  up  under  the  

aforestated policy, the respondent-State passed further order  

on 26th October, 1999, whereby it granted extension of period  

of assured power supply to the new units, who were adversely  

affected because of  the power cut  in certain circumstances.  

Under the aforestated order, it was decided and declared to  

extend the benefit which had been given under G.O. dated 25th  

May, 1990 and 6th February, 1992 to the new units by number  

of days during which supply of electricity to them had been  

cut to the extent of 50% or more. The respondent-State also  

decided to reimburse the Board with the amount of  benefit  

which was given to the new units on account of power cut  

beyond 50%.

8. In  the  aforestated  admitted  facts  and  circumstances,  the  

respondent-State  should  have  given  the  benefits  which  had  

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been  assured  to  the  new units  but  for  the  reasons  beyond  

control of the State as well as the Board, the benefits assured  

to the new units could not be given and therefore, along with  

other  industrial  units,  the  present  appellants  had  filed  writ  

petitions  before  the  High Court  of  Kerala  praying that  the  

benefits which had been assured to them should be given and  

they should not be constrained to pay tariff at the enhanced  

rate.  

9. Thus, according to the appellants, in fact, they did not get real  

benefit of the policy because their production was adversely  

affected whenever there was power cut  and the five years’  

period of exemption from power cut was not extended by the  

Government which was in violation of the promise given to  

the appellants and other similarly situated new units.

10. All these grievances were ventilated before the High Court by  

filing different petitions which were ultimately rejected by the  

High Court by virtue of the impugned order.

11. The  learned  counsel  appearing  for  the  appellants  had  

vehemently  submitted  that  it  was  unfair  on the  part  of  the  

respondent -State not to adhere to the promise given to the  

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appellants  with  regard  to  uninterrupted  100%  electricity  

supply.  The appellants had set up their industries in the State  

of  Kerala because of  the promise given by the respondent-

State that at least for a period of first 5 years from the date of  

commencement of the commercial production, there would be  

uninterrupted  power  supply  and  there  would  not  be  any  

increase in the tariff and therefore,  the respondent-State was  

bound  by  the  said  policy.  The  principle  of  promissory  

estoppel was also invoked by the appellants.  

12. The learned counsel  had further  submitted that  if  for  some  

reason it  was not possible for the respondent- State to give  

uninterrupted 100% electricity supply to the appellants on a  

particular  day,  the said  period or  the said day should have  

been added to the period of 5 years for which the respondent-

State had promised uninterrupted 100% electricity supply to  

the new units.  According to the learned counsel, though, the  

period had been extended,  but  not  in a fair  and reasonable  

manner  because  the  days  during  which  there  was  cut  of  

electricity supply to the extent of 50% or more, were added to  

the  period  of  5  years.   According  to  the  learned  counsel,  

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whenever there was any reduction in power supply, even if  

the reduction or cut was 50% or less, the said period should  

have been added to the period of 5 years, for the reason that in  

case of continuing process industries, for proper functioning  

of  the  manufacturing  units,  uninterrupted  100%  supply  of  

electricity is a sine qua non.   

13. The learned counsel had shown us some material whereby it  

was  shown  that  out  of  first  5  years  during  which  the  

appellants were to be given benefit, there was electricity cut  

for 921 days and out of those 921 days there were 214 days  

when the cut in electricity supply was for more than 50%.  It  

had been further submitted that the period during which even  

the electricity cut was less than 50%, the new units could not  

work at  its  optimum level,  which had resulted into several  

problems for the appellants.     

14. He had further added that the respondent Board had accepted  

the policy of the State with regard to giving benefit to the new  

units  for  uninterrupted  power  supply  on  same  tariff  and  

therefore, the Board could not have asked for additional tariff  

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during the period of 5 years, as extended by the period during  

which there was power cut.

15. The  learned  counsel  had  also  alleged  that  the  respondent-  

State had given discriminatory treatment to the appellants by  

not giving uninterrupted 100% electricity supply because the  

State  had  given  uninterrupted  100%  electricity  supply  to  

certain other manufacturing units like  Malabar Cement and  

the industries set up within the Export Processing Zone.  It  

had been asserted that if the above stated manufacturing units  

could be given 100% uninterrupted electricity supply,  there  

was no reason for denying the same benefit to the appellants.

16. So as to substantiate the submission with regard to promissory  

estoppel,  the  learned  counsel  had  relied  upon  certain  

judgments delivered by this Court.  

17. On  the  other  hand,  the  learned  counsel  appearing  for  the  

respondent -State had submitted that the prayers made by the  

appellants before the High Court were unjust and therefore,  

their  petitions and other petitions,  praying for  similar  relief  

had rightly been rejected by the impugned order of the High  

Court.

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18. It  had been also submitted that  Section 22 B of the Indian  

Electricity  Act,  1910  (hereinafter  referred  to  as  ‘the  Act’)  

enables the respondent-State to impose control on distribution  

and consumption of energy.  Section 22 B of the Act reads as  

under:

“Sector 22B. (1)  Power to control the distribution and  

consumption  of  energy:-  If  the  State  Government  is  of  

opinion  that  it  is  necessary  or  expedient  so  to  do,  for  

maintaining the supply and securing the equitable distribution  

of energy, it may by order provide for regulating the supply,  

distribution, consumption or use thereof.”  

19. The aforestated provision, according to the learned counsel,  

enables  the  respondent-State  to  regulate  the  supply,  

distribution  or  consumption of  electricity  and  as  there  was  

shortage  of  electricity  supply,  the  respondent-State  had  to  

impose some electricity cut, so as to see that least problems  

were created to the residents and industrial units set up in the  

respondent-State.   The  Government  authorities  had  to  use  

their discretion in the matter of  supply of electricity.  The  

discretion  which  the  respondent-State  used  was  quite  

reasonable  as  it  was  not  possible  to  give  100% electricity  

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supply to all the consumers of electricity in the State.  In the  

aforestated  circumstances,  the  respondent-State  had  to  

regulate  the  supply  by  imposing  some  power  cut,  and  

unfortunately  it  resulted  into  some  difficulties  to  the  

appellants.

20. It had been further submitted by the learned counsel that, so as  

to reduce the difficulties  of  the appellants,  the Government  

had issued an order whereby the days, during which electricity  

supply was cut beyond 50%, had been added to the period of  

5  years  during  which  the  appellants  were  entitled  to  the  

concession declared by the State of Kerala.  Thus, sufficient  

efforts  were  made  to  see  that  the  benefits  assured  to  the  

appellants were provided.

21. It had been further submitted that the appellants cannot expect  

benefit  of  extension  of  period  simply  because  there  was  

negligible cut in the supply for very less period.  Therefore,  

the respondent-State had decided that as and when the cut was  

50% or  more,  the  period for  which such  the  cut  had been  

effected would be added to the period of 5 years and the said  

decision was just and fair.  

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22. The learned counsel had also submitted that all consumers of  

electricity,  including  the  appellants  were  informed  well  in  

advance  about the stoppage of electricity supply and thus, all  

possible efforts were made to see that the appellants and other  

similarly situated consumers were not put to much hardship.  

23. The learned counsel had further submitted that looking at the  

facts of the case, there would not be any promissory estoppel  

as  submitted  by  the  learned  counsel  appearing  for  the  

appellants.   The  learned  counsel  had  relied  upon  the  

judgments delivered in the case of  State of Haryana & Ors.  

v.   Mahabir Vegetable Oils Pvt. Ltd., [2011 (3) SCC 778]  

and  State  of  Rajasthan  &  Anr.  v.   M/s  Mahaveer  Oil  

Industries & Ors., [1999(4) SCC 357] to substantiate their  

case  to  the  effect  that  there  could  not  be  any  promissory  

estoppel in such cases.

24. We had heard the learned counsel at length and perused the  

impugned  judgment  and  the  judgments  referred  to  in  the  

course of hearing and the relevant material placed on record  

of this Court.   It is not in dispute that the appellants had set  

up their new units in the State of Kerala only upon knowing  

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the policy with regard to uninterrupted power supply and that  

too at the same tariff for a period of 5 years from the date of  

commercial production.

25. In  the  instant  case,  no  case  had  been  made  out  by  the  

respondent-State  that  the  appellants  had  committed  any  

breach  or  were  not  entitled  to  any  of  the  benefits  or  

concessions  which  had  been  offered  to  them  by  the  

respondent-State.  In the circumstances, the respondent-State  

was bound to give the benefits which had been assured to the  

appellants.

26.  Though  the  respondent-State  was  bound  to  supply  

uninterrupted 100% electricity required by the appellants, one  

cannot  lose  sight  of  the  fact  that  at  times  there  would  be  

circumstances which would put the respondent-State and the  

Board  into  such  a  difficulty  that  they  would  not  be  in  a  

position to fulfill the assurance given to the new units.  It is  

not in dispute that the State of Kerala is not generating enough  

electricity to cater the needs of all its consumers in the State  

of Kerala.  The respondent-State is not having a magic wand  

which  would  enable  the  State  to  generate  more  electricity.  

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There  might  be  several  factors  which  might  be  adversely  

affecting  the  respondents  and  as  a  result  thereof,  the  

respondents might not be generating sufficient electricity so as  

to fulfill the needs of  the appellants and other residents of the  

State.

27.     The question, thus, arises as to how the adversely affected  

persons  who  had  been  assured  by  a  promise  with  regard  to  

continuous  supply  of  electricity  for  five  years  can  be  fairly  

compensated.

28.       It  is  true  that  the  respondent-State  came  out  with  

Government  Order  dated  26th October,  1999,  whereby  it  had  

decided that the period when there would be reduction or cut in  

supply of power to the extent of 50% or more, such period of  

power cut would be added to the period of 5 years, during which  

the  appellants  and other  similarly  situated  persons  were  to  be  

given continuous power supply.

29.The learned counsel  appearing for  the respondents  could not  

show  us  any  justifiable  reason  for  deciding  as  to  why  the  

respondent-State decided to give the benefit of extended period  

only when the power cut was 50% or more.  It is pertinent to  

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know that the cases where the consumer is having a continuous  

process industry, even power cut below 50% would adversely  

affect  the  manufacturing  unit.   It  is  a  matter  of  common  

knowledge that in several industries, the manufacturing process  

can not be stopped abruptly.  Many a times, restarting of the  

machines or boilers take lot of time and energy, which results  

into loss to the manufacturer.  The said fact ought to have been  

considered by the State while taking the aforestated decision.  

The decision with regard to giving extension of time to such a  

limited extent is not reasonable and in our opinion, that would  

have surely affected the new units adversely.

30.It  is  true  that  Section  22B  of  the  Act  enables  the  State  

Government  to  regulate  the  supply,  distribution  and  

consumption of electricity for the purpose of maintenance and  

supply of equitable distribution of energy but in our opinion,  

provisions  of  the  said  section  are  not  much  relevant  for  the  

reason that in the instant case, the respondent State had given  

an assurance with regard to uninterrupted supply of electricity  

and therefore, the respondents ought to have made provision for  

uninterrupted supply of electricity to the appellants and other  

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similarly situated persons by regulating electricity supply in a  

proper manner.   

31.Framing  such  policies  and  doing  the  needful  for  its  

implementation are administrative functions of the respondent-

State  and  therefore,  normally  this  Court  would  not  like  to  

interfere with its policies but looking at the peculiar facts of the  

case,  where  an  assurance  had  been  given   for  uninterrupted  

supply of electricity, one would presume that the respondent-

State must have made necessary arrangements to provide 100%  

uninterrupted supply of electricity for 5 years to the new units.  

If  for  any reason it  was not  possible  to supply electricity as  

assured, the respondent-State ought to have extended the period  

of 5 years by the period during which assured electricity was  

not  supplied.   By doing so,  the  respondent-State  could have  

made an effort to fulfill its promise and satisfied the persons  

who had acted on an assurance given by the State and set up  

their manufacturing units in the State of Kerala.

32.Before laying down any policy which would give benefits to its  

subjects, the State must think about pros and cons of the policy  

and  its  capacity  to  give  the  benefits.   Without  proper  

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appreciation of all the relevant factors, the State should not give  

any assurance, not only because that would be in violation of  

the principles of promissory estoppel but it would be unfair and  

immoral on the part of the State not to act as per its promise.

33.In the instant case, the respondent-State was conscious about  

the  fact  that  there  was  a  problem  with  regard  to  supply  of  

electricity in the State of Kerala and possibly for that reason  

industries which depended much upon electricity as a source of  

power were not inclined to establish new industries in the State  

of Kerala.  Before setting up an industry, the entrepreneur or the  

industrialist  considers  several  factors  and  thereupon  takes  

several  decisions  like  place  of  business,  capacity  at  which  

production should be made, type of raw-material, etc.   After  

considering  all  these  factors,  a  final  decision  is  taken  with  

regard to setting up of an industry.  For a new entrepreneur,  

such a decision is of vital importance because if he fails in his  

estimates or in consideration of all the relevant factors, there are  

all chances that he would fail not only in his business but he  

would  completely  ruin  himself.   Thus,  one  can  very  well  

appreciate  that  the  appellants  must  have  thought  about  all  

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relevant  factors,  including  the  incentives  offered  by  the  

respondent-State  and  might  have  decided  to  set  up  their  

industries  in the respondent-State.   While deciding this  case,  

this Court would invariably keep in mind the circumstances in  

which the appellants had set up their industries in the State of  

Kerala.

34.In view of the incentives and assurances given to the appellants  

along  with  others,  who  were  desirous  of  setting  up  new  

industries,  the  appellants  set  up  their  new units  which  were  

much dependant upon continuous supply of electricity.  One of  

the appellants is a Steel Re-rolling Mill. In Steel industry, when  

the industry is concerned with making of steel or re-rolling of  

steel, it requires lot of power and energy, and electricity being  

one of the important sources of power, the appellant was much  

dependent on continuous supply of electricity, which had been  

assured to it by the respondent-State.

35.If  an  assurance  was  given  to  the  appellants  and  similarly  

situated  persons  that  they  would  be  given  100%  electricity  

supply for five years, the respondents can not riggle out of their  

liability by making a policy to the effect that the benefit by way  

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of incentive would be extended only if  the electricity supply  

was  reduced  to  less  than 50% on a  particular  day.   A steel  

industry, for example, which cannot function without electricity  

or  power  in  any  other  form,  would  be  put  to  enormous  

inconvenience and loss if the power supply is not continuous.  

So as  to  reactivate  or  to  restart  the  machines  or  to  start  the  

process afresh, the industry has to spend something more then  

what  it  would  have  spent  if  the  supply  or  power  namely,  

electricity  was  uninterrupted.    Stoppage  of  manufacturing  

process would mean losses under several  heads.   The labour  

employed has to be paid even when the employer does not get  

work  from the  labour  force.    Very  often,  so  as  to  bring  a  

required  temperature  for  the  purpose  of  carrying  on  certain  

processes,  more  fuel  is  to  be  injected  so  as  to  attain  the  

condition which was prevailing prior to electricity supply being  

disconnected.  Moreover,  there  would  be  several  overhead  

expenses which one has to incur even if there is no production  

or stoppage of manufacturing process.

36.The  judgments  cited  by  the  counsel  appearing  for  the  

respondents would not help them for the reason that in the cases  

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referred to, the Government had to change the policy in public  

interest.   In  the  instant  case,  by compensating  the aggrieved  

appellants,  no  harm would  be  caused  to  the  State  of  Kerala  

except  that  it  will  have  to  compensate  the  appellants  by  

supplying  assured  electricity  for  some  extended  period  at  a  

specified tariff.

37.For the aforestated reasons, in our opinion, the respondent-State  

was not wholly fair when it extended benefit to the appellants  

only for the period during which electricity supply was reduced  

to less than 50% on certain days.

38.We, therefore, hold that the benefit extended by the respondent  

State  is  not  sufficient.   The  respondent-State  ought  to  have  

extended the period even for the days when supply of electricity  

was more than 50% but not 100% as assured under G.O. dated  

21.5.1990 and 6.2.1992.  We, therefore, direct the respondents  

to give the said benefit by extending the period of incentive.  

39.We, therefore, allow the appeals by quashing and setting aside  

the impugned order passed by the High Court and direct the  

respondents  to  calculate  the  period  during  which  100%  

electricity supply was not given to the appellants and extend the  

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period of incentive accordingly.  The calculation shall be made  

and  consequential  orders  shall  be  passed  within  two months  

from today. The appeals are allowed with no order as to costs.

 ……………………….J.              (ANIL R. DAVE)

 ……………………….J.              (A.K. SIKRI)  

New Delhi February  6,  2014.

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