[2020] 14 S.C.R. 45 45
THE STATE OF JHARKHAND AND ORS. A
v.
BRAHMPUTRA METALLICS LTD., RANCHI AND ANR.
(Civil Appeal Nos. 3860-3862 of 2020)
DECEMBER 01, 2020 B
[DR. DHANANJAYA Y CHANDRACHUD AND
INDU MALHOTRA, JJ.]
Bihar Electricity Duty Act, 1948 – s.9 – Jharkhand Industrial
Policy, 2012 – The Industrial Policy 2012 was notified by the State
government on 16.06.2012 providing an exemption from payment C
of 50 per cent of the electricity duty for a period of five years – The
policy envisaged that the industrial units will be entitled for
reimbursement/payment of subsidy etc. under the different categories
only from the next financial year of the date of production – It was
also stipulated in the policy that notifications enforcing the terms D
of the industrial policy would be issued within a period of one month
by the Departments of the State government – The Departments of
the State government failed to comply with the one month time
schedule – Eventually, the State government issued an exemption
notification on 08.01.2015 but made it effective from the date on
which it was issued – Writ petition by the respondent – Before the E
High Court, the respondent claimed that the clause in the notification
making it prospective should be effaced since it was contrary to the
representation that was held out by the Industrial Policy 2012 –
Alternately, the respondent sought a direction that it would be entitled
to an exemption from electricity duty for a period of five years from F
the date of the issuance of the notification – High Court held that
there was no specific reason for delay and that ‘but for the lethargic
approach of the state authorities’ the exemption should have been
issued within a month of the issuance of the Industrial Policy 2012
– The High Court concluded that the notification dated 08.01.2015
issued by the Commercial Tax Department of the State government G
ought not to be construed with prospective effect and the clause
making it prospective would have to be struck down – The
notification was deemed to be in effect from the date of the Industrial
Policy 2012 (1 April 2011) – The electricity duty deposited for FYs
2011-12, 2012-13 and 2013-14 was directed to be adjusted against
H
45
46 SUPREME COURT REPORTS [2020] 14 S.C.R.
A the future liability of the respondent towards electricity duty – On
appeal, held: The State government issued a statutory notification
u/s. 9, but by doing so prospectively with effect from 08.01.2015 it
negated the nature of the representation which was held out in the
Industrial Policy 2012 – Absolutely no justification bearing on
reasons of policy or public interest has been offered before the
B
High Court or before the Supreme Court for the delay in issuing a
notification – Since the State has offered no justification for the
delay in issuance of the notification, or provided reasons for it being
in public interest, such a course of action by the State is arbitrary
and is violative of Art.14 – In the instant case, the respondent is
C entitled to a rebate/deduction from electricity duty – However, the
respondent would not be entitled to a rebate/deduction for FY 2011-
12 – In terms of the Industrial Policy 2012, the entitlement ensues
from the financial year following the commencement of production
– The respondent commenced production on 17.08.2011 – Therefore,
the order of the High Court for the FYs 2012-13 and 2013-14 is
D
confirmed.
Principles/Doctrines – Promissory estoppel – Origins and
evolution – discussed.
Principles/Doctrines – Promissory estoppel and legitimate
E expectation – Difference between – discussed.
Disposing of the appeals, the Court
HELD: Expectations breached by the State of Jharkhand
1. In the present case, this Court is unable to perceive any
F substance in the submission of the State which was urged in
defense before the High Court. Not only did the State in the
present case hold out a solemn representation, this
representation was founded on its stated desire to encourage
industrialization in the State. The policy document spelt out:
(i) The nature of the incentives;
G
(ii) The period during which the incentives would be
available; and
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 47
LTD.
(iii) The time limit within which follow-up action would be A
taken by the State government through its
departments for implementing the Industrial Policy
2012. [Para 43][78-F-H]
2. The State having held out a solemn representation in
the above terms, it would be manifestly unfair and arbitrary to B
deprive industrial units within the State of their legitimate
entitlement. The State government did as a matter of fact, issue
a statutory notification under Section 9 of the Bihar Electricity
Duty Act, 1948 but by doing so prospectively with effect from 8
January 2015 it negated the nature of the representation which
was held out in the Industrial Policy 2012. Absolutely no C
justification bearing on reasons of policy or public interest has
been offered before the High Court or before this Court for the
delay in issuing a notification. The pleadings are completely silent
on the reasons for the delay on the part of the government and
offer no justification for making the exemption prospective, D
contrary to the terms of the representation held out in the
Industrial Policy 2012. [Para 44][79-A-C]
3. It is one thing for the State to assert that the writ
petitioner had no vested right but quite another for the State to
assert that it is not duty bound to disclose its reasons for not E
giving effect to the exemption notification within the period that
was envisaged in the Industrial Policy 2012. Both the accountability
of the State and the solemn obligation which it undertook in terms
of the policy document militate against accepting such a notion of
state power. The state must discard the colonial notion that it is
a sovereign handing out doles at its will. Its policies give rise to F
legitimate expectations that the state will act according to what it
puts forth in the public realm. In all its actions, the State is bound
to act fairly, in a transparent manner. This is an elementary
requirement of the guarantee against arbitrary state action which
Article 14 of the Constitution adopts. A deprivation of the G
entitlement of private citizens and private business must be
proportional to a requirement grounded in public interest. This
conception of state power has been recognized by this Court in a
consistent line of decisions. [Para 45][79-C-F]
H
48 SUPREME COURT REPORTS [2020] 14 S.C.R.
A 4. Therefore, it is clear that the State had made a
representation to the respondent and similarly situated industrial
units under the Industrial Policy 2012. This representation gave
rise to a legitimate expectation on their behalf, that they would
be offered a 50 per cent rebate/deduction in electricity duty for
the next five years. However, due to the failure to issue a
B
notification within the stipulated time and by the grant of the
exemption only prospectively, the expectation and trust in the
State stood violated. Since the State has offered no justification
for the delay in issuance of the notification, or provided reasons
for it being in public interest, such a course of action by the State
C is arbitrary and is violative of Article 14. [Para 46][80-A-C]
5. The narrow issue is whether the respondent is entitled
to a rebate/deduction from electricity duty which is answered in
the affirmative. It is necessary, however, to clarify that the
respondent would not be entitled to a rebate/deduction for FY
D 2011-12. In terms of Clause 35.7(b) of the Industrial Policy 2012,
the entitlement ensues from the financial year following the
commencement of production. The respondent commenced
production on 17 August 2011. Hence, the order of the High Court
would have to be confirmed for FYs 2012-13 and 2013-14. In
conclusion, this Court in agreement with the conclusion of the
E High Court that the respondent was entitled to an exemption
from electricity duty, although for the reasons indicated in this
judgment. Further, the relief granted would stand confined to FYs
2012-13 and 2013-14. [Para 51][85-B-D]
National Buildings Construction Corporation vs S.
F Raghunathan (1998) 7 SCC 66 : [1998] 1 Suppl. SCR
156; Monnet Ispat and Energy Ltd. vs Union of India
(2012) 11 SCC 1 : [2012] 7 SCR 644; Union of India
vs Lt. Col. P.K. Choudhary (2016) 4 SCC 236 : [2016]
2 SCR 426; Food Corporation of India vs Kamdhenu
G Cattle Feed Industries (1993) 1 SCC 71 : [1992]
2 Suppl. SCR 322; NOIDA Entrepreneurs Assn. vs
NOIDA (2011) 6 SCC 508 : [2011] 8 SCR 25; Indian
Council for Enviro-Legal Action vs Union of India (2011)
8 SCC 161: [2011] 9 SCR 146 – relied on.
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 49
LTD.
State of Bihar v. Kalyanpur Cement Limited (2010) 3 A
SCC 274 : [2010] 1 SCR 928 Manuelsons Hotels
Private Limited vs State of Kerala (2016) 6 SCC 766
: [2016] 3 SCR 718; Motilal Padampat Sagar Mills Co.
Ltd. v. State of UP (1979) 2 SCC 409: [1979] 2 SCR
641 ; State of Madhya Pradesh v. Bhailal Bhai AIR
B
1964 SC 1006 : [1964] SCR 261; Suganmal v. State of
Madhya Pradesh AIR 1965 SC 1740; Mafatlal
Industries Ltd. v. Union of India (1997) 5 SCC
536:[1996] 10 Suppl. SCR 585; Amarjit Singh
Ahluwalia (Dr) vs State of Punjab, (1975) 3 SCC 503 :
[1975] 3 SCR 82; Sukhdev Singh vs Bhagatram Sardar C
Singh Raghuvanshi, (1975) 1 SCC 421 : [1975] 3 SCR
619 (concurring opinion of Justice K K Mathew) and
Ramana Dayaram Shetty vs International Airport
Authority of India, (1979) 3 SCC 489 : [1979]
3 SCR 1014; High Court of Judicature of Patna vs
D
Madan Mohan Prasad (2011) 9 SCC 65 :[2011]
13 SCR 972; Dayal Singh vs Union of India (2003) 2
SCC 593 : [2003] 1 SCR 714; Hindustan Petroleum
Corporation Ltd. vs Dolly Das (1999) 4 SCC 450 –
referred to.
Crabb v. Arun DC [1976] 1 Ch 179 27;Combe v. Combe E
[1951] 2 K.B. 21529; Wyvern Development, Re, [1974]
1 W.L.R. 1097 Tungsten Electric Co Ltd. vs Tool Metal
Manufacturing Co. Ltd., [1955] 1 W.L.R. 761,Baird
Textiles Holdings Ltd. vs Marks and Spencer Plc.,
[2002] 1 All ER (Comm) 737, Waltons Stores F
(Interstate) Ltd vs Maher, (1988) 164 CLR 387. 30; R
vs North and East Devon Health Authority, ex p
Coughlan [2001] QB 213; Regina (Bibi) vs Newham
London Borough Council [2002] 1 W.L.R. 23734;
Vitarelli vs Seton 359 US 535 (1959); East Sussex County
Council [2003] 1 WLR 348; Attorney General for New G
South Wales vs. Quinn (1990) 64 Aust LJR 327 : (1990)
170 CLR 1; Regina (Reprotech (Pebsham) Ltd) vs East
Sussex County Council [2003] 1 WLR 348 – referred
to.
H
50 SUPREME COURT REPORTS [2020] 14 S.C.R.
A Hugh Beale, Chitty on Contracts (32nd edn., Sweet &
Maxwell 2017). Harry Woolf and others, De Smith’s
Judicial Review (8th edn, Thomson Reuters 2018).
M.P. Jain and S.N. Jain, Principles of Administrative
Law (7th edn., EBC 2013) – referred to.
B Case Law Reference
[2010] 1 SCR 928 referred to Para 11
[2016] 3 SCR 718 referred to Para 11
[1979] 2 SCR 641 referred to Para 11
C [1964] SCR 261 referred to Para 14(x)
AIR 1965 SC 1740 referred to Para 14(x)
[1996] 10 Suppl. SCR 585 referred to Para 14(xii)
[1975] 3 SCR 82, referred to Para 38
D [1975] 3 SCR 619 referred to Para 38
[1979] 3 SCR 1014 referred to Para 38
[1998] 1 Suppl. SCR 156 relied on Para 39
[2012] 7 SCR 644 relied on Para 40
E
[2016] 2 SCR 426 relied on Para 41
[1992] 2 Suppl. SCR 322 relied on Para 42
[2011] 8 SCR 25 relied on Para 42
[2011] 13 SCR 972 referred to Para 42
F
[2003] 1 SCR 714 referred to Para 42
(1999) 4 SCC 450 referred to Para 48
[2011] 9 SCR 146 relied on Para 50
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3860-
G
3862 of 2020
From the Judgment and Order dated 11.12.2019 of the High Court
of Jharkhand in Writ Petition (T) No. 4274 of 2019, Writ Petition (T) No.
4275 of 2019 and Writ Petition (T) No. 4320 of 2019
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 51
LTD.
Tapesh Kumar Singh, AAG, Aditya Pratap Singh, Ms. Bhashwati A
Singh, Devashish Bharuka Mrs. Jaya Bharuka, Ravi Bharuka, Ms.
Sarvshree, Justine George, Ms. Srishti Agarwal, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J. B
A The appeal
B The issue
C Captive power plant : assessment to electricity duty
D Industrial Policy 2012
C
E Exemption from Electricity Duty
F Before the High Court
G Submissions of Counsel
H Analysis
H.I A State in breach of policy commitments D
H.2 Building on Motilal Padampat
H.3 Promissory estoppel – origins and evolution
H.4 From estoppel to expectations
H.5 Indian Law and the doctrine of legitimate
expectations E
H.6 Expectations breached by the State of
Jharkhand
H.7 The technical defences to the claim
I Conclusion F
1. Leave granted.
A. The appeal
2. This appeal arises from a judgment of the High Court of
Jharkhand. While allowing a petition instituted by the respondents under G
Article 226 of the Constitution, the Division Bench:
(i) struck down the last paragraph of a notification dated 8
January 2015 issued by the State government in its
H
52 SUPREME COURT REPORTS [2020] 14 S.C.R.
A Department of Commercial Taxes, giving prospective effect
to the rebate/deduction from electricity duty offered under
the Jharkhand Industrial Policy, 20121;
(ii) directed that the notification shall be deemed to be in effect
from 1 April 2011, when the Industrial Policy 2012 was
B enforced with retrospective effect; and
(iii) upheld the claim of the respondent that it was entitled to a
rebate/deduction from electricity duty in terms of the
representation held out in the Industrial Policy 2012, and
that the denial of the exemption by the State government
C for FYs2011-12, 2012-13 and 2013-14 was contrary to the
doctrine of promissory estoppel.
The State is in appeal to challenge the judgment dated 11
December 2019.
B. The issue
D
3. The issue for determination is whether the respondent is entitled
to claim a rebate or deduction of 50 per cent of the amount assessed
towards electricity duty for FYs 2011-12, 2012-13 and 2013-14.The
respondent claims its entitlement on the basis of the Industrial Policy
2012 (notified by the appellant on 16 June 2012) and a statutory
E notification dated 8 January 2015 issued under Section 9 of the Bihar
Electricity Duty Act 19482. The Bihar Act 1948 was adopted with effect
from 15 November 2000 for the State of Jharkhandunder the provisions
of the Bihar Reorganization Act 2000.
C. Captive power plant : assessment to electricity duty
F
4. The respondent was granted a certificate of commencement
of commercial production on 31 May 2013. The certificate records that
the integrated manufacturing unit of Sponge Iron and Mild Steel Billets,
together with a captive thermal plant of 20 MW capacity set up by the
respondent commenced commercial production on 17 August 2011. A
G certificate of registration was granted to the respondent on 22 November
2011 under Rule 4 of the Bihar (Jharkhand) Electricity Duty Rules 19493,
according to which it was liable to pay duty for distribution and/or
1
“Industrial Policy 2012”
2
“the Bihar Act 1948”
3
H “the Bihar Rules 1949”
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 53
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
consumption of the energy from 1 October 2011. On the basis of the A
returns submitted by the respondent in Form-III, read with Rule 9 of the
Bihar Rules 1949, assessment orders were passed by the assessing
officer for FY 2011-12 on 9 December 2014, for FY 2012-13 on 18
December 2015 and for FY 2013-14 on 16 December 2016.
D. Industrial Policy 2012 B
5. The Industrial Policy 2012 was notified by the State government
on16 June 2012. Some of the salient features of the Industrial Policy
2012need to be visited:
(i) Clause 32.10 provided an exemption from the payment of
50 per cent of the electricity duty for a period of five years, C
for captive power plants established for self-consumption
or captive use:
“32.10 Incentive for captive power plant
New or existing industrial units setting up captive power D
plant shall be exempted from the payment of 50% of
electricity duty for a period of five years for self-
consumption or captive use (i.e. in respect of power
being used by the plant) from the date of its
commissioning”.
E
(ii) Clause 35.7(b) envisaged that the entitlement would ensue
from the financial year following the Date of Production
(DoP):
“35.7(b) Industrial units will be entitled for
reimbursement/ payment of subsidy / incentives under
F
different categories only from the next financial year of
DoP.”
(iii) Clause 38(b) stipulated that notifications enforcing the terms
of the industrial policy would be issued within a period of
one month by the Departments of the State government:
G
“38. Monitoring and Review
(b) All concerned departments and organizations
would issue necessary follow up notifications within a
month to give effect to the provisions of this Policy. The
implementation of this policy will be duly monitored by H
54 SUPREME COURT REPORTS [2020] 14 S.C.R.
A Government at the level of Chief Secretary atleast once
in a quarter, so that the State Government may carry
out a mid-term review of this Policy.”
E. Exemption from Electricity Duty
6. Though the Industrial Policy 2012 which was notified on 16
B June 2012 envisaged that notifications by the Departments of the State
government would be issued within one month, there was a failure to
comply with the time schedule. In order to give effect to the exemption
from electricity duty, a notification under Section 9 of the Bihar Act
1948 was necessary. Section 9 recognizes the power of the State
C government to grant exemptions4.
7. Rule 6 of the Bihar Rules1949 casts a duty on every assessee
to pay the duty which falls due within two calendar months of the month
to which it relates. Rule 9 requires the submission of a return in Form-III
within a period of two calendar months from the expiry of the month to
which the return relates5.
D
8. Since an exemption notification was not issued by the State of
Jharkhand under Section 9, a writ petition was filed under Article 226 of
the Constitution before the High Court of Jharkhand by a company by
the name of Usha Martin Limited6. Eventually, the State government
issued an exemption notificationon 8 January 2015 but made it effective
E from the date on which it was issued. The exemption notification is
extracted below:
“S.O.67 dated 8th January, 2015 – In the light of Para 32.10 of
Jharkhand Industrial Policy, 2012 and in exercise of the powers
4
“Section 9. Power of State Government to grant exemptions-
F The State Government shall have power to exempt any person or class of persons
notified in this behalf from the duty payable under this Act and such exemptions, may
be subject to such conditions and exemptions if any, as may be mentioned in the said
notification.”
5
Rule 6. Payment of duty. - Every assessee shall pay the full amount of the duty due
from him under section 4 within two calendar months of the month to which the duty
relates.
G Rule 9. Submission of Returns. - Every assessee shall submit to the appropriate
inspecting authority of the Circle or sub-circle as the case may be, a return in Form III,
within two calendar months from the expiry of the month to which the return relates.
The return shall be verified in the manner indicated therein and shall be signed by the
assessee or by his authorised agent. When an assessee holds more than, one license,
separate returns shall be submitted in respect of each license.
6
WP (T) No. 6008 of 2014, decided on 3/4 February 2015.
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 55
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
conferred by the Section 9 of the adopted Bihar Electricity Duty A
Act, 1948, the Governor of Jharkhand is pleased to exempt new
or existing industrial units setting up captive power plant for self-
consumption or captive use (in respect of power being used by
the plant) from the payment of 50% of Electricity Duty from the
date of the commissioning of the power plant.
B
This notification shall be effective from the date of issue and shall
remain effective till the period mentioned in the relevant provisions
of the Jharkhand Industrial Policy, 2012.”
9. The Industrial Policy 2012 announced an incentive in the form
of a rebate or deduction on electricity duty for a period of five years C
from the commencement of production. If a notification under Section 9
had been issued by the State government within a month,in terms of the
representation held out by the Industrial Policy 2012, the respondent
would have had the benefit of almost the entire period of exemption
contemplated by the policy. But since the exemption notification dated 8
January 2015 was made prospective, the respondent (and other similar D
units) would receive the benefit of the exemption from electricity duty
for a much lesser period. Faced with this situation, the respondent
instituted writ proceedings before the High Court of Jharkhand in August
2019.
F. Before the High Court E
10. Placing reliance on the doctrine of promissory estoppel,the
respondent sought, in its submissions before the High Court, one of two
reliefs or directions. First, the respondent claimed that the clause in the
notification making it prospective should be effaced since it was contrary
to the representation that was held out by the Industrial Policy 2012. F
Alternately, the respondent sought a direction that it would be entitled to
an exemption from electricity duty for a period of five years from the
date of the issuance of the notification (the period of five years being the
envisaged period under the Industrial Policy 2012).
11. The High Court accepted the first of the two courses of action G
noted above, placing reliance on the decisions of this Court in State of
Bihar vs Kalyanpur Cement Limited7 (“Kalyanpur Cement Ltd.”)
and Manuelsons Hotels Private Limited vs State of Kerala 8
7
(2010) 3 SCC 274.
8
(2016) 6 SCC 766. H
56 SUPREME COURT REPORTS [2020] 14 S.C.R.
A (“Manuelsons Hotels Pvt. Ltd.”). These decisions are premised on
the doctrine of promissory estoppel enunciated in Motilal Padampat
Sagar Mills Co. Ltd. vs State of UP9 (“Motilal Padampat”). The
High Court held that a promise was made by the State government to
give the benefit of an exemption of 50 per cent in electricity duty for a
period of five years, for self-consumption or captive use, to all new and
B
existing industrial units setting up captive power plants in the State of
Jharkhand. The High Court observed that it was not the case of the
State government that it did not intend to give the benefit to these industrial
units since, as a matter of fact, it had issued a notification, though
belatedly, on 8 January 2015.
C 12. Finding fault with the delay on the part of the government in
issuing an exemption notification, the High Court held that there was no
specific reason for the delay and that “but for the lethargic approach of
the state authorities” the exemption should have been issued within a
month of the issuance of the Industrial Policy 2012. The effect of the
D belated notification was to deny industrial units of the benefit of the
promise held out by the State government. The High Court noted that
the benefit was to be given with effect from FY 2011-12 for a period of
five years which ended in FY 2015-16. Since the exemption notification
was issued on 8 January 2015, the unit of the respondent and similarly
placed units would receive the benefit for only one or two years instead
E of promised five years,as the Industrial Policy 2012 envisaged. In this
backdrop, the conclusion of the High Court was that the failure of the
State to issue an exemption notification within time should not stand in
the way of the industrial units getting the benefit which was promised
and its denial of such benefit for FYs 2011-12, 2012-13 and 2013-14
F was contrary to the doctrine of promissory estoppel. The issuance of
an exemption notification being a ministerial act, the High Court held
that it should not stand in the way of industrial units obtaining relief
under the doctrine as a result of the unconscionable delay caused by the
State government. It was on this rationale that the High Court concluded
that the notification dated 8 January 2015 issued by the Commercial Tax
G Department of the State government ought not to be construed with
prospective effect and the clause making it prospective would have to
be struck down. The notification was deemed to be in effect from the
date of the Industrial Policy 2012 (1 April 2011). The electricity duty
9
H (1979) 2 SCC 409.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 57
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
deposited for FYs 2011-12, 2012-13 and 2013-14 was directed to be A
adjusted against the future liability of the respondent towards electricity
duty. Since the amount has already been deposited no refund, but an
adjustment of future payments was directed.
13 The State is in appeal.
G. Submissions of Counsel B
14. Mr Tapesh Kumar Singh, Additional Advocate General
appearing for the State of Jharkhand submits that:
(i) In terms of the rebate/concession admissible under the
Industrial Policy 2012, the respondent was required by C
Column 6(iv) of Form-III to raise a claim for exemption
from the payment of electricity duty;
(ii) In all the three returns which were furnished by the
respondent, a rebate/deduction was sought only towards
“auxiliary consumption”, which was accepted and allowed D
by the assessing officer;
(iii) In the absence of a claim for rebate/deduction sought before
the assessing officer, the assessing officer could not have
granted a concession to the respondent;
(iv) The three assessment orders demonstrate that the E
respondent paid electricity duty without protest or demur,
and the computation made by the assessing officer of the
payable amount was accepted;
(v) The three returns filed by the respondent for the
corresponding assessment years were belated and an F
amount of Rs 2000/- was levied as penalty;
(vi) The submission that the notification under Section 9 of the
Bihar Act 1948 was belatedly issued on 8 January 2015 is
not available to the respondent since two of the three
assessment orders were issued eleven months and twenty- G
three months after the issuance of the notification.Hence,
in the assessment orders of FYs 2012-13 and 2013-14, no
prejudice has been caused to the respondent by the belated
issuance of the notification;
H
58 SUPREME COURT REPORTS [2020] 14 S.C.R.
A (vii) For FY 2011-12, it has been conceded during the course of
the hearingby the respondent that upon a correct construction
of the relevant terms of the Industrial Policy 2012, it is not
entitled in law to claim a rebate/deduction or adjustment in
view of Clause 35.7(b);
B (viii) The relief which has been granted by the High Court to
another similarly situated writ petitioner on 4 February 2015
shall operate erga omnes;
(ix) In 2019, the respondent instituted three writ petitions for
the corresponding three assessment years – FYs 2011-12,
C 2012-13 and 2013-14 with a view to overcome the period
of limitation under the general law and these have
erroneously been allowed by the common judgment and
order of the High Court;
(x) The law laid down in the judgments of the Constitution
D Bench in State of Madhya Pradesh vs Bhailal Bhai10
(“Bhailal Bhai”) and Suganmal vs State of Madhya
Pradesh11 (“Suganmal”) continues to hold the field;
(xi) The above judgments hold that any claim for refund could
be made only within the period of limitation prescribed under
E the general law for the filing of suits for the recovery of
amounts due and the High Court ought not to entertain a
petition under Article 226 in the exercise of its extra-ordinary
writ jurisdiction;
(xii) In the absence of any pleading before the High Court,there
F is a presumption in law against the respondent that the
amount claimed as rebate/deduction from electricity duty
has already been passed on to its customers.Hence,the
adjustment which has been granted by the High Court would
result in unjust enrichment to the respondent. Reliance was
placed on the decision of this Court in Mafatlal Industries
G Ltd. vs Union of India12 (“Mafatlal Industries”);
(xiii) An alternative and efficacious statutory remedy of an appeal
under Section 9A of the Bihar Act 1948 was available to
10
AIR 1964 SC 1006.
11
AIR 1965 SC 1740.
12
H (1997) 5 SCC 536.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 59
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
the respondent against the orders of assessment,and hence A
the High Court should have refused to allow recourse to
the extra-ordinary writ jurisdiction; and
(xiv) Since the unit of the respondent commenced commercial
production on 17 August 2011, whereas the Industrial Policy
is of 2012, the doctrine of promissory estoppel cannot be B
extended “backwards in favour of the respondent”.
15. On the other hand, opposing these submissions on behalf of
the respondent and in support of the judgment of the High Court,
Mr.Devashish Bharuka, learned Counsel urged the following submissions:
(i) The act of the State government in making the exemption C
notification prospective in effect from 8 January 2015 is in
derogation to the promise held out by the State in its
Industrial Policy 2012. The High Court in placing reliance
on the doctrine of promissory estoppel has correctly relied
upon the decisions of this Court in Motilal Padampat D
(supra), Kalyanpur Cement Ltd (supra) and Manuelsons
Hotels Pvt Ltd. (supra);
(ii) As regards the claim of exemption by the first respondent:
(a) The benefit of a rebate/deduction could not have been
claimed in the returns for FYs 2011-12, 2012-13 and E
2013-14. The exemption notificationwas issued only
on 8 January 2015, and that too with prospective
effect;
(b) The first respondent has,as a matter of fact, received
a rebate/deduction only for the period 8 January 2015 F
to 31 March 2015 and for FY 2015-16;
(iii) As regards the submission that there has been a delay in
instituting the writ petitions before the High Court under
Article 226:
(a) The issue of delay has not been raised by the State G
government either before the High Courtor in the
Special Leave Petition;
(b) Once the High Court entertained the writ petition on
merits, this Courtought not to interfere on the ground
H
60 SUPREME COURT REPORTS [2020] 14 S.C.R.
A of delay alone, particularly when the judgment of the
High Court is legally sustainable;
(c) Delay by itself in filing a Writ Petition may not defeat
theclaim unless the position of the opposite party has
been so alteredthat it cannot be retracted on account
B of a lapse of time orinaction of the writ petitioner.
The State has neither pleaded nor arguedany change
in its position;
(d) This is a case where the opposite party has not been
put through any hardship by reason of the delay in
C approaching the High Court; and
(iv) The decisions in Bhailal Bhai (supra) and Suganmal
(supra) are distinguishable as they relate to a writ petition
seeking refund of illegally collected tax.
16. On the above grounds, it has been submitted that the
D respondent is entitled to the benefit of a rebate for a period offive years
as held out in clause 32.10 of the Industrial Policy 2012.
17. The respondent has submitted that the period of five years
may commence from 17 August 2011 (the date of commercial
production) or from FY 2012-13 (in accord with clause 35.7(b) of
E Industrial Policy 2012) or from 8 January 2015(the date of the notification).
H. Analysis
18. The rival submissions will now be considered.
H.I A State in breach of policy commitments
F 19. The Industrial Policy 2012 refers to the earlier Industrial Policy,
which was formulated in 2001 after the formation of the State of
Jharkhand. The policy notes that “considerable progress in industrialization
has been achieved during the policy period”. Yet, according to Clause
1.8, there is a need to “boost economic activities to sustain the current
G level of growth and achieve even better pace of development”. Clause
1.9 takes notice of the fact that “there has been large scale change in
(the) industrialization environment (sic) due to economic liberalization,
privatization and globalization”. The policy document states in Clause
1.12 that it “aims at creating (an) industry-friendly environment for
maximizing investment”:
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 61
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
“1.12. The present policy aims at creating industry-friendly A
environment for maximizing investment especially in mineral and
natural resource based industries, MSMEs, infrastructure
development and rehabilitation of viable sick units.The objective
here is to maximize the value addition to state’s natural resources
by setting up industries across the state, generating revenue and
B
creating employment.”
Clause 1.13 stipulates that the policy was drafted after intensive
interaction with stakeholders and to accommodate their views. It was
expected that the policy would, upon implementation, facilitate
industrialization of the State, generate employment and add to its overall
growth. C
20. As an integral component of the policy, Clause 32.10 envisages
the grant of an exemption from the payment of 50 per cent of the
electricity duty for a period of five years both for new and existing
industrial units setting up captive power plants for self-consumption or
captive use The period of five years was to be reckoned from the date D
of the commissioning of the plant. Under Clause 35.7(b), the entitlement
would ensue from the financial year following the date of production.
The State government was cognizant of the need to implement the policy
immediately to secure the benefit to eligible units over the entire term of
five years. Recognizing this need, Clause 38(b) envisaged that E
notifications by its diverse departments to enforce the terms of the policy
would be issued within a period of one month.
21. The alacrity expected by the Industrial Policy 2012 of the
State of Jharkhand did not find a resonance in its administrative apparatus.
The High Court has justifiably referred to this as a case of bureaucratic F
lethargy. As a matter of first principle, there can be no gainsaying the
fact that when a statute, such as the Bihar Act 1948, empowers the
state to grant an exemption from its provisions, the State has the discretion
to determine the date from which and the period over which the
exemption will operate. An individual or entity cannot compel the State
to issue a notification providing for an exemption or to insist upon the G
terms on which the government does so. Whether an exemption should
be issued and if so, the terms for the exemption, have to be determined
by the State. But this case does not rest on that principle nor did the
claim of the respondent require the High Court to make a departure
from it. The Industrial Policy 2012 contained a representation that a H
62 SUPREME COURT REPORTS [2020] 14 S.C.R.
A rebate/deduction would be granted. It held out a representation that a
notification would be issued in a month. These were solemn commitments
made by the State of Jharkhand. What remained was their implementation
by issuing a notification, which was to be done within one month. The
State government evidently intended to implement and act in pursuance
of its commitment. For, ultimately, it did issue a notification. But it did so
B
on 8 January 2015 – after a period of a month envisaged under the
Industrial Policy 2012 had dragged on for nearly three years.
22. It is time for the State government to take notice of the
observations of the High Court in regard to administrative lethargy. If
the object of formulating the industrial policy is to encourage investment,
C employment and growth, the administrative lethargy of the State apparatus
is clearly a factor which will discourage entrepreneurship. The policy
document held out a solemn representation. It contemplated the grant of
a rebate/deduction from the payment of electricity duty not only to new
units but to existing units as well who had or would set up captive power
D plants. The State, in the present case, held out inter alia a solemn
representation in terms of Clauses 32.10 and 35.7(b) of the entitlement
of the exemption for a period of five years from the date of production.
Besides this, it also contemplated in Clause 38(b) that a follow-up
exemption notification would be issued within one month. That period of
one month stretched on interminably with the result that the purpose and
E object of granting the exemption would virtually stand defeated. The net
result was that when belatedly, the State government issued a notification
under Section 9 of Bihar Act 1948 on 8 January 2015, it was prospective.
As a consequence, by the time that the exemption notification was issued,
a large part of the term for which the exemption was to operate in terms
F of the Industrial Policy 2012 had come to an end.
23. The State government was evidently inclined to grant the
exemption. This is not a case where due to an overarching requirement
of public interest, the State government decided to override the
representation which was contained in the Industrial Policy 2012. To the
G contrary, it sought to implement the representation albeit in fits and starts.
Firstly, there was a delay of three years in the issuance of the notification.
Secondly, by making the notification prospective, it deprived units such
as the respondent of the full benefit of the exemptionwhich was originally
envisaged in terms of the Industrial Policy 2012.
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 63
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
H.2. Building on Motilal Padampat A
24. In this backdrop, the High Court has, with justification, adverted
to two decisions of this Court. In Kalyanpur Cement (supra), an
industrial policy had been notified in 1995 in the State of Bihar. The
policy contained a provision for monitoring and reviewing and envisaged
that all departments and organizations would issue a follow-up notification B
to give effect to the policy within one month. This was similar to clause
38(b) of the policy in the present case. No notification was issued by the
State of Bihar to give effect to the industrial policy, which lapsed on 31
August 2000. The claim to sales tax exemption by the unit was rejected
by the State government on the ground that it had decided not to grant
an incentive to a sick industrial unit. A follow-up notification was issued C
during the pendency of the case before this Court. In the backdrop of
these facts, this Court speaking through Justice S S Nijjar, observed:
“85. Even if we are to accept the submissions…that the provisions
contained in Clause 24 were mandatory, the time of one month
for issuing the notification could only have been extended for a D
reasonable period. It is inconceivable that it could have taken the
Government three years to issue the follow-up notification. We
are of the considered opinion that failure of the appellants to issue
the necessary notification within a reasonable period of the
enforcement of the Industrial Policy, 1995 has rendered the
decisions dated 6-1-2001 and 5-3-2001 wholly arbitrary. The E
appellant cannot be permitted to rely on its own lapses in
implementing its Policy to defeat the just and valid claim of the
Company. For the same reason we are unable to accept the
submissions of the learned Senior Counsel for the appellant that
no relief can be granted to the Company as the Policy has lapsed
F
on 31-8-2000. Accepting such a submission would be to put a
premium and accord a justification to the wholly arbitrary action
of the appellant, in not issuing the notification in accordance with
the provisions contained in Clause 24 of the Industrial Policy, 1995.”
25. In the decision in Manuelsons Hotels Private Limited v.
State of Kerala (supra), speaking through Justice Rohinton F Nariman, G
the Court had to construe a notification dated 11 July 1986 of the
Government of Kerala enabling those engaged in tourism promotional
activities to become automatically eligible for concessions/ incentives as
provided to the industrial sector from time to time. An amendment to the
Kerala Building Tax Act 1975 was made with effect from 6 November H
64 SUPREME COURT REPORTS [2020] 14 S.C.R.
A 1990 giving an exemption as promised in 1986 and the amendment was
deleted with effect from 1 March 1993. Relying on the earlier decision
of this Court inter alia in Motilal Padampat (supra), this Court held:
“3… The non-exercise of such discretionary power is clearly
vitiated on account of the application of the doctrine of promissory
B estoppel in terms of this Court’s judgments in Motilal
Padampat [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.,
(1979) 2 SCC 409 : 1979 SCC (Tax) 144 : (1979) 2 SCR 641]
and Nestle [State of Punjab v. Nestle India Ltd., (2004) 6 SCC
465] . This is for the reason that non-exercise of such power is
itself an arbitrary act which is vitiated by non-application of mind
C to relevant facts, namely, the fact that a G.O. dated 11-7-1986
specifically provided for exemption from building tax if hotels were
to be set up in the State of Kerala pursuant to the representation
made in the said G.O. True, no mandamus could issue to the
legislature to amend the Kerala Building Tax Act, 1975, for that
D would necessarily involve the judiciary in transgressing into a
forbidden field under the constitutional scheme of separation of
powers. However, on facts, we find that Section 3-A was, in fact,
enacted by the Kerala Legislature by suitably amending the Kerala
Building Tax Act, 1975 on 6-11-1990 in order to give effect to the
representation made by the G.O. dated 11-7-1986. We find that
E the said provision continued on the statute book and was deleted
only with effect from 1-3-1993. This would make it clear that
from 6-11-1990 to 1-3-1993, the power to grant exemption from
building tax was statutorily conferred by Section 3-A on the
Government. And we have seen that the Statement of Objects
F and Reasons for introducing Section 3-A expressly states that the
said section was introduced in order to fulfil one of the promises
contained in the G.O. dated 11-7-1986. We find that the appellants,
having relied on the said G.O. dated 11-7-1986, had, in fact,
constructed a hotel building by 1991. It is clear, therefore, that the
non-issuance of a notification under Section 3-A was an arbitrary
G act of the Government which must be remedied by application of
the doctrine of promissory estoppel, as has been held by us
hereinabove. The ministerial act of non-issue of the notification
cannot possibly stand in the way of the appellants getting relief
under the said doctrine for it would be unconscionable on the part
H of the Government to get away without fulfilling its promise.”
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 65
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
H.3 Promissory estoppel – origins and evolution A
26. Before the High Court, the State of Jharkhand sought to sustain
its action on the ground that though the follow-up notification under Section
9 was issued on 8 January 2015, no outer limit for the issuance of a
notification was prescribed and there was no vested right on the part of
the respondent to get the notification implemented from an earlier date B
or to obtain the benefit of the policy until it was implemented by a follow-
up notification. The decision in Kalyanpur Cement (supra) was sought
to be distinguished on the ground that in that case no follow-up notification
had been issued at all until the policy lapsed. In sum and substance, the
objection was that the writ petitioner – the respondent here - had no
vested right to claim that a follow-up notification should be issued and C
that the doctrine of promissory estoppel would not, in the facts, apply.
27. In order to analyze the contentions relating to the doctrine of
promissory estoppel in the present case, it is necessary to discuss the
origin of the doctrine and the evolution of its application. The common
law recognizes various kinds of equitable estoppel, one of which is D
promissory estoppel. In Crabb vs Arun DC13, Lord Denning, speaking
for the Court of Appeal, traced the genesis of promissory estoppel in
equity, and observed:
“The basis of this proprietary estoppel – as indeed of promissory
estoppel – is the interposition of equity. Equity comes in, true to E
form, to mitigate the rigours of strict law. The early cases did not
speak of it as “estoppel”. They spoke of it as “raising an equity”
If I may expand that, Lord Cairns said: “It is the first principle
upon which all Courts of Equity proceed”, that it will prevent a
person from insisting on his legal rights – whether arising under a F
contract or on his title deed, or by statute – when it would be
inequitable for him to do so having regard to the dealings which
have taken place between the parties.”
28. The requirements of the doctrine of promissory estoppel have
also been formulated in Chitty on Contracts14 (“Chitty”): G
“4.086. For the equitable doctrine to operate there must be a legal
relationship giving rise to rights and duties between the parties; a
promise or a representation by one party that he will not enforce
13
[1976] 1 Ch 179 (Court of Appeal).
14
Hugh Beale, Chitty on Contracts (32 nd edn., Sweet & Maxwell 2017). H
66 SUPREME COURT REPORTS [2020] 14 S.C.R.
A against the other his strict legal rights arising out of that relationship;
an intention on the part of the former party that the latter will rely
on the representation; and such reliance by the latter party. Even
if these requirements are satisfied, the operation of the doctrine
may be excluded if it is, nevertheless, not “inequitable” for the
first party to go back on his promise. The doctrine most commonly
B
applies to promises not to enforce contractual rights, but it also
extends to certain other relationships.
4.088…..The doctrine can also apply where the relationship giving
rise to rights and correlative duties is non-contractual: e.g. to
prevent the enforcement of a liability imposed by statute on a
C company director for signing a bill of exchange on which the
company’s name is not correctly given; or to prevent a man from
ejecting a woman, with whom he has been cohabitating, from the
family home.”
Chitty (supra) clarifies that the doctrine of promissory estoppel
D may be enforced even in the absence of a legal relationship. However, it
is argued that this would be an incorrect application of the doctrine since
it gives rise to new rights between the parties, when the intent of the
doctrine is to restrict the enforcement of previously existing rights:
“4.089. It has, indeed, been suggested that the doctrine can apply
E where, before the making of the promise or representation, there
is no legal relationship giving rise to rights and duties between the
parties, or where there is only a putative contract between them:
e.g. where the promisee is induced to believe that a contract into
which he had undoubtedly entered was between him and the
F promisor, when in fact it was between the promisee and another
person. But it is submitted that these suggestions mistake the
nature of the doctrine, which is to restrict the enforcement by the
promisor of previously existing rights against the promisee. Such
rights can arise only out of a legal relationship existing between
these parties before the making of the promise or representation.
G To apply doctrine where there was no such relationship would
contravene the rule (to be discussed in para.4-099 below) that the
doctrine creates no new rights.”
29. Generally speaking under English Law, judicial decisions have
in the past postulated that the doctrine of promissory estoppel cannot
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 67
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
be used as a ‘sword’, to give rise to a cause of action for the enforcement A
of a promise lacking any consideration. Its use in those decisions has
been limited as a ‘shield’, where the promisor is estopped from claiming
enforcement of its strict legal rights, when a representation by words or
conduct has been made to suspend such rights. In Combe vs Combe15
(“Combe”), the Court of Appeal held that consideration is an essential
B
element of the cause of action:
“It [promissory estoppel] may be part of a cause of action, but not
a cause of action itself.]
……
The principle [promissory estoppel] never stands alone as giving C
a cause of action in itself, it can never do away with the necessity
of consideration when that is an essential part of the cause of
action. The doctrine of consideration is too firmly fixed to be
overthrown by a side-wind.”
30. Even within English Law, the application of the rule laid down D
in Combe (supra) has been noticed to be inconsistent16. The scope of
the rule has also been doubted on the ground that it has been widely
framed17. Hence, in the absence of a definitive pronouncement by the
House of Lords holding that promissory estoppel can be a cause of
action, a difficulty was expressed in stating with certainty that English E
Law has evolved from the traditional approach of treating promissory
estoppel as a ‘shield’ instead of a ‘sword’18. By contrast, the law in the
United States19 and Australia20 is less restrictive in this regard.
15
[1951] 2 K.B. 215.
16
Wyvern Development, Re, [1974] 1 W.L.R. 1097 cited in Susan M. Morgan, “A F
Comparative Analysis of the Doctrine of Promissory Estoppel in Australia, Great
Britain and the United States”, (1985) 15 Melbourne University Law Review 134,
139-141.
17
In Tungsten Electric Co Ltd. vs Tool Metal Manufacturing Co. Ltd., [1955] 1
W.L.R. 761, Lord Simonds states, “I do not wish to lend the authority of this House to
the statement of the principle which is to be found in Combe v. Combe and may well be
far too widely stated”.
G
18
In Baird Textiles Holdings Ltd. vs Marks and Spencer Plc., [2002] 1 All ER
(Comm) 737, Court of Appeal stated that “there is no real prospect of the claim
[estoppel] succeeding unless and until law is developed, or corrected, by the House of
Lords”.
19
American Law Institute, Restatement of the Law (2d), Contracts (1981), para 90.
20
Waltons Stores (Interstate) Ltd vs Maher, (1988) 164 CLR 387. H
68 SUPREME COURT REPORTS [2020] 14 S.C.R.
A 31. India, as we shall explore shortly, adopted a more expansive
statement of the doctrine. Comparative law enables countries which
apply a doctrine from across international frontiers to have the benefit
of hindsight.
This Court has given an expansive interpretation to the doctrine
B of promissory estoppel in order to remedy the injustice being done to a
party who has relied on a promise. In Motilal Padampat (supra), this
Court viewed promissory estoppel as a principle in equity, which was
not hampered by the doctrine of consideration as was the case under
English Law. This Court, speaking through Justice P N Bhagwati (as he
was then), held thus:
C
“12....having regard to the general opprobrium to which the doctrine
of consideration has been subjected by eminent jurists, we need
not be unduly anxious to project this doctrine against assault or
erosion nor allow it to dwarf or stultify the full development of the
equity of promissory estoppel or inhibit or curtail its operational
D efficacy as a justice device for preventing injustice…We do not
see any valid reason why promissory estoppel should not be allowed
to found a cause of action where, in order to satisfy the equity, it
is necessary to do so.”
H.4 From estoppel to expectations
E
32. Under English Law, the doctrine of promissory estoppel has
developed parallel to the doctrine of legitimate expectations. The doctrine
of legitimate expectations is founded on the principles of fairness in
government dealings. It comes into play if a public body leads an individual
to believe that they will be a recipient of a substantive benefit.The doctrine
F of substantive legitimate expectation has been explained in R vs North
and East Devon Health Authority, ex p Coughlan21 in the following
terms:
“55…. But what was their legitimate expectation?” Where there
is a dispute as to this, the dispute has to be determined by the
G court, as happened in In re Findlay. This can involve a detailed
examination of the precise terms of the promise or representation
made, the circumstances in which the promise was made and the
nature of the statutory or other discretion.
……
21
H [2001] QB 213.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 69
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
56….Where the court considers that a lawful promise or practice A
has induced a legitimate expectation of a benefit which is
substantive, not simply procedural, authority now establishes that
here too the court will in a proper case decide whether to frustrate
the expectation is so unfair that to take a new and different course
will amount to an abuse of power. Here, once the legitimacy of
B
the expectation is established, the court will have the task of
weighing the requirements of fairness against any overriding
interest relied upon for the change of policy.”
(emphasis supplied)
33. Under English Law, the doctrine of legitimate expectation C
initially developed in the context of public law as an analogy to the doctrine
of promissory estoppel found in private law. However, since then, English
Law has distinguished between the doctrines of promissory estoppel
and legitimate expectation as distinct remedies under private law and
public law, respectively. De Smith’s Judicial Review22 notes the contrast
between the public law approach of the doctrine of legitimate expectation D
and the private law approach of the doctrine of promissory estoppel :
“[d]espite dicta to the contrary [Rootkin v Kent CC, (1981) 1
WLR 1186 (CA); R vJockey Club Ex p RAM Racecourses Ltd,
[1993] AC 380 (HL); R v IRC Ex p Camacq Corp, (1990) 1
WLR 191 (CA)], it is not normally necessary for a person to have E
changed his position or to have acted to his detriment in order to
qualify as the holder of a legitimate expectation [R v Ministry for
Agriculture, Fisheries and Foods Ex p Hamble Fisheries
(Offshore) Ltd, (1995) 2 All ER 714 (QB)]. . . Private law
analogies from the field of estoppel are, we have seen, of limited F
relevance where a public law principle requires public officials to
honour their undertakings and respect legal certainty, irrespective
of whether the loss has been incurred by the individual concerned
[Simon Atrill, ‘The End of Estoppel in Public Law?’ (2003)
62 Cambridge Law Journal 3].”
G
(emphasis supplied)
34. Another difference between the doctrines of promissory
estoppel and legitimate expectation under English Law is that the latter
22
Harry Woolf and others, De Smith ’s Judicial Review (8 th edn, Thomson Reuters
2018). H
70 SUPREME COURT REPORTS [2020] 14 S.C.R.
A can constitute a cause of action23. The scope of the doctrine of legitimate
expectation is wider than promissory estoppel because it not only takes
into consideration a promise made by a public body but also official
practice, as well. Further, under the doctrine of promissory estoppel,
there may be a requirement to show a detriment suffered by a party due
to the reliance placed on the promise. Although typically it is sufficient to
B
show that the promisee has altered its position by placing reliance on the
promise, the fact that no prejudice has been caused to the promisee may
be relevant to hold that it would not be “inequitable” for the promisor to
go back on their promise.24 However, no such requirement is present
under the doctrine of legitimate expectation. In Regina (Bibi) vs
C Newham London Borough Council25, the Court of Appeal held:
“55 The present case is one of reliance without concrete detriment.
We use this phrase because there is moral detriment, which should
not be dismissed lightly, in the prolonged disappointment which
has ensued; and potential detriment in the deflection of the
D possibility, for a refugee family, of seeking at the start to settle
somewhere in the United Kingdom where secure housing was
less hard to come by. In our view these things matter in public
law, even though they might not found an estoppel or actionable
misrepresentation in private law, because they go to fairness and
through fairness to possible abuse of power. To disregard the
E legitimate expectation because no concrete detriment can be
shown would be to place the weakest in society at a particular
disadvantage. It would mean that those who have a choice and
the means to exercise it in reliance on some official practice or
promise would gain a legal toehold inaccessible to those who,
F lacking any means of escape, are compelled simply to place their
trust in what has been represented to them.”
(emphasis supplied)
35. Consequently, while the basis of the doctrine of promissory
estoppel in private law is a promise made between two parties, the
G basis of the doctrine of legitimate expectation in public law is premised
on the principles of fairness and non-arbitrariness surrounding the conduct
23
Rebecca Williams, “The Multiple Doctrines of Legitimate Expectations”, (2016)
132(Oct) Law Quarterly Review 639, 645.
24
Supra note 19 at para 4-095.
25
H [2002] 1 W.L.R. 237.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 71
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
of public authorities. This is not to suggest that the doctrine of promissory A
estoppel has no application in circumstances when a State entity has
entered into a private contract with another private party. Rather, in
English law, it is inapplicable in circumstances when the State has made
representation to a private party, in furtherance of its public functions26.
H.5. Indian Law and the doctrine of legitimate expectations B
36. Under Indian Law, there is often a conflation between the
doctrines of promissory estoppel and legitimate expectation. This has
been described in Jain and Jain’s well known treatise, Principles of
Administrative Law27 :
“At times, the expressions ‘legitimate expectation’ and ‘promissory C
estoppel’ are used interchangeably, but that is not a correct usage
because ‘legitimate expectation’ is a concept much broader in
scope than ‘promissory estoppel’.
…
D
A reading of the relevant Indian cases, however, exhibit some
confusion of ideas. It seems that the judicial thinking has not as
yet crystallised as regards the nature and scope of the doctrine.
At times, it has been referred to as merely a procedural doctrine;
at times, it has been treated interchangeably as promissory
estoppel. However both these ideas are incorrect. As stated above, E
legitimate expectation is a substantive doctrine as well and has
much broader scope than promissory estoppel.
…
In Punjab Communications Ltd. v. Union of India, the Supreme
F
Court has observed in relation to the doctrine of legitimate
expectation:
“the doctrine of legitimate expectation in the substantive sense
has been accepted as part of our law and that the decision maker
can normally be compelled to give effect to his representation in
regard to the expectation based on previous practice or past G
conduct unless some overriding public interest comes in the way
Reliance must have been placed on the said representation and
the representee must have thereby suffered detriment.”
26
Nicholas Bamforth, “Legitimate Expectation and Estoppel” (1998) 3 Jud Rev 196.
27
M.P. Jain and S.N. Jain, Principles of Administrative Law (7 th edn., EBC 2013). H
72 SUPREME COURT REPORTS [2020] 14 S.C.R.
A It is suggested that this formulation of the doctrine of legitimate
expectation is not correct as it makes “legitimate expectation”
practically synonymous with promissory estoppel. Legitimate
expectation may arise from conduct of the authority; a promise is
not always necessary for the purpose.”
B 37. While this doctrinal confusion has the unfortunate consequence
of making the law unclear, citizens have been the victims. Representations
by public authorities need to be held to scrupulous standards, since citizens
continue to live their lives based on the trust they repose in the State. In
the commercial world also, certainty and consistency are essential to
planning the affairs of business. When public authorities fail to adhere to
C their representations without providing an adequate reason to the citizens
for this failure, it violates the trust reposed by citizens in the State. The
generation of a business friendly climate for investment and trade is
conditioned by the faith which can be reposed in government to fulfil the
expectations which it generates. Professors Jain and Deshpande
D characterize the consequences of this doctrinal confusion in the following
terms:
“Thus, in India, the characterization of legitimate expectations is
on a weaker footing, than in jurisdictions like UK where the courts
are now willing to recognize the capacity of public law to absorb
E the moral values underlying the notion of estoppel in the light of
the evolution of doctrines like LE [Legitimate Expectations] and
abuse of power. If the Supreme Court of India has shown its
creativity in transforming the notion of promissory estoppel from
the limitations of private law, then it does not stand to reason as to
why it should also not articulate and evolve the doctrine of LE for
F judicial review of resilement of administrative authorities from
policies and long-standing practices. If such a notion of LE is
adopted, then not only would the Court be able to do away with
the artificial hierarchy between promissory estoppel and legitimate
expectation, but, it would also be able to hold the administrative
G authorities to account on the footing of public law outside the
zone of promises on a stronger and principled anvil. Presently, in
the absence of a like doctrine to that of promissory estoppel outside
the promissory zone, the administrative law adjudication of
resilement of policies stands on a shaky public law foundation.”
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 73
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
38. We shall therefore attempt to provide a cogent basis for the A
doctrine of legitimate expectation, which is not merely grounded on
analogy with the doctrine of promissory estoppel. The need for this
doctrine to have an independent existence was articulated by Justice
Frankfurter of the United State Supreme Court in Vitarelli vs Seton28:
“An executive agency must be rigorously held to the standards by B
which it professes its action to be judged. Accordingly, if dismissal
from employment is based on a defined procedure, even though
generous beyond the requirements that bind such agency, that
procedure must be scrupulously observed. This judicially evolved
rule of administrative law is now firmly established and, if I may
add, rightly so. He that takes the procedural sword shall perish C
with the sword.”
39. However, before we do this, it is important to clarify the
understanding of the doctrine of legitimate expectation in previous
judgements of this Court. In National Buildings Construction
Corporation vs S. Raghunathan29 (“National Buildings Construction D
Corpn.”), a three Judge bench of this Court, speaking through Justice
S. Saghir Ahmad, held that:
“18. The doctrine of “legitimate expectation” has its genesis in
the field of administrative law. The Government and its
departments, in administering the affairs of the country, are
expected to honour their statements of policy or intention and E
treat the citizens with full personal consideration without any iota
of abuse of discretion. The policy statements cannot be disregarded
unfairly or applied selectively. Unfairness in the form of
unreasonableness is akin to violation of natural justice. It was in
this context that the doctrine of “legitimate expectation” was
F
evolved which has today become a source of substantive as well
as procedural rights. But claims based on “legitimate expectation”
have been held to require reliance on representations and resulting
detriment to the claimant in the same way as claims based on
promissory estoppel.”
(emphasis supplied) G
28
359 US 535 (1959); the principle espoused in this judgment has been followed by
this Court in Amarjit Singh Ahluwalia (Dr) vs State of Punjab, (1975) 3 SCC 503,
Sukhdev Singh vs Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421
(concurring opinion of Justice K K Mathew) and Ramana Dayaram Shetty vs
International Airport Authority of India, (1979) 3 SCC 489.
29
(1998) 7 SCC 66. H
74 SUPREME COURT REPORTS [2020] 14 S.C.R.
A However, it is important to note that this observation was made
by this Court while discussing the ambit of the doctrine of legitimate
expectation under English Law, as it stood then. As we have discussed
earlier, there was a substantial conflation or overlap between the doctrines
of legitimate expectation and promissory estoppel even under English
Law since the former was often invoked as being analogous to the latter.
B
However, since then and since the judgment of this Court in National
Buildings Construction Corporation (supra), the English Law in
relation to the doctrine of legitimate expectation has evolved. More
specifically, it has actively tried to separate the two doctrines and to
situate the doctrine of legitimate expectations on a broader footing. In
C Regina (Reprotech (Pebsham) Ltd) vs East Sussex County
Council30, the House of Lords has held thus:
“33 In any case, I think that it is unhelpful to introduce private law
concepts of estoppel into planning law. As Lord Scarman pointed
out in Newbury District Council v Secretary of State for the
D Environment [1981] AC 578 , 616, estoppels bind individuals on
the ground that it would be unconscionable for them to deny what
they have represented or agreed. But these concepts of private
law should not be extended into “the public law of planning control,
which binds everyone”. (See also Dyson J in R v Leicester City
Council, Ex p Powergen UK Ltd [2000] JPL 629 , 637.)
E
34 There is of course an analogy between a private law estoppel
and the public law concept of a legitimate expectation created by
a public authority, the denial of which may amount to an abuse of
power… But it is no more than an analogy because remedies
against public authorities also have to take into account the interests
F of the general public which the authority exists to promote. Public
law can also take into account the hierarchy of individual rights
which exist under the Human Rights Act 1998, so that, for example,
the individual’s right to a home is accorded a high degree of
protection (see Coughlan’s case, at pp 254–255) while ordinary
G property rights are in general far more limited by considerations
of public interest: see R (Alconbury Developments Ltd) v
Secretary of State for the Environment, Transport and the Regions
[2001] 2 WLR 1389.
30
H [2003] 1 WLR 348.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 75
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
35 It is true that in early cases such as the Wells case [1967] 1 A
WLR 1000 and Lever Finance Ltd v Westminster (City) London
Borough Council [1971] 1 QB 222 , Lord Denning MR used the
language of estoppel in relation to planning law. At that time the
public law concepts of abuse of power and legitimate expectation
were very undeveloped and no doubt the analogy of estoppel
B
seemed useful…..It seems to me that in this area, public law has
already absorbed whatever is useful from the moral values which
underlie the private law concept of estoppel and the time has
come for it to stand upon its own two feet.”
(emphasis supplied)
40. In a concurring opinion in Monnet Ispat and Energy Ltd. C
vs Union of India31 (“Monnet Ispat”), Justice H L Gokhalehighlighted
the different considerations that underlie the doctrines of promissory
estoppel and legitimate expectation. The learned judge held that for the
application of the doctrine of promissory estoppel, there has to be a
promise, based on which the promisee has acted to its prejudice. In D
contrast, while applying the doctrine of legitimate expectation, the primary
considerations are reasonableness and fairness of the State action. He
observed thus:
“Promissory Estoppel and Legitimate Expectations
289. As we have seen earlier, for invoking the principle of E
promissory estoppel there has to be a promise, and on that basis
the party concerned must have acted to its prejudice. In the instant
case it was only a proposal, and it was very much made clear that
it was to be approved by the Central Government, prior whereto
it could not be construed as containing a promise. Besides, equity
cannot be used against a statutory provision or notification. F
290…..In any case, in the absence of any promise, the Appellants
including Aadhunik cannot claim promissory estoppel in the teeth
of the notifications issued under the relevant statutory powers.
Alternatively, the Appellants are trying to make a case under the
doctrine of legitimate expectations. The basis of this doctrine is in G
reasonableness and fairness. However, it can also not be invoked
where the decision of the public authority is founded in a provision
of law, and is in consonance with public interest.”
(emphasis supplied)
31
(2012) 11 SCC 1. H
76 SUPREME COURT REPORTS [2020] 14 S.C.R.
A 41. In Union of India vs Lt. Col. P.K. Choudhary32, speaking
through Chief Justice T S Thakur, the Court discussed the decision in
Monnet Ispat (supra) and noted its reliance on the judgment in Attorney
General for New South Wales vs. Quinn33. It then observed:
“This Court went on to hold that if denial of legitimate expectation
B in a given case amounts to denial of a right that is guaranteed or is
arbitrary, discriminatory, unfair or biased, gross abuse of power
or in violation of principles of natural justice, the same can be
questioned on the well-known grounds attracting Article 14 of the
Constitution but a claim based on mere legitimate expectation
without anything more cannot ipso facto give a right to invoke
C these principles.”
Thus, the Court held that the doctrine of legitimate expectation
cannot be claimed as a right in itself, but can be used only when the
denial of a legitimate expectation leads to the violation of Article 14 of
the Constitution.
D
42. As regards the relationship between Article 14 and the doctrine
of legitimate expectation, a three judge Bench in Food Corporation of
India vs Kamdhenu Cattle Feed Industries34, speaking through Justice
J S Verma, held thus:
E “7. In contractual sphere as in all other State actions, the State
and all its instrumentalities have to conform to Article 14 of the
Constitution of which non-arbitrariness is a significant facet. There
is no unfettered discretion in public law: A public authority
possesses powers only to use them for public good. This imposes
the duty to act fairly and to adopt a procedure which is ‘fairplay in
F action’. Due observance of this obligation as a part of good
administration raises a reasonable or legitimate expectation in every
citizen to be treated fairly in his interaction with the State and its
instrumentalities, with this element forming a necessary component
of the decision-making process in all State actions. To satisfy this
G requirement of non-arbitrariness in a State action, it is, therefore,
necessary to consider and give due weight to the reasonable or
legitimate expectations of the persons likely to be affected by the
32
(2016) 4 SCC 236.
33
(1990) 64 Aust LJR 327: (1990) 170 CLR 1.
34
H (1993) 1 SCC 71.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 77
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
decision or else that unfairness in the exercise of the power may A
amount to an abuse or excess of power apart from affecting the
bona fides of the decision in a given case. The decision so made
would be exposed to challenge on the ground of arbitrariness.
Rule of law does not completely eliminate discretion in the exercise
of power, as it is unrealistic, but provides for control of its exercise
B
by judicial review.
8. The mere reasonable or legitimate expectation of a citizen, in
such a situation, may not by itself be a distinct enforceable right,
but failure to consider and give due weight to it may render the
decision arbitrary, and this is how the requirement of due
consideration of a legitimate expectation forms part of the principle C
of non-arbitrariness, a necessary concomitant of the rule of law.
Every legitimate expectation is a relevant factor requiring due
consideration in a fair decision-making process. Whether the
expectation of the claimant is reasonable or legitimate in the context
is a question of fact in each case. Whenever the question arises, D
it is to be determined not according to the claimant’s perception
but in larger public interest wherein other more important
considerations may outweigh what would otherwise have been
the legitimate expectation of the claimant. A bona fide decision of
the public authority reached in this manner would satisfy the
requirement of non-arbitrariness and withstand judicial scrutiny. E
The doctrine of legitimate expectation gets assimilated in the rule
of law and operates in our legal system in this manner and to this
extent.”
(emphasis supplied)
F
More recently, in NOIDA Entrepreneurs Assn. vs NOIDA35,
a two-judge bench of this Court, speaking through Justice B. S. Chauhan,
elaborated on this relationship in the following terms:
“39. State actions are required to be non-arbitrary and justified on
the touchstone of Article 14 of the Constitution. Action of the G
State or its instrumentality must be in conformity with some principle
which meets the test of reason and relevance. Functioning of a
“democratic form of Government demands equality and absence
of arbitrariness and discrimination”. The rule of law prohibits
35
(2011) 6 SCC 508. H
78 SUPREME COURT REPORTS [2020] 14 S.C.R.
A arbitrary action and commands the authority concerned to act in
accordance with law. Every action of the State or its
instrumentalities should neither be suggestive of discrimination,
nor even apparently give an impression of bias, favouritism and
nepotism. If a decision is taken without any principle or without
any rule, it is unpredictable and such a decision is antithesis to the
B
decision taken in accordance with the rule of law.
…
41. Power vested by the State in a public authority should be
viewed as a trust coupled with duty to be exercised in larger public
C and social interest. Power is to be exercised strictly adhering to
the statutory provisions and fact situation of a case. “Public
authorities cannot play fast and loose with the powers vested in
them.” A decision taken in an arbitrary manner contradicts the
principle of legitimate expectation. An authority is under a legal
obligation to exercise the power reasonably and in good faith to
D effectuate the purpose for which power stood conferred. In this
context, “in good faith” means “for legitimate reasons”. It must
be exercised bona fide for the purpose and for none other...”
(emphasis supplied)
E As such, we can see that the doctrine of substantive legitimate
expectation is one of the ways in which the guarantee of non-arbitrariness
enshrined under Article 14 finds concrete expression.
H.6. Expectations breached by the State of Jharkhand
43. Applying the abovementioned principles in the present case,
F we are unable to perceive any substance in the submission of the
Statewhich was urged in defense before the High Court. Not only did
the State in the present case hold out a solemn representation, this
representation was founded on its stated desire to encourage
industrialization in the State. The policy document spelt out:
G (i) The nature of the incentives;
(ii) The period during which the incentives would be available;
and
(iii) The time limit within which follow-up action would be taken
by the State government through its departments for
H implementing the Industrial Policy 2012.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 79
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
44. The State having held out a solemn representation in the above A
terms, it would be manifestly unfair and arbitrary to deprive industrial
units within the State of their legitimate entitlement. The State government
did as a matter of fact, issue a statutory notification under Section 9 but
by doing so prospectively with effect from 8 January 2015 it negated the
nature of the representationwhich was held out in the Industrial Policy
B
2012. Absolutely no justification bearing on reasons of policy or public
interest has been offered before the High Court or before this Court for
the delay in issuing a notification. The pleadings are completely silent on
the reasons for the delay on the part of the government and offer no
justification for making the exemption prospective, contrary to the terms
of the representation held out in the Industrial Policy 2012. C
45. It is one thing for the State to assert that the writ petitioner
had no vested right but quite another for the State to assert that it is not
duty bound to disclose its reasons for not giving effect to the exemption
notification within the period that was envisaged in the Industrial Policy
2012. Both the accountability of the State and the solemn obligation D
which it undertook in terms of the policy document militate against
accepting such a notion of state power. The state must discard the colonial
notion that it is a sovereign handing out doles at its will. Its policies give
rise to legitimate expectations that the state will act according to what it
puts forth in the public realm. In all its actions, the State is bound to act
fairly, in a transparent manner. This is an elementary requirement of the E
guarantee against arbitrary state action which Article 14 of the
Constitution adopts. A deprivation of the entitlement of private citizens
and private business must be proportional to a requirement grounded in
public interest. This conception of state power has been recognized by
this Court in a consistent line of decisions. As an illustration, we would F
like to extract this Court’s observationsin National Buildings
Construction Cororation (supra):
“The Government and its departments, in administering the affairs
of the country are expected to honour their statements of policy
or intention and treat the citizens with full personal consideration G
without any iota of abuse of discretion. The policy statements
cannot be disregarded unfairly or applied selectively. Unfairness
in the form of unreasonableness is akin to violation of natural
justice.”
H
80 SUPREME COURT REPORTS [2020] 14 S.C.R.
A 46. Therefore, it is clear that the State had made a representation
to the respondent and similarly situated industrial units under the Industrial
Policy 2012. This representation gave rise to a legitimate expectation on
their behalf, that they would be offered a 50 per cent rebate/deduction in
electricity duty for the next five years. However, due to the failure to
issue a notification within the stipulated timeand by the grant of the
B
exemption only prospectively, the expectation and trust in the State stood
violated. Since the State has offered no justification for the delay in
issuance of the notification, or provided reasons for it being in public
interest, we hold that such a course of action by the State is arbitrary
and is violative of Article 14.
C H.7. The technical defences to the claim
(i) Assessment and recourse to Article 226
47. We have not been impressed with the submission of the State
on the technicalities of the respondent not having filed in its assessment
D returns, a claim for exemption from electricity duty. What is significant
is that since no exemption notification had been issued under Section 9,
a writ petition was initially filed before the High Court by Usha Martin
Limited. As a result of the writ petition, an exemption notification was
issued on 8 January 2015. Now it is correct that in the case of FYs
2012-13 and 2013-14, the orders of assessment were passed on 8
E December 2015 and 16 December 2016, which was after the date of
the exemption notification. However, the fact remains that so long as
the clause in the exemption notification granting it prospective effect
continued to hold the field, the assessing officer as a creature of the
statutewas bound to enforce the terms of the exemption and accordingly
F denied any exemption for a period prior to 8 January 2015. The only
remedy which was available to the respondent, was to challenge the
terms of the exemption notification which it did by instituting writ
proceedings before the High Court under Article 226.
(ii) The argument of delay
G 48. An earnest effort has been made on behalf of the appellant to
submit that the writ petitions before the High Court ought not to have
been entertained since they were instituted in 2019.However,
Mr.Devashish Bharuka, learned Counsel on behalf of the respondents
has, in the course of his submissions, correctly urged that the issue of
delay has never been raised in the course of the proceedings before the
H
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 81
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
High Court or raised as a ground in the Special Leave Petition before A
this Court. In High Court of Judicature of Patna vs Madan Mohan
Prasad36, a two judge Bench of this Court, speaking through Justice J
M Panchal, held thus:
“19. The contention advanced on behalf of the appellant that the
writ petition was filed by Respondent 1 on 10-11-1990 i.e. seven B
years after he had superannuated from service, and therefore,
the writ petition should have been dismissed on the ground of
delay and laches, cannot be accepted. The impugned judgment
nowhere shows that such a point was argued by the appellant
before the High Court. No grievance is made in the memorandum
of SLP that point regarding delay and laches was argued before C
the High Court but the same was not dealt with by the High Court
when impugned judgment was delivered.”
Further, Mr Bharuka has submitted that once the High Court has
held the respondent’s writ petition to be legally sustainable on merits,
this Court should not interfere on grounds on delays and laches alone. D
This finds support in the judgment of this Court in Dayal Singh vs Union
of India37, where a three judge Bench, speaking through Justice S B
Sinha, held thus:
“41. It was submitted that the respondents having filed a writ
petition after a period of eight years, the same ought not to have E
been entertained. Primarily a question of delay and laches is a
matter which is required to be considered by the writ court. Once
the writ court has exercised its jurisdiction despite delay and laches
on the part of the respondents, it is not for us at this stage to set
aside the order of the High Court on that ground alone particularly F
when we find that the impugned judgment is legally sustainable.”
Mr Bharuka is also correct in submitting that the State cannot
possibly contend that the result of the delay has led to it altering its
position to its detriment. Nor is it a case where third parties may be
affected as a consequence of a delay in instituting writ proceedings. G
This submission finds support in Hindustan Petroleum Corporation
Ltd. vs Dolly Das38, where a two judge Bench, speaking through Justice
S Rajendra Babu, noted thus:
36
(2011) 9 SCC 65.
37
(2003) 2 SCC 593.
38
(1999) 4 SCC 450. H
82 SUPREME COURT REPORTS [2020] 14 S.C.R.
A “8. So far as the contention regarding laches of the respondent in
filing the writ petition is concerned, delay, by itself, may not defeat
the claim for relief unless the position of the appellant had been so
altered which cannot be retracted on account of lapse of time or
inaction of the other party. This aspect being dependent upon the
examination of the facts of the case and such a contention not
B
having been raised before the High Court, it would not be
appropriate to allow the appellants to raise such a contention for
the first time before us. Besides, we may notice that the period
for which the option of renewal has been exercised has not come
to an end. During the subsistence of such a period certainly the
C respondent could make a complaint that such exercise of option
was not available to the appellants and, therefore, the jurisdiction
of the High Court could be invoked even at a later stage. Further,
the appellants are not put to undue hardship in any manner by
reason of this delay in approaching the High Court for a relief.”
D In this view of the matter, we are not inclined to interfere with the
judgment of the High Court on the ground of delay alone when the
judgment is based on legally sustainable principles.The delay of the
respondent in filing a writ petition by itself should not defeat the claim
unless the position of the State has been so altered that it cannot be
retracted on account of a lapse of time or the inaction of the writ
E petitioner. The State has not in the present case either pleaded or argued
any hardship if the respondent were to be granted relief. Finally, the
decisions in Bhailal Bhai (supra) and Suganmal (supra) related to a
petitioner seeking a refund of an illegally collected tax. In the present
case, we are not concerned with such a situation. Rather, the petitioner
F has come before this Court due to arbitrariness in State action which led
to the non-fulfillment of their legitimate expectations.
(iii) The defence of unjust enrichment
49. Nor is the court inclined to accept the plea of unjust enrichment
– the High Court has not ordered a refund at all since the duty has been
G paid. The respondent cannot be deprived of an adjustment of the excess
duty paid. Further, the State’s submission that there was no pleading by
the respondent in the High Court on whether the amount being claimed
as rebate/deduction had been passed on by the respondent to its customers
is factually incorrect. In the writ petition filed before the High Court, the
H respondent specifically asserted that the burden of differential amount
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 83
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
of electricity duty, realized by the State from the respondent herein, was A
not passed by the latter to its customers, either directly or indirectly or in
any other manner. The relevant excerpt of the pleading in the respondent’s
writ petition reads thus:
“41. That, at this stage, it is most humbly stated and submitted
that if the amount of 50% of the electricity duty is refunded to the B
Petitioner, the same would not lead to unjust enrichment in the
hands of the Petitioner as the Petitioner has not passed on the
burden of differential amount of electricity duty, realized by
Respondent-State from the Petitioner, to its customers either
directly or indirectly or in any other manner.
C
42. That it is most humbly stated and submitted that for the period
in question 100% of electricity duty has been realized from the
Petitioner by Respondent-State of Jharkhand and, thus, extra 50%
of the electricity duty has been borne by the Petitioner out of the
own pocket and the burden of the same cannot be passed by the
Petitioner to its customers. D
43. That it is most humbly stated and submitted that the Petitioner
is a manufacturer of Sponge Iron and M.S. Billet and the price of
the said commodity is market driven and is controlled by the market.
The amount of electricity duty paid by the Petitioner was out of
its own pocket affecting the gross profit of the Petitioner on sale E
of its final product. It is categorically reiterated herein that burden
of the amount of electricity has not been passed on by the Petitioner
to its customers.”
As regards the petitioner’s reliance on the ninejudge Bench
decision of this Court in Mafatlal Industries (supra), we would like to F
advert to the holding in the majority opinion of Justice BP Jeevan Reddy,
speaking for himself and four other learned judges, in the following terms:
“108(iii). A claim for refund, whether made under the provisions
of the Act as contemplated in Proposition (i) above or in a suit or
writ petition in the situations contemplated by Proposition (ii) above, G
can succeed only if the Petitioner/Plaintiff alleges and establishes
that he has not passed on the burden of duty to another person/
other persons. His refund claim shall be allowed/decreed only
when he establishes that he has not passed on the burden of the
duty or to the extent he has not so passed on, as the case may be.
H
84 SUPREME COURT REPORTS [2020] 14 S.C.R.
A Whether the claim for restitution is treated as a constitutional
imperative or as a statutory requirement, it is neither an absolute
right nor an unconditional obligation but is subject to the above
requirement, as explained in the body of the judgment. Where the
burden of the duty has been passed on, the claimant cannot say
that he has suffered any real loss or prejudice. The real loss or
B
prejudice is suffered in such a case by the person who has
ultimately borne the burden and it is only that person who can
legitimately claim its refund. But where such person does not
come forward or where it is not possible to refund the amount to
him for one or the other reason, it is just and appropriate that that
C amount is retained by the State, i.e., by the people. There is no
immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine.
No person can seek to collect the duty from both ends. In other
words, he cannot collect the duty from his purchaser at one end
D and also collect the same duty from the State on the ground that it
has been collected from him contrary to law. The power of the
Court is not meant to be exercised for unjustly enriching a person.”
In the present case, as we have previously held, the present
respondent did not collect the electricity duty from both ends, to deploy
E the above phrasing. As a result, this doctrine has no application to the
facts of the case at hand.
50. In Indian Council for Enviro-Legal Action vs Union of
India39, a two judge Bench of this Court, speaking through Justice
Dalveer Bhandari, outlined the ingredients of unjust enrichment in the
F following terms:
“152. “Unjust enrichment” has been defined by the court as the
unjust retention of a benefit to the loss of another, or the retention
of money or property of another against the fundamental principles
of justice or equity and good conscience. A person is enriched if
G he has received a benefit, and he is unjustly enriched if retention
of the benefit would be unjust. Unjust enrichment of a person
occurs when he has and retains money or benefits which in justice
and equity belong to another.”
39
H (2011) 8 SCC 161.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS 85
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
Applying this definition to the facts of the case at hand, the doctrine A
of unjust enrichment could have been attracted if the respondent had
passed on the electricity duty to its customers and then retained the
refund occasioned by the 50 per cent rebate in its own pocket. This is
not demonstrated to be the factualposition and hence, the respondent
cannot be denied relief on the application of the doctrine.
B
I. Conclusion
51. The narrow issue is whether the respondent is entitled to a
rebate/deduction from electricity duty which is answered in the
affirmative. It is necessary,however, to clarify that the respondent would
not be entitled to a rebate/deduction for FY 2011-12. In terms of Clause C
35.7(b)of the Industrial Policy 2012, the entitlement ensues from the
financial year following the commencement of production. The respondent
commenced production on 17 August 2011. Hence, the order of the
High Court would have to be confirmed for FYs 2012-13 and 2013-14.
In conclusion, we are in agreement with the conclusion of the High
Court that the respondent was entitled to an exemption from electricity D
duty, although for the reasons indicated in this judgment. Further, the
relief granted would stand confined to FYs 2012-13 and 2013-14. The
appeals shall stand disposed of in the above terms. There shall be no
order as to costs.
52. Pending application(s), if any, stand disposed of. E
Ankit Gyan Appeals disposed of.
F
G
H