THE STATE OF JHARKHAND AND ORS. versus BRAHMPUTRA METALLICS LTD., RANCHI AND ANR. on 1 December 2020

1. In the present case, this Court is unable to perceive anyFsubstance in the submission of the State which was urged indefense before the High Court. Not only did the State in thepresent case hold out a solemn representation, thisrepresentation was founded on its stated desire to encourageindustrialization in the State. The policy document spelt out:

(i) The nature of the incentives;G

Conclusion

(ii) The period during which the incentives would beavailable; and H

(iii) The time limit within which follow-up action would betaken by the State government through itsdepartments for implementing the Industrial Policy2012. [Para 43][78-F-H]

2. The State having held out a solemn representation inthe above terms, it would be manifestly unfair and arbitrary todeprive industrial units within the State of their legitimateentitlement. The State government did as a matter of fact, issuea statutory notification under Section 9 of the Bihar ElectricityDuty Act, 1948 but by doing so prospectively with effect from 8January 2015 it negated the nature of the representation whichwas held out in the Industrial Policy 2012. Absolutely nojustification bearing on reasons of policy or public interest hasbeen offered before the High Court or before this Court for thedelay in issuing a notification. The pleadings are completely silenton the reasons for the delay on the part of the government andoffer no justification for making the exemption prospective,contrary to the terms of the representation held out in theIndustrial Policy 2012. [Para 44][79-A-C]

3. It is one thing for the State to assert that the writpetitioner had no vested right but quite another for the State toassert that it is not duty bound to disclose its reasons for notgiving effect to the exemption notification within the period thatwas envisaged in the Industrial Policy 2012. Both the accountabilityof the State and the solemn obligation which it undertook in termsof the policy document militate against accepting such a notion ofstate power. The state must discard the colonial notion that it isa sovereign handing out doles at its will. Its policies give rise tolegitimate expectations that the state will act according to what itputs forth in the public realm. In all its actions, the State is boundto act fairly, in a transparent manner. This is an elementaryrequirement of the guarantee against arbitrary state action whichArticle 14 of the Constitution adopts. A deprivation of theentitlement of private citizens and private business must beproportional to a requirement grounded in public interest. Thisconception of state power has been recognized by this Court in aconsistent line of decisions. [Para 45][79-C-F]

A

BC

D

EF

G

H

A

A4. Therefore, it is clear that the State had made arepresentation to the respondent and similarly situated industrialunits under the Industrial Policy 2012. This representation gaverise to a legitimate expectation on their behalf, that they wouldbe offered a 50 per cent rebate/deduction in electricity duty forthe next five years. However, due to the failure to issue aBnotification within the stipulated time and by the grant of theexemption only prospectively, the expectation and trust in theState stood violated. Since the State has offered no justificationfor the delay in issuance of the notification, or provided reasonsfor it being in public interest, such a course of action by the StateCis arbitrary and is violative of Article 14. [Para 46][80-A-C]

5. The narrow issue is whether the respondent is entitledto a rebate/deduction from electricity duty which is answered inthe affirmative. It is necessary, however, to clarify that therespondent would not be entitled to a rebate/deduction for FYD2011-12. In terms of Clause 35.7(b) of the Industrial Policy 2012,the entitlement ensues from the financial year following thecommencement of production. The respondent commencedproduction on 17 August 2011. Hence, the order of the High Courtwould have to be confirmed for FYs 2012-13 and 2013-14. Inconclusion, this Court in agreement with the conclusion of theEHigh Court that the respondent was entitled to an exemptionfrom electricity duty, although for the reasons indicated in thisjudgment. Further, the relief granted would stand confined to FYs2012-13 and 2013-14. [Para 51][85-B-D]

National Buildings Construction Corporation vs S.FRaghunathan (1998) 7 SCC 66 : [1998] 1 Suppl. SCR156; Monnet Ispat and Energy Ltd. vs Union of India(2012) 11 SCC 1 : [2012] 7 SCR 644; Union of Indiavs Lt. Col. P.K. Choudhary (2016) 4 SCC 236 : [2016]2 SCR 426; Food Corporation of India vs KamdhenuGCattle Feed Industries (1993) 1 SCC 71 : [1992]2 Suppl. SCR 322; NOIDA Entrepreneurs Assn. vsNOIDA (2011) 6 SCC 508 : [2011] 8 SCR 25; IndianCouncil for Enviro-Legal Action vs Union of India (2011)8 SCC 161: [2011] 9 SCR 146 – relied on.

H

State of Bihar v. Kalyanpur Cement Limited (2010) 3SCC 274 : [2010] 1 SCR 928 Manuelsons HotelsPrivate 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 AIR1964 SC 1006 : [1964] SCR 261; Suganmal v. State ofMadhya Pradesh AIR 1965 SC 1740; MafatlalIndustries Ltd. v. Union of India (1997) 5 SCC536:[1996] 10 Suppl. SCR 585; Amarjit SinghAhluwalia (Dr) vs State of Punjab, (1975) 3 SCC 503 :[1975] 3 SCR 82; Sukhdev Singh vs Bhagatram SardarSingh Raghuvanshi, (1975) 1 SCC 421 : [1975] 3 SCR 619 (concurring opinion of Justice K K Mathew) andRamana Dayaram Shetty vs International AirportAuthority of India, (1979) 3 SCC 489 : [1979]3 SCR 1014; High Court of Judicature of Patna vsMadan Mohan Prasad (2011) 9 SCC 65 :[2011]13 SCR 972; Dayal Singh vs Union of India (2003) 2SCC 593 : [2003] 1 SCR 714; Hindustan PetroleumCorporation Ltd. vs Dolly Das (1999) 4 SCC 450 –referred to.

Crabb v. Arun DC [1976] 1 Ch 179 27;Combe v. Combe[1951] 2 K.B. 21529; Wyvern Development, Re, [1974]1 W.L.R. 1097 Tungsten Electric Co Ltd. vs Tool MetalManufacturing Co. Ltd., [1955] 1 W.L.R. 761,BairdTextiles Holdings Ltd. vs Marks and Spencer Plc.,[2002] 1 All ER (Comm) 737, Waltons Stores(Interstate) Ltd vs Maher, (1988) 164 CLR 387. 30; Rvs North and East Devon Health Authority, ex pCoughlan [2001] QB 213; Regina (Bibi) vs NewhamLondon Borough Council [2002] 1 W.L.R. 23734;Vitarelli vs Seton 359 US 535 (1959); East Sussex CountyCouncil [2003] 1 WLR 348; Attorney General for NewSouth Wales vs. Quinn (1990) 64 Aust LJR 327 : (1990)170 CLR 1; Regina (Reprotech (Pebsham) Ltd) vs EastSussex County Council [2003] 1 WLR 348 – referredto.

A

B

E

F

AHugh Beale, Chitty on Contracts (32nd edn., Sweet &Maxwell 2017). Harry Woolf and others, De Smith’sJudicial Review (8th edn, Thomson Reuters 2018).M.P. Jain and S.N. Jain, Principles of AdministrativeLaw (7th edn., EBC 2013) – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3860-G3862 of 2020

From the Judgment and Order dated 11.12.2019 of the High Courtof 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

Tapesh Kumar Singh, AAG, Aditya Pratap Singh, Ms. BhashwatiSingh, Devashish Bharuka Mrs. Jaya Bharuka, Ravi Bharuka, Ms.Sarvshree, Justine George, Ms. Srishti Agarwal, Advs. for the appearingparties.

A

The Judgment of the Court was delivered by B

DR. DHANANJAYA Y CHANDRACHUD, J.

AThe appeal

BThe issue

CCaptive power plant : assessment to electricity duty DIndustrial Policy 2012

C

EExemption from Electricity Duty

FBefore the High Court

GSubmissions of Counsel

HAnalysis

H.IA State in breach of policy commitments D

H.2Building on Motilal Padampat

H.3Promissory estoppel – origins and evolution H.4From estoppel to expectations H.5Indian Law and the doctrine of legitimateEexpectations H.6Expectations breached by the State ofJharkhand H.7The technical defences to the claim F

IConclusion

1. Leave granted.

A. The appeal

2. This appeal arises from a judgment of the High Court ofJharkhand. While allowing a petition instituted by the respondents underGArticle 226 of the Constitution, the Division Bench:

(i) struck down the last paragraph of a notification dated 8January 2015 issued by the State government in its H

Department of Commercial Taxes, giving prospective effectto the rebate/deduction from electricity duty offered underthe Jharkhand Industrial Policy, 2012[1]; A

(ii) directed that the notification shall be deemed to be in effectfrom 1 April 2011, when the Industrial Policy 2012 wasBenforced with retrospective effect; and

(iii) upheld the claim of the respondent that it was entitled to arebate/deduction from electricity duty in terms of therepresentation held out in the Industrial Policy 2012, andthat the denial of the exemption by the State governmentCfor FYs2011-12, 2012-13 and 2013-14 was contrary to thedoctrine of promissory estoppel.

The State is in appeal to challenge the judgment dated 11December 2019.

B. The issueD

3. The issue for determination is whether the respondent is entitledto claim a rebate or deduction of 50 per cent of the amount assessedtowards electricity duty for FYs 2011-12, 2012-13 and 2013-14.Therespondent claims its entitlement on the basis of the Industrial Policy2012 (notified by the appellant on 16 June 2012) and a statutoryEnotification dated 8 January 2015 issued under Section 9 of the BiharElectricity Duty Act 1948[2]. The Bihar Act 1948 was adopted with effectfrom 15 November 2000 for the State of Jharkhandunder the provisionsof the Bihar Reorganization Act 2000.

C. Captive power plant : assessment to electricity dutyF

4. The respondent was granted a certificate of commencementof commercial production on 31 May 2013. The certificate records thatthe integrated manufacturing unit of Sponge Iron and Mild Steel Billets,together with a captive thermal plant of 20 MW capacity set up by therespondent commenced commercial production on 17 August 2011. AGcertificate of registration was granted to the respondent on 22 November2011 under Rule 4 of the Bihar (Jharkhand) Electricity Duty Rules 1949[3],according to which it was liable to pay duty for distribution and/or 1 “Industrial Policy 2012”

2 “the Bihar Act 1948”H3 “the Bihar Rules 1949”

consumption of the energy from 1 October 2011. On the basis of thereturns submitted by the respondent in Form-III, read with Rule 9 of theBihar Rules 1949, assessment orders were passed by the assessingofficer for FY 2011-12 on 9 December 2014, for FY 2012-13 on 18December 2015 and for FY 2013-14 on 16 December 2016.

D. Industrial Policy 2012

5. The Industrial Policy 2012 was notified by the State governmenton16 June 2012. Some of the salient features of the Industrial Policy2012need to be visited:

(i) Clause 32.10 provided an exemption from the payment of50 per cent of the electricity duty for a period of five years,for captive power plants established for self-consumptionor captive use:

“32.10 Incentive for captive power plant

New or existing industrial units setting up captive powerplant shall be exempted from the payment of 50% ofelectricity duty for a period of five years for self-consumption or captive use (i.e. in respect of powerbeing used by the plant) from the date of itscommissioning”.

(ii) Clause 35.7(b) envisaged that the entitlement would ensuefrom the financial year following the Date of Production(DoP):

“35.7(b) Industrial units will be entitled forreimbursement/ payment of subsidy / incentives underdifferent categories only from the next financial year ofDoP.”

(iii) Clause 38(b) stipulated that notifications enforcing the termsof the industrial policy would be issued within a period ofone month by the Departments of the State government:

“38. Monitoring and Review

(b) All concerned departments and organizationswould issue necessary follow up notifications within amonth to give effect to the provisions of this Policy. Theimplementation of this policy will be duly monitored by A

B

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AGovernment at the level of Chief Secretary atleast oncein a quarter, so that the State Government may carryout a mid-term review of this Policy.”

E. Exemption from Electricity Duty

6. Though the Industrial Policy 2012 which was notified on 16BJune 2012 envisaged that notifications by the Departments of the Stategovernment would be issued within one month, there was a failure tocomply with the time schedule. In order to give effect to the exemptionfrom electricity duty, a notification under Section 9 of the Bihar Act1948 was necessary. Section 9 recognizes the power of the StateCgovernment to grant exemptions[4].

7. Rule 6 of the Bihar Rules1949 casts a duty on every assesseeto pay the duty which falls due within two calendar months of the monthto which it relates. Rule 9 requires the submission of a return in Form-IIIwithin a period of two calendar months from the expiry of the month toDwhich the return relates[5].

8. Since an exemption notification was not issued by the State ofJharkhand under Section 9, a writ petition was filed under Article 226 ofthe Constitution before the High Court of Jharkhand by a company bythe name of Usha Martin Limited[6]. Eventually, the State governmentissued an exemption notificationon 8 January 2015 but made it effectiveEfrom the date on which it was issued. The exemption notification isextracted below:

“S.O.67 dated 8th January, 2015 – In the light of Para 32.10 ofJharkhand Industrial Policy, 2012 and in exercise of the powers 4 “Section 9. Power of State Government to grant exemptions-FThe State Government shall have power to exempt any person or class of personsnotified in this behalf from the duty payable under this Act and such exemptions, maybe subject to such conditions and exemptions if any, as may be mentioned in the saidnotification.”

5 Rule 6. Payment of duty. - Every assessee shall pay the full amount of the duty duefrom him under section 4 within two calendar months of the month to which the dutyrelates.GRule 9. Submission of Returns. - Every assessee shall submit to the appropriateinspecting 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 theassessee 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

6 WP (T) No. 6008 of 2014, decided on 3/4 February 2015.

H

conferred by the Section 9 of the adopted Bihar Electricity DutyAct, 1948, the Governor of Jharkhand is pleased to exempt newor existing industrial units setting up captive power plant for self-consumption or captive use (in respect of power being used bythe plant) from the payment of 50% of Electricity Duty from thedate of the commissioning of the power plant.

This notification shall be effective from the date of issue and shallremain effective till the period mentioned in the relevant provisionsof the Jharkhand Industrial Policy, 2012.”

9. The Industrial Policy 2012 announced an incentive in the formof a rebate or deduction on electricity duty for a period of five yearsfrom the commencement of production. If a notification under Section 9had been issued by the State government within a month,in terms of therepresentation held out by the Industrial Policy 2012, the respondentwould have had the benefit of almost the entire period of exemptioncontemplated by the policy. But since the exemption notification dated 8January 2015 was made prospective, the respondent (and other similarunits) would receive the benefit of the exemption from electricity dutyfor a much lesser period. Faced with this situation, the respondentinstituted writ proceedings before the High Court of Jharkhand in August2019.

F. Before the High Court

10. Placing reliance on the doctrine of promissory estoppel,therespondent sought, in its submissions before the High Court, one of tworeliefs or directions. First, the respondent claimed that the clause in thenotification making it prospective should be effaced since it was contraryto the representation that was held out by the Industrial Policy 2012.Alternately, the respondent sought a direction that it would be entitled toan exemption from electricity duty for a period of five years from thedate of the issuance of the notification (the period of five years being theenvisaged period under the Industrial Policy 2012).

11. The High Court accepted the first of the two courses of actionnoted above, placing reliance on the decisions of this Court in State ofBihar vs Kalyanpur Cement Limited[7 ](“Kalyanpur Cement Ltd.”)and Manuelsons Hotels Private Limited vs State of Kerala[8]

7 (2010) 3 SCC 274.8 (2016) 6 SCC 766.

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A(“Manuelsons Hotels Pvt. Ltd.”). These decisions are premised onthe doctrine of promissory estoppel enunciated in Motilal PadampatSagar Mills Co. Ltd. vs State of UP[9] (“Motilal Padampat”). TheHigh Court held that a promise was made by the State government togive the benefit of an exemption of 50 per cent in electricity duty for aperiod of five years, for self-consumption or captive use, to all new andBexisting industrial units setting up captive power plants in the State ofJharkhand. The High Court observed that it was not the case of theState government that it did not intend to give the benefit to these industrialunits since, as a matter of fact, it had issued a notification, thoughbelatedly, on 8 January 2015.C12. Finding fault with the delay on the part of the government inissuing an exemption notification, the High Court held that there was nospecific reason for the delay and that “but for the lethargic approach ofthe state authorities” the exemption should have been issued within amonth of the issuance of the Industrial Policy 2012. The effect of theDbelated notification was to deny industrial units of the benefit of thepromise held out by the State government. The High Court noted thatthe benefit was to be given with effect from FY 2011-12 for a period offive years which ended in FY 2015-16. Since the exemption notificationwas issued on 8 January 2015, the unit of the respondent and similarlyplaced units would receive the benefit for only one or two years insteadEof promised five years,as the Industrial Policy 2012 envisaged. In thisbackdrop, the conclusion of the High Court was that the failure of theState to issue an exemption notification within time should not stand inthe way of the industrial units getting the benefit which was promisedand its denial of such benefit for FYs 2011-12, 2012-13 and 2013-14Fwas contrary to the doctrine of promissory estoppel. The issuance ofan exemption notification being a ministerial act, the High Court heldthat it should not stand in the way of industrial units obtaining reliefunder the doctrine as a result of the unconscionable delay caused by theState government. It was on this rationale that the High Court concludedthat the notification dated 8 January 2015 issued by the Commercial TaxGDepartment of the State government ought not to be construed withprospective effect and the clause making it prospective would have tobe struck down. The notification was deemed to be in effect from thedate of the Industrial Policy 2012 (1 April 2011). The electricity dutyH9 (1979) 2 SCC 409.

deposited for FYs 2011-12, 2012-13 and 2013-14 was directed to beadjusted against the future liability of the respondent towards electricityduty. Since the amount has already been deposited no refund, but anadjustment of future payments was directed.

13 The State is in appeal.

G. Submissions of Counsel

14. Mr Tapesh Kumar Singh, Additional Advocate Generalappearing for the State of Jharkhand submits that:

(i) In terms of the rebate/concession admissible under theIndustrial Policy 2012, the respondent was required byColumn 6(iv) of Form-III to raise a claim for exemptionfrom the payment of electricity duty;

(ii) In all the three returns which were furnished by therespondent, a rebate/deduction was sought only towards“auxiliary consumption”, which was accepted and allowedby the assessing officer;

(iii) In the absence of a claim for rebate/deduction sought beforethe assessing officer, the assessing officer could not havegranted a concession to the respondent;

(iv) The three assessment orders demonstrate that therespondent paid electricity duty without protest or demur,and the computation made by the assessing officer of thepayable amount was accepted;

(v) The three returns filed by the respondent for thecorresponding assessment years were belated and anamount of Rs 2000/- was levied as penalty;

(vi) The submission that the notification under Section 9 of theBihar Act 1948 was belatedly issued on 8 January 2015 isnot available to the respondent since two of the threeassessment orders were issued eleven months and twenty-three months after the issuance of the notification.Hence,in the assessment orders of FYs 2012-13 and 2013-14, noprejudice has been caused to the respondent by the belatedissuance of the notification; A

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58SUPREME COURT REPORTS

A(vii)For FY 2011-12, it has been conceded during the course ofthe hearingby the respondent that upon a correct constructionof the relevant terms of the Industrial Policy 2012, it is notentitled in law to claim a rebate/deduction or adjustment inview of Clause 35.7(b); B(viii) The relief which has been granted by the High Court toanother similarly situated writ petitioner on 4 February 2015shall operate erga omnes;

(ix) In 2019, the respondent instituted three writ petitions forthe corresponding three assessment years – FYs 2011-12,C2012-13 and 2013-14 with a view to overcome the periodof limitation under the general law and these haveerroneously been allowed by the common judgment andorder of the High Court;

(x) The law laid down in the judgments of the ConstitutionDBench in State of Madhya Pradesh vs Bhailal Bhai[10](“Bhailal Bhai”) and Suganmal vs State of MadhyaPradesh[11 ](“Suganmal”) continues to hold the field;

(xi) The above judgments hold that any claim for refund couldbe made only within the period of limitation prescribed underEthe general law for the filing of suits for the recovery ofamounts due and the High Court ought not to entertain apetition under Article 226 in the exercise of its extra-ordinarywrit jurisdiction;

(xii) In the absence of any pleading before the High Court,thereFis a presumption in law against the respondent that theamount claimed as rebate/deduction from electricity dutyhas already been passed on to its customers.Hence,theadjustment which has been granted by the High Court wouldresult in unjust enrichment to the respondent. Reliance wasplaced on the decision of this Court in Mafatlal IndustriesGLtd. vs Union of India[12 ](“Mafatlal Industries”);

(xiii) An alternative and efficacious statutory remedy of an appealunder Section 9A of the Bihar Act 1948 was available to10 AIR 1964 SC 1006.11 AIR 1965 SC 1740.H12(1997) 5 SCC 536.

the respondent against the orders of assessment,and hencethe High Court should have refused to allow recourse tothe extra-ordinary writ jurisdiction; and A

(xiv) Since the unit of the respondent commenced commercialproduction on 17 August 2011, whereas the Industrial Policyis of 2012, the doctrine of promissory estoppel cannot beBextended “backwards in favour of the respondent”.

15. On the other hand, opposing these submissions on behalf ofthe respondent and in support of the judgment of the High Court,Mr.Devashish Bharuka, learned Counsel urged the following submissions:

C

(i) The act of the State government in making the exemptionnotification prospective in effect from 8 January 2015 is inderogation to the promise held out by the State in itsIndustrial Policy 2012. The High Court in placing relianceon the doctrine of promissory estoppel has correctly reliedupon the decisions of this Court in Motilal Padampat(supra), Kalyanpur Cement Ltd (supra) and ManuelsonsHotels Pvt Ltd. (supra); D

(ii) As regards the claim of exemption by the first respondent:

(a) The benefit of a rebate/deduction could not have beenclaimed in the returns for FYs 2011-12, 2012-13 andE2013-14. The exemption notificationwas issued onlyon 8 January 2015, and that too with prospectiveeffect; (b)The first respondent has,as a matter of fact, receiveda rebate/deduction only for the period 8 January 2015to 31 March 2015 and for FY 2015-16; F

(iii) As regards the submission that there has been a delay ininstituting the writ petitions before the High Court underArticle 226:

G

(a) The issue of delay has not been raised by the Stategovernment either before the High Courtor in theSpecial Leave Petition; (b)Once the High Court entertained the writ petition onmerits, this Courtought not to interfere on the ground H

Aof delay alone, particularly when the judgment of theHigh Court is legally sustainable;

(c) Delay by itself in filing a Writ Petition may not defeattheclaim unless the position of the opposite party hasbeen so alteredthat it cannot be retracted on accountBof a lapse of time orinaction of the writ petitioner.The State has neither pleaded nor arguedany changein its position; (d)This is a case where the opposite party has not beenput through any hardship by reason of the delay inapproaching the High Court; and C

(iv) The decisions in Bhailal Bhai (supra) and Suganmal(supra) are distinguishable as they relate to a writ petitionseeking refund of illegally collected tax.

16. On the above grounds, it has been submitted that theDrespondent is entitled to the benefit of a rebate for a period offive yearsas held out in clause 32.10 of the Industrial Policy 2012.

17. The respondent has submitted that the period of five yearsmay commence from 17 August 2011 (the date of commercialproduction) or from FY 2012-13 (in accord with clause 35.7(b) ofEIndustrial 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 commitmentsF

19. The Industrial Policy 2012 refers to the earlier Industrial Policy,which was formulated in 2001 after the formation of the State ofJharkhand. The policy notes that “considerable progress in industrializationhas been achieved during the policy period”. Yet, according to Clause1.8, there is a need to “boost economic activities to sustain the currentGlevel of growth and achieve even better pace of development”. Clause1.9 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 Clause1.12 that it “aims at creating (an) industry-friendly environment formaximizing investment”:H

“1.12. The present policy aims at creating industry-friendlyenvironment for maximizing investment especially in mineral andnatural resource based industries, MSMEs, infrastructuredevelopment and rehabilitation of viable sick units.The objectivehere is to maximize the value addition to state’s natural resourcesby setting up industries across the state, generating revenue andcreating employment.”

Clause 1.13 stipulates that the policy was drafted after intensiveinteraction with stakeholders and to accommodate their views. It wasexpected that the policy would, upon implementation, facilitateindustrialization of the State, generate employment and add to its overallgrowth.

20. As an integral component of the policy, Clause 32.10 envisagesthe grant of an exemption from the payment of 50 per cent of theelectricity duty for a period of five years both for new and existingindustrial units setting up captive power plants for self-consumption orcaptive use The period of five years was to be reckoned from the dateof the commissioning of the plant. Under Clause 35.7(b), the entitlementwould ensue from the financial year following the date of production.The State government was cognizant of the need to implement the policyimmediately to secure the benefit to eligible units over the entire term offive years. Recognizing this need, Clause 38(b) envisaged thatnotifications by its diverse departments to enforce the terms of the policywould be issued within a period of one month.

21. The alacrity expected by the Industrial Policy 2012 of theState of Jharkhand did not find a resonance in its administrative apparatus.The High Court has justifiably referred to this as a case of bureaucraticlethargy. As a matter of first principle, there can be no gainsaying thefact that when a statute, such as the Bihar Act 1948, empowers thestate to grant an exemption from its provisions, the State has the discretionto determine the date from which and the period over which theexemption will operate. An individual or entity cannot compel the Stateto issue a notification providing for an exemption or to insist upon theterms on which the government does so. Whether an exemption shouldbe issued and if so, the terms for the exemption, have to be determinedby the State. But this case does not rest on that principle nor did theclaim of the respondent require the High Court to make a departurefrom it. The Industrial Policy 2012 contained a representation that a A

B

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Arebate/deduction would be granted. It held out a representation that anotification would be issued in a month. These were solemn commitmentsmade by the State of Jharkhand. What remained was their implementationby issuing a notification, which was to be done within one month. TheState government evidently intended to implement and act in pursuanceof its commitment. For, ultimately, it did issue a notification. But it did soBon 8 January 2015 – after a period of a month envisaged under theIndustrial Policy 2012 had dragged on for nearly three years.

22. It is time for the State government to take notice of theobservations of the High Court in regard to administrative lethargy. Ifthe object of formulating the industrial policy is to encourage investment,Cemployment and growth, the administrative lethargy of the State apparatusis clearly a factor which will discourage entrepreneurship. The policydocument held out a solemn representation. It contemplated the grant ofa rebate/deduction from the payment of electricity duty not only to newunits but to existing units as well who had or would set up captive powerDplants. The State, in the present case, held out inter alia a solemnrepresentation in terms of Clauses 32.10 and 35.7(b) of the entitlementof 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-upexemption notification would be issued within one month. That period ofone month stretched on interminably with the result that the purpose andEobject of granting the exemption would virtually stand defeated. The netresult was that when belatedly, the State government issued a notificationunder 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 termsFof the Industrial Policy 2012 had come to an end.

23. The State government was evidently inclined to grant theexemption. This is not a case where due to an overarching requirementof public interest, the State government decided to override therepresentation which was contained in the Industrial Policy 2012. To theGcontrary, 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 suchas the respondent of the full benefit of the exemptionwhich was originallyenvisaged in terms of the Industrial Policy 2012.

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H.2. Building on Motilal Padampat

24. In this backdrop, the High Court has, with justification, advertedto two decisions of this Court. In Kalyanpur Cement (supra), anindustrial policy had been notified in 1995 in the State of Bihar. Thepolicy contained a provision for monitoring and reviewing and envisagedthat all departments and organizations would issue a follow-up notificationto give effect to the policy within one month. This was similar to clause38(b) of the policy in the present case. No notification was issued by theState of Bihar to give effect to the industrial policy, which lapsed on 31August 2000. The claim to sales tax exemption by the unit was rejectedby the State government on the ground that it had decided not to grantan incentive to a sick industrial unit. A follow-up notification was issuedduring the pendency of the case before this Court. In the backdrop ofthese facts, this Court speaking through Justice S S Nijjar, observed:

“85. Even if we are to accept the submissions…that the provisionscontained in Clause 24 were mandatory, the time of one monthfor issuing the notification could only have been extended for areasonable period. It is inconceivable that it could have taken theGovernment three years to issue the follow-up notification. Weare of the considered opinion that failure of the appellants to issuethe necessary notification within a reasonable period of theenforcement of the Industrial Policy, 1995 has rendered thedecisions dated 6-1-2001 and 5-3-2001 wholly arbitrary. Theappellant cannot be permitted to rely on its own lapses inimplementing its Policy to defeat the just and valid claim of theCompany. For the same reason we are unable to accept thesubmissions of the learned Senior Counsel for the appellant thatno relief can be granted to the Company as the Policy has lapsedon 31-8-2000. Accepting such a submission would be to put apremium and accord a justification to the wholly arbitrary actionof the appellant, in not issuing the notification in accordance withthe 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,the Court had to construe a notification dated 11 July 1986 of theGovernment of Kerala enabling those engaged in tourism promotionalactivities to become automatically eligible for concessions/ incentives asprovided to the industrial sector from time to time. An amendment to theKerala Building Tax Act 1975 was made with effect from 6 November A

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A1990 giving an exemption as promised in 1986 and the amendment wasdeleted with effect from 1 March 1993. Relying on the earlier decisionof this Court inter alia in Motilal Padampat (supra), this Court held:

“3… The non-exercise of such discretionary power is clearlyvitiated on account of the application of the doctrine of promissoryBestoppel in terms of this Court’s judgments in MotilalPadampat [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 SCC465] . This is for the reason that non-exercise of such power isitself an arbitrary act which is vitiated by non-application of mindCto relevant facts, namely, the fact that a G.O. dated 11-7-1986specifically provided for exemption from building tax if hotels wereto be set up in the State of Kerala pursuant to the representationmade in the said G.O. True, no mandamus could issue to thelegislature to amend the Kerala Building Tax Act, 1975, for thatDwould necessarily involve the judiciary in transgressing into aforbidden field under the constitutional scheme of separation ofpowers. However, on facts, we find that Section 3-A was, in fact,enacted by the Kerala Legislature by suitably amending the KeralaBuilding Tax Act, 1975 on 6-11-1990 in order to give effect to therepresentation made by the G.O. dated 11-7-1986. We find thatEthe said provision continued on the statute book and was deletedonly with effect from 1-3-1993. This would make it clear thatfrom 6-11-1990 to 1-3-1993, the power to grant exemption frombuilding tax was statutorily conferred by Section 3-A on theGovernment. And we have seen that the Statement of ObjectsFand Reasons for introducing Section 3-A expressly states that thesaid section was introduced in order to fulfil one of the promisescontained 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 thenon-issuance of a notification under Section 3-A was an arbitraryGact of the Government which must be remedied by application ofthe doctrine of promissory estoppel, as has been held by ushereinabove. The ministerial act of non-issue of the notificationcannot possibly stand in the way of the appellants getting reliefunder the said doctrine for it would be unconscionable on the partHof the Government to get away without fulfilling its promise.”

H.3 Promissory estoppel – origins and evolution

26. Before the High Court, the State of Jharkhand sought to sustainits action on the ground that though the follow-up notification under Section9 was issued on 8 January 2015, no outer limit for the issuance of anotification was prescribed and there was no vested right on the part ofthe respondent to get the notification implemented from an earlier dateor to obtain the benefit of the policy until it was implemented by a follow-up notification. The decision in Kalyanpur Cement (supra) was soughtto be distinguished on the ground that in that case no follow-up notificationhad been issued at all until the policy lapsed. In sum and substance, theobjection was that the writ petitioner – the respondent here - had novested right to claim that a follow-up notification should be issued andthat the doctrine of promissory estoppel would not, in the facts, apply.

27. In order to analyze the contentions relating to the doctrine ofpromissory estoppel in the present case, it is necessary to discuss theorigin of the doctrine and the evolution of its application. The commonlaw recognizes various kinds of equitable estoppel, one of which ispromissory estoppel. In Crabb vs Arun DC[13], Lord Denning, speakingfor the Court of Appeal, traced the genesis of promissory estoppel inequity, and observed:

“The basis of this proprietary estoppel – as indeed of promissoryestoppel – is the interposition of equity. Equity comes in, true toform, to mitigate the rigours of strict law. The early cases did notspeak of it as “estoppel”. They spoke of it as “raising an equity”If I may expand that, Lord Cairns said: “It is the first principleupon which all Courts of Equity proceed”, that it will prevent aperson from insisting on his legal rights – whether arising under acontract or on his title deed, or by statute – when it would beinequitable for him to do so having regard to the dealings whichhave taken place between the parties.”

28. The requirements of the doctrine of promissory estoppel havealso been formulated in Chitty on Contracts[14 ](“Chitty”):

“4.086. For the equitable doctrine to operate there must be a legalrelationship giving rise to rights and duties between the parties; apromise 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 (32nd edn., Sweet & Maxwell 2017).

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Aagainst the other his strict legal rights arising out of that relationship;an intention on the part of the former party that the latter will relyon the representation; and such reliance by the latter party. Evenif these requirements are satisfied, the operation of the doctrinemay be excluded if it is, nevertheless, not “inequitable” for thefirst party to go back on his promise. The doctrine most commonlyBapplies to promises not to enforce contractual rights, but it alsoextends to certain other relationships.

4.088…..The doctrine can also apply where the relationship givingrise to rights and correlative duties is non-contractual: e.g. toprevent the enforcement of a liability imposed by statute on aCcompany director for signing a bill of exchange on which thecompany’s name is not correctly given; or to prevent a man fromejecting a woman, with whom he has been cohabitating, from thefamily home.”

Chitty (supra) clarifies that the doctrine of promissory estoppelDmay be enforced even in the absence of a legal relationship. However, itis argued that this would be an incorrect application of the doctrine sinceit gives rise to new rights between the parties, when the intent of thedoctrine is to restrict the enforcement of previously existing rights:

“4.089. It has, indeed, been suggested that the doctrine can applyEwhere, before the making of the promise or representation, thereis no legal relationship giving rise to rights and duties between theparties, or where there is only a putative contract between them:e.g. where the promisee is induced to believe that a contract intowhich he had undoubtedly entered was between him and theFpromisor, when in fact it was between the promisee and anotherperson. But it is submitted that these suggestions mistake thenature of the doctrine, which is to restrict the enforcement by thepromisor of previously existing rights against the promisee. Suchrights can arise only out of a legal relationship existing betweenthese parties before the making of the promise or representation.GTo apply doctrine where there was no such relationship wouldcontravene the rule (to be discussed in para.4-099 below) that thedoctrine creates no new rights.”

29. Generally speaking under English Law, judicial decisions havein the past postulated that the doctrine of promissory estoppel cannotH

be used as a ‘sword’, to give rise to a cause of action for the enforcementof a promise lacking any consideration. Its use in those decisions hasbeen limited as a ‘shield’, where the promisor is estopped from claimingenforcement of its strict legal rights, when a representation by words orconduct has been made to suspend such rights. In Combe vs Combe[15](“Combe”), the Court of Appeal held that consideration is an essentialelement of the cause of action:

“It [promissory estoppel] may be part of a cause of action, but nota cause of action itself.]

……

The principle [promissory estoppel] never stands alone as givinga cause of action in itself, it can never do away with the necessityof consideration when that is an essential part of the cause ofaction. The doctrine of consideration is too firmly fixed to beoverthrown by a side-wind.”

30. Even within English Law, the application of the rule laid downin Combe (supra) has been noticed to be inconsistent[16]. The scope ofthe rule has also been doubted on the ground that it has been widelyframed[17]. Hence, in the absence of a definitive pronouncement by theHouse of Lords holding that promissory estoppel can be a cause ofaction, a difficulty was expressed in stating with certainty that EnglishLaw has evolved from the traditional approach of treating promissoryestoppel as a ‘shield’ instead of a ‘sword’[18]. By contrast, the law in theUnited States[19] and Australia[20] 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, “AComparative Analysis of the Doctrine of Promissory Estoppel in Australia, GreatBritain 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] 1W.L.R. 761, Lord Simonds states, “I do not wish to lend the authority of this House tothe statement of the principle which is to be found in Combe v. Combe and may well befar too widely stated”.

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 ofLords”.

19 American Law Institute, Restatement of the Law (2d), Contracts (1981), para 90.20 Waltons Stores (Interstate) Ltd vs Maher, (1988) 164 CLR 387.

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A31. India, as we shall explore shortly, adopted a more expansivestatement of the doctrine. Comparative law enables countries whichapply a doctrine from across international frontiers to have the benefitof hindsight.

This Court has given an expansive interpretation to the doctrineBof promissory estoppel in order to remedy the injustice being done to aparty who has relied on a promise. In Motilal Padampat (supra), thisCourt viewed promissory estoppel as a principle in equity, which wasnot hampered by the doctrine of consideration as was the case underEnglish Law. This Court, speaking through Justice P N Bhagwati (as hewas then), held thus:C

“12....having regard to the general opprobrium to which the doctrineof consideration has been subjected by eminent jurists, we neednot be unduly anxious to project this doctrine against assault orerosion nor allow it to dwarf or stultify the full development of theequity of promissory estoppel or inhibit or curtail its operationalDefficacy as a justice device for preventing injustice…We do notsee any valid reason why promissory estoppel should not be allowedto found a cause of action where, in order to satisfy the equity, itis necessary to do so.”

H.4 From estoppel to expectationsE

H.4 From estoppel to expectationsE

32. Under English Law, the doctrine of promissory estoppel hasdeveloped parallel to the doctrine of legitimate expectations. The doctrineof legitimate expectations is founded on the principles of fairness ingovernment dealings. It comes into play if a public body leads an individualto believe that they will be a recipient of a substantive benefit.The doctrineFof substantive legitimate expectation has been explained in R vs Northand East Devon Health Authority, ex p Coughlan[21] in the followingterms:

“55…. But what was their legitimate expectation?” Where thereis a dispute as to this, the dispute has to be determined by theGcourt, as happened in In re Findlay. This can involve a detailedexamination of the precise terms of the promise or representationmade, the circumstances in which the promise was made and thenature of the statutory or other discretion.

……

56….Where the court considers that a lawful promise or practicehas induced a legitimate expectation of a benefit which issubstantive, not simply procedural, authority now establishes thathere too the court will in a proper case decide whether to frustratethe expectation is so unfair that to take a new and different coursewill amount to an abuse of power.Here, once the legitimacy ofthe expectation is established, the court will have the task ofweighing the requirements of fairness against any overridinginterest relied upon for the change of policy.”

33. Under English Law, the doctrine of legitimate expectationinitially developed in the context of public law as an analogy to the doctrineof promissory estoppel found in private law. However, since then, EnglishLaw has distinguished between the doctrines of promissory estoppeland legitimate expectation as distinct remedies under private law andpublic law, respectively. De Smith’s Judicial Review[22] notes the contrastbetween the public law approach of the doctrine of legitimate expectationand the private law approach of the doctrine of promissory estoppel :

“[d]espite dicta to the contrary [Rootkin v Kent CC, (1981) 1WLR 1186 (CA); R vJockey Club Ex p RAM Racecourses Ltd,[1993] AC 380 (HL); R v IRC Ex p Camacq Corp, (1990) 1WLR 191 (CA)], it is not normally necessary for a person to havechanged his position or to have acted to his detriment in order toqualify as the holder of a legitimate expectation [R v Ministry forAgriculture, Fisheries and Foods Ex p Hamble Fisheries(Offshore) Ltd, (1995) 2 All ER 714 (QB)]. . . Private lawanalogies from the field of estoppel are, we have seen, of limitedrelevance where a public law principle requires public officials tohonour their undertakings and respect legal certainty, irrespectiveof 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].”

34. Another difference between the doctrines of promissoryestoppel and legitimate expectation under English Law is that the latter 22 Harry Woolf and others, De Smith ’s Judicial Review (8th edn, Thomson Reuters2018).

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Acan constitute a cause of action[23]. The scope of the doctrine of legitimateexpectation is wider than promissory estoppel because it not only takesinto consideration a promise made by a public body but also officialpractice, as well. Further, under the doctrine of promissory estoppel,there may be a requirement to show a detriment suffered by a party dueto the reliance placed on the promise. Although typically it is sufficient toBshow that the promisee has altered its position by placing reliance on thepromise, the fact that no prejudice has been caused to the promisee maybe relevant to hold that it would not be “inequitable” for the promisor togo back on their promise.[24] However, no such requirement is presentunder the doctrine of legitimate expectation. In Regina (Bibi) vsCNewham London Borough Council[25], 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 shouldnot be dismissed lightly, in the prolonged disappointment whichhas ensued; and potential detriment in the deflection of theDpossibility, for a refugee family, of seeking at the start to settlesomewhere in the United Kingdom where secure housing wasless hard to come by. In our view these things matter in publiclaw, even though they might not found an estoppel or actionablemisrepresentation in private law, because they go to fairness andthrough fairness to possible abuse of power. To disregard theElegitimate expectation because no concrete detriment can beshown would be to place the weakest in society at a particulardisadvantage. It would mean that those who have a choice andthe means to exercise it in reliance on some official practice orpromise would gain a legal toehold inaccessible to those who,Flacking any means of escape, are compelled simply to place theirtrust in what has been represented to them.”

35. Consequently, while the basis of the doctrine of promissoryestoppel in private law is a promise made between two parties, theGbasis of the doctrine of legitimate expectation in public law is premisedon 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.H25[2002] 1 W.L.R. 237.

of public authorities. This is not to suggest that the doctrine of promissoryestoppel has no application in circumstances when a State entity hasentered into a private contract with another private party. Rather, inEnglish law, it is inapplicable in circumstances when the State has maderepresentation to a private party, in furtherance of its public functions[26].

H.5. Indian Law and the doctrine of legitimate expectations

36. Under Indian Law, there is often a conflation between thedoctrines of promissory estoppel and legitimate expectation. This hasbeen described in Jain and Jain’s well known treatise, Principles ofAdministrative Law[27] :

“At times, the expressions ‘legitimate expectation’ and ‘promissoryestoppel’ are used interchangeably, but that is not a correct usagebecause ‘legitimate expectation’ is a concept much broader inscope than ‘promissory estoppel’.

…

A reading of the relevant Indian cases, however, exhibit someconfusion of ideas. It seems that the judicial thinking has not asyet 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 promissoryestoppel. However both these ideas are incorrect. As stated above,legitimate expectation is a substantive doctrine as well and hasmuch broader scope than promissory estoppel.

…

In Punjab Communications Ltd. v. Union of India, the SupremeCourt has observed in relation to the doctrine of legitimateexpectation:

“the doctrine of legitimate expectation in the substantive sensehas been accepted as part of our law and that the decision makercan normally be compelled to give effect to his representation inregard to the expectation based on previous practice or pastconduct unless some overriding public interest comes in the wayReliance must have been placed on the said representation andthe 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 (7th edn., EBC 2013).

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It is suggested that this formulation of the doctrine of legitimateexpectation is not correct as it makes “legitimate expectation”practically synonymous with promissory estoppel. Legitimateexpectation may arise from conduct of the authority; a promise isnot always necessary for the purpose.”

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B37. While this doctrinal confusion has the unfortunate consequenceof making the law unclear, citizens have been the victims. Representationsby public authorities need to be held to scrupulous standards, since citizenscontinue to live their lives based on the trust they repose in the State. Inthe commercial world also, certainty and consistency are essential toplanning the affairs of business. When public authorities fail to adhere toCtheir representations without providing an adequate reason to the citizensfor this failure, it violates the trust reposed by citizens in the State. Thegeneration of a business friendly climate for investment and trade isconditioned by the faith which can be reposed in government to fulfil theexpectations which it generates. Professors Jain and DeshpandeDcharacterize the consequences of this doctrinal confusion in the followingterms:

“Thus, in India, the characterization of legitimate expectations ison a weaker footing, than in jurisdictions like UK where the courtsare now willing to recognize the capacity of public law to absorbEthe moral values underlying the notion of estoppel in the light ofthe evolution of doctrines like LE [Legitimate Expectations] andabuse of power. If the Supreme Court of India has shown itscreativity in transforming the notion of promissory estoppel fromthe limitations of private law, then it does not stand to reason as towhy it should also not articulate and evolve the doctrine of LE forFjudicial review of resilement of administrative authorities frompolicies and long-standing practices. If such a notion of LE isadopted, then not only would the Court be able to do away withthe artificial hierarchy between promissory estoppel and legitimateexpectation, but, it would also be able to hold the administrativeGauthorities to account on the footing of public law outside thezone of promises on a stronger and principled anvil. Presently, inthe absence of a like doctrine to that of promissory estoppel outsidethe promissory zone, the administrative law adjudication ofresilement of policies stands on a shaky public law foundation.”

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38. We shall therefore attempt to provide a cogent basis for thedoctrine of legitimate expectation, which is not merely grounded onanalogy with the doctrine of promissory estoppel. The need for thisdoctrine to have an independent existence was articulated by JusticeFrankfurter of the United State Supreme Court in Vitarelli vs Seton[28]:

“An executive agency must be rigorously held to the standards bywhich it professes its action to be judged. Accordingly, if dismissalfrom employment is based on a defined procedure, even thoughgenerous beyond the requirements that bind such agency, thatprocedure must be scrupulously observed. This judicially evolvedrule of administrative law is now firmly established and, if I mayadd, rightly so. He that takes the procedural sword shall perishwith the sword.”

39. However, before we do this, it is important to clarify theunderstanding of the doctrine of legitimate expectation in previousjudgements of this Court. In National Buildings ConstructionCorporation vs S. Raghunathan[29 ](“National Buildings ConstructionCorpn.”), a three Judge bench of this Court, speaking through JusticeS. Saghir Ahmad, held that:

“18. The doctrine of “legitimate expectation” has its genesis inthe field of administrative law. The Government and itsdepartments, in administering the affairs of the country, areexpected to honour their statements of policy or intention andtreat the citizens with full personal consideration without any iotaof abuse of discretion. The policy statements cannot be disregardedunfairly or applied selectively. Unfairness in the form ofunreasonableness is akin to violation of natural justice. It was inthis context that the doctrine of “legitimate expectation” wasevolved which has today become a source of substantive as wellas procedural rights. But claims based on “legitimate expectation”have been held to require reliance on representations and resultingdetriment to the claimant in the same way as claims based onpromissory estoppel.”

28 359 US 535 (1959); the principle espoused in this judgment has been followed bythis 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 vsInternational Airport Authority of India, (1979) 3 SCC 489.29 (1998) 7 SCC 66.

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AHowever, it is important to note that this observation was madeby this Court while discussing the ambit of the doctrine of legitimateexpectation under English Law, as it stood then. As we have discussedearlier, there was a substantial conflation or overlap between the doctrinesof legitimate expectation and promissory estoppel even under EnglishLaw since the former was often invoked as being analogous to the latter.BHowever, since then and since the judgment of this Court in NationalBuildings Construction Corporation (supra), the English Law inrelation to the doctrine of legitimate expectation has evolved. Morespecifically, it has actively tried to separate the two doctrines and tosituate the doctrine of legitimate expectations on a broader footing. InCRegina (Reprotech (Pebsham) Ltd) vs East Sussex CountyCouncil[30], the House of Lords has held thus:

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“33 In any case, I think that it is unhelpful to introduce private lawconcepts of estoppel into planning law. As Lord Scarman pointedout in Newbury District Council v Secretary of State for theDEnvironment [1981] AC 578 , 616, estoppels bind individuals onthe ground that it would be unconscionable for them to deny whatthey have represented or agreed. But these concepts of privatelaw should not be extended into “the public law of planning control,”which binds everyone. (See also Dyson J in R v Leicester CityCouncil, Ex p Powergen UK Ltd [2000] JPL 629 , 637.)

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34 There is of course an analogy between a private law estoppeland the public law concept of a legitimate expectation created bya public authority, the denial of which may amount to an abuse ofpower… But it is no more than an analogy because remediesagainst public authorities also have to take into account the interestsFof the general public which the authority exists to promote.Publiclaw can also take into account the hierarchy of individual rightswhich exist under the Human Rights Act 1998, so that, for example,the individual’s right to a home is accorded a high degree ofprotection (see Coughlan’s case, at pp 254–255) while ordinaryGproperty rights are in general far more limited by considerationsof public interest: see R (Alconbury Developments Ltd) vSecretary of State for the Environment, Transport and the Regions[2001] 2 WLR 1389.

35 It is true that in early cases such as the Wells case [1967] 1WLR 1000 and Lever Finance Ltd v Westminster (City) LondonBorough Council [1971] 1 QB 222 , Lord Denning MR used thelanguage of estoppel in relation to planning law. At that time thepublic law concepts of abuse of power and legitimate expectationwere very undeveloped and no doubt the analogy of estoppelseemed useful…..It seems to me that in this area, public law hasalready absorbed whatever is useful from the moral values whichunderlie the private law concept of estoppel and the time has”come for it to stand upon its own two feet.

40. In a concurring opinion in Monnet Ispat and Energy Ltd.vs Union of India[31 ](“Monnet Ispat”), Justice H L Gokhalehighlightedthe different considerations that underlie the doctrines of promissoryestoppel and legitimate expectation. The learned judge held that for theapplication of the doctrine of promissory estoppel, there has to be apromise, based on which the promisee has acted to its prejudice. Incontrast, while applying the doctrine of legitimate expectation, the primaryconsiderations are reasonableness and fairness of the State action. Heobserved thus:

“Promissory Estoppel and Legitimate Expectations

289. As we have seen earlier, for invoking the principle ofpromissory estoppel there has to be a promise, and on that basisthe party concerned must have acted to its prejudice.In the instantcase it was only a proposal, and it was very much made clear thatit was to be approved by the Central Government, prior wheretoit could not be construed as containing a promise. Besides, equitycannot be used against a statutory provision or notification.

290…..In any case, in the absence of any promise, the Appellantsincluding Aadhunik cannot claim promissory estoppel in the teethof the notifications issued under the relevant statutory powers.Alternatively, the Appellants are trying to make a case under thedoctrine of legitimate expectations. The basis of this doctrine is inreasonableness and fairness.However, it can also not be invokedwhere the decision of the public authority is founded in a provisionof law, and is in consonance with public interest.”

(emphasissupplied)

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A41. In Union of India vs Lt. Col. P.K. Choudhary[32], speakingthrough Chief Justice T S Thakur, the Court discussed the decision inMonnet Ispat (supra) and noted its reliance on the judgment in AttorneyGeneral for New South Wales vs. Quinn[33]. It then observed:

“This Court went on to hold that if denial of legitimate expectationBin a given case amounts to denial of a right that is guaranteed or isarbitrary, discriminatory, unfair or biased, gross abuse of poweror in violation of principles of natural justice, the same can bequestioned on the well-known grounds attracting Article 14 of theConstitution but a claim based on mere legitimate expectationwithout anything more cannot ipso facto give a right to invokeCthese principles.”

Thus, the Court held that the doctrine of legitimate expectationcannot be claimed as a right in itself, but can be used only when thedenial of a legitimate expectation leads to the violation of Article 14 ofthe Constitution.D

42. As regards the relationship between Article 14 and the doctrineof legitimate expectation, a three judge Bench in Food Corporation ofIndia vs Kamdhenu Cattle Feed Industries[34], speaking through JusticeJ S Verma, held thus:

E“7. In contractual sphere as in all other State actions, the Stateand all its instrumentalities have to conform to Article 14 of theConstitution of which non-arbitrariness is a significant facet. Thereis no unfettered discretion in public law: A public authoritypossesses powers only to use them for public good. This imposesthe duty to act fairly and to adopt a procedure which is ‘fairplay inFaction’. Due observance of this obligation as a part of goodadministration raises a reasonable or legitimate expectation in everycitizen to be treated fairly in his interaction with the State and itsinstrumentalities, with this element forming a necessary componentof the decision-making process in all State actions. To satisfy this-Grequirement of nonarbitrariness in a State action, it is, therefore,necessary to consider and give due weight to the reasonable orlegitimate 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.

H34(1993) 1 SCC 71.

decision or else that unfairness in the exercise of the power mayamount to an abuse or excess of power apart from affecting thebona fides of the decision in a given case. The decision so madewould be exposed to challenge on the ground of arbitrariness.Rule of law does not completely eliminate discretion in the exerciseof power, as it is unrealistic, but provides for control of its exerciseby judicial review.

8. The mere reasonable or legitimate expectation of a citizen, insuch a situation, may not by itself be a distinct enforceable right,but failure to consider and give due weight to it may render thedecision arbitrary, and this is how the requirement of dueconsideration of a legitimate expectation forms part of the principleof non-arbitrariness, a necessary concomitant of the rule of law.Every legitimate expectation is a relevant factor requiring dueconsideration in a fair decision-making process. Whether theexpectation of the claimant is reasonable or legitimate in the contextis a question of fact in each case. Whenever the question arises,it is to be determined not according to the claimant’s perceptionbut in larger public interest wherein other more importantconsiderations may outweigh what would otherwise have beenthe legitimate expectation of the claimant. A bona fide decision ofthe public authority reached in this manner would satisfy therequirement of non-arbitrariness and withstand judicial scrutiny.The doctrine of legitimate expectation gets assimilated in the ruleof law and operates in our legal system in this manner and to thisextent.”

More recently, in NOIDA Entrepreneurs Assn. vs NOIDA[35],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 onthe touchstone of Article 14 of the Constitution. Action of theState or its instrumentality must be in conformity with some principlewhich meets the test of reason and relevance. Functioning of a“democratic form of Government demands equality and absenceof arbitrariness and discrimination”. The rule of law prohibits A

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Aarbitrary action and commands the authority concerned to act inaccordance with law. Every action of the State or itsinstrumentalities should neither be suggestive of discrimination,nor even apparently give an impression of bias, favouritism andnepotism. If a decision is taken without any principle or withoutany rule, it is unpredictable and such a decision is antithesis to theBdecision taken in accordance with the rule of law.

…

41. Power vested by the State in a public authority should beviewed as a trust coupled with duty to be exercised in larger publicCand social interest. Power is to be exercised strictly adhering tothe statutory provisions and fact situation of a case. “Publicauthorities cannot play fast and loose with the powers vested inthem.” A decision taken in an arbitrary manner contradicts theprinciple of legitimate expectation. An authority is under a legalobligation to exercise the power reasonably and in good faith toDeffectuate the purpose for which power stood conferred. In thiscontext, “in good faith” means “for legitimate reasons”. It mustbe exercised bona fide for the purpose and for none other...”

EAs such, we can see that the doctrine of substantive legitimateexpectation is one of the ways in which the guarantee of non-arbitrarinessenshrined under Article 14 finds concrete expression.

H.6. Expectations breached by the State of Jharkhand

43. Applying the abovementioned principles in the present case,Fwe are unable to perceive any substance in the submission of theStatewhich was urged in defense before the High Court. Not only didthe State in the present case hold out a solemn representation, thisrepresentation was founded on its stated desire to encourageindustrialization 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 takenby the State government through its departments forHimplementing the Industrial Policy 2012.

44. The State having held out a solemn representation in the aboveterms, it would be manifestly unfair and arbitrary to deprive industrialunits within the State of their legitimate entitlement. The State governmentdid as a matter of fact, issue a statutory notification under Section 9 butby doing so prospectively with effect from 8 January 2015 it negated thenature of the representationwhich was held out in the Industrial Policy2012. Absolutely no justification bearing on reasons of policy or publicinterest has been offered before the High Court or before this Court forthe delay in issuing a notification. The pleadings are completely silent onthe reasons for the delay on the part of the government and offer nojustification for making the exemption prospective, contrary to the termsof the representation held out in the Industrial Policy 2012.

45. It is one thing for the State to assert that the writ petitionerhad no vested right but quite another for the State to assert that it is notduty bound to disclose its reasons for not giving effect to the exemptionnotification within the period that was envisaged in the Industrial Policy2012. Both the accountability of the State and the solemn obligationwhich it undertook in terms of the policy document militate againstaccepting such a notion of state power. The state must discard the colonialnotion that it is a sovereign handing out doles at its will. Its policies giverise to legitimate expectations that the state will act according to what itputs forth in the public realm. In all its actions, the State is bound to actfairly, in a transparent manner. This is an elementary requirement of theguarantee against arbitrary state action which Article 14 of theConstitution adopts. A deprivation of the entitlement of private citizensand private business must be proportional to a requirement grounded inpublic interest. This conception of state power has been recognized bythis Court in a consistent line of decisions. As an illustration, we wouldlike to extract this Court’s observationsin National BuildingsConstruction Cororation (supra):

“The Government and its departments, in administering the affairsof the country are expected to honour their statements of policyor intention and treat the citizens with full personal considerationwithout any iota of abuse of discretion. The policy statementscannot be disregarded unfairly or applied selectively. Unfairnessin the form of unreasonableness is akin to violation of naturaljustice.”

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A46. Therefore, it is clear that the State had made a representationto the respondent and similarly situated industrial units under the IndustrialPolicy 2012. This representation gave rise to a legitimate expectation ontheir behalf, that they would be offered a 50 per cent rebate/deduction inelectricity duty for the next five years. However, due to the failure toissue a notification within the stipulated timeand by the grant of theBexemption only prospectively, the expectation and trust in the State stoodviolated. Since the State has offered no justification for the delay inissuance of the notification, or provided reasons for it being in publicinterest, we hold that such a course of action by the State is arbitraryand is violative of Article 14.CH.7. The technical defences to the claim A

(i) Assessment and recourse to Article 226

47. We have not been impressed with the submission of the Stateon the technicalities of the respondent not having filed in its assessmentDreturns, a claim for exemption from electricity duty. What is significantis that since no exemption notification had been issued under Section 9,a writ petition was initially filed before the High Court by Usha MartinLimited. As a result of the writ petition, an exemption notification wasissued on 8 January 2015. Now it is correct that in the case of FYs2012-13 and 2013-14, the orders of assessment were passed on 8EDecember 2015 and 16 December 2016, which was after the date ofthe exemption notification. However, the fact remains that so long asthe clause in the exemption notification granting it prospective effectcontinued to hold the field, the assessing officer as a creature of thestatutewas bound to enforce the terms of the exemption and accordinglyFdenied any exemption for a period prior to 8 January 2015. The onlyremedy which was available to the respondent, was to challenge theterms of the exemption notification which it did by instituting writproceedings before the High Court under Article 226.

(ii) The argument of delay

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(ii) The argument of delay

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G48. An earnest effort has been made on behalf of the appellant tosubmit that the writ petitions before the High Court ought not to havebeen entertained since they were instituted in 2019.However,Mr.Devashish Bharuka, learned Counsel on behalf of the respondentshas, in the course of his submissions, correctly urged that the issue ofdelay has never been raised in the course of the proceedings before theH

High Court or raised as a ground in the Special Leave Petition beforethis Court. In High Court of Judicature of Patna vs Madan MohanPrasad[36], a two judge Bench of this Court, speaking through Justice JM Panchal, held thus:

“19. The contention advanced on behalf of the appellant that thewrit petition was filed by Respondent 1 on 10-11-1990 i.e. sevenyears after he had superannuated from service, and therefore,the writ petition should have been dismissed on the ground ofdelay and laches, cannot be accepted. The impugned judgmentnowhere shows that such a point was argued by the appellantbefore the High Court. No grievance is made in the memorandumof SLP that point regarding delay and laches was argued beforethe High Court but the same was not dealt with by the High Courtwhen impugned judgment was delivered.”

Further, Mr Bharuka has submitted that once the High Court hasheld the respondent’s writ petition to be legally sustainable on merits,this Court should not interfere on grounds on delays and laches alone.This finds support in the judgment of this Court in Dayal Singh vs Unionof India[37], where a three judge Bench, speaking through Justice S BSinha, held thus:

“41. It was submitted that the respondents having filed a writpetition after a period of eight years, the same ought not to havebeen entertained. Primarily a question of delay and laches is amatter which is required to be considered by the writ court. Oncethe writ court has exercised its jurisdiction despite delay and lacheson the part of the respondents, it is not for us at this stage to setaside the order of the High Court on that ground alone particularlywhen we find that the impugned judgment is legally sustainable.”

Mr Bharuka is also correct in submitting that the State cannotpossibly contend that the result of the delay has led to it altering itsposition to its detriment. Nor is it a case where third parties may beaffected as a consequence of a delay in instituting writ proceedings.This submission finds support in Hindustan Petroleum CorporationLtd. vs Dolly Das[38], where a two judge Bench, speaking through JusticeS Rajendra Babu, noted thus:

36(2011) 9 SCC 65.37(2003) 2 SCC 593.38(1999) 4 SCC 450.

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36(2011) 9 SCC 65.37(2003) 2 SCC 593.38(1999) 4 SCC 450.

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A“8. So far as the contention regarding laches of the respondent infiling the writ petition is concerned, delay, by itself, may not defeatthe claim for relief unless the position of the appellant had been soaltered which cannot be retracted on account of lapse of time orinaction of the other party. This aspect being dependent upon theexamination of the facts of the case and such a contention notBhaving been raised before the High Court, it would not beappropriate to allow the appellants to raise such a contention forthe first time before us. Besides, we may notice that the periodfor which the option of renewal has been exercised has not cometo an end. During the subsistence of such a period certainly theCrespondent could make a complaint that such exercise of optionwas not available to the appellants and, therefore, the jurisdictionof the High Court could be invoked even at a later stage. Further,the appellants are not put to undue hardship in any manner byreason of this delay in approaching the High Court for a relief.”DIn this view of the matter, we are not inclined to interfere with thejudgment of the High Court on the ground of delay alone when thejudgment is based on legally sustainable principles.The delay of therespondent in filing a writ petition by itself should not defeat the claimunless the position of the State has been so altered that it cannot beretracted on account of a lapse of time or the inaction of the writEpetitioner. The State has not in the present case either pleaded or arguedany hardship if the respondent were to be granted relief. Finally, thedecisions in Bhailal Bhai (supra) and Suganmal (supra) related to apetitioner seeking a refund of an illegally collected tax. In the presentcase, we are not concerned with such a situation. Rather, the petitionerFhas come before this Court due to arbitrariness in State action which ledto 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 beenGpaid. The respondent cannot be deprived of an adjustment of the excessduty paid. Further, the State’s submission that there was no pleading bythe respondent in the High Court on whether the amount being claimedas rebate/deduction had been passed on by the respondent to its customersis factually incorrect. In the writ petition filed before the High Court, theHrespondent specifically asserted that the burden of differential amount

of electricity duty, realized by the State from the respondent herein, wasnot passed by the latter to its customers, either directly or indirectly or inany other manner. The relevant excerpt of the pleading in the respondent’swrit petition reads thus:

“41. That, at this stage, it is most humbly stated and submittedthat if the amount of 50% of the electricity duty is refunded to thePetitioner, the same would not lead to unjust enrichment in thehands of the Petitioner as the Petitioner has not passed on theburden of differential amount of electricity duty, realized byRespondent-State from the Petitioner, to its customers eitherdirectly or indirectly or in any other manner.

42. That it is most humbly stated and submitted that for the periodin question 100% of electricity duty has been realized from thePetitioner by Respondent-State of Jharkhand and, thus, extra 50%of the electricity duty has been borne by the Petitioner out of theown pocket and the burden of the same cannot be passed by thePetitioner to its customers.

43. That it is most humbly stated and submitted that the Petitioneris a manufacturer of Sponge Iron and M.S. Billet and the price ofthe said commodity is market driven and is controlled by the market.The amount of electricity duty paid by the Petitioner was out ofits own pocket affecting the gross profit of the Petitioner on saleof its final product. It is categorically reiterated herein that burdenof the amount of electricity has not been passed on by the Petitionerto its customers.”

As regards the petitioner’s reliance on the ninejudge Benchdecision of this Court in Mafatlal Industries (supra), we would like toadvert 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 provisionsof the Act as contemplated in Proposition (i) above or in a suit orwrit petition in the situations contemplated by Proposition (ii) above,can succeed only if the Petitioner/Plaintiff alleges and establishesthat he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed onlywhen he establishes that he has not passed on the burden of theduty or to the extent he has not so passed on, as the case may be.

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AWhether the claim for restitution is treated as a constitutionalimperative or as a statutory requirement, it is neither an absoluteright nor an unconditional obligation but is subject to the aboverequirement, as explained in the body of the judgment. Where theburden of the duty has been passed on, the claimant cannot saythat he has suffered any real loss or prejudice. The real loss orBprejudice is suffered in such a case by the person who hasultimately borne the burden and it is only that person who canlegitimately claim its refund. But where such person does notcome forward or where it is not possible to refund the amount tohim for one or the other reason, it is just and appropriate that thatCamount is retained by the State, i.e., by the people. There is noimmorality or impropriety involved in such a proposition.

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The doctrine of unjust enrichment is a just and salutary doctrine.No person can seek to collect the duty from both ends. In otherwords, he cannot collect the duty from his purchaser at one endDand also collect the same duty from the State on the ground that ithas been collected from him contrary to law. The power of theCourt is not meant to be exercised for unjustly enriching a person.”

In the present case, as we have previously held, the presentrespondent did not collect the electricity duty from both ends, to deployEthe above phrasing. As a result, this doctrine has no application to thefacts of the case at hand.

50. In Indian Council for Enviro-Legal Action vs Union ofIndia[39], a two judge Bench of this Court, speaking through JusticeDalveer Bhandari, outlined the ingredients of unjust enrichment in theFfollowing terms:

“152. “Unjust enrichment” has been defined by the court as theunjust retention of a benefit to the loss of another, or the retentionof money or property of another against the fundamental principlesof justice or equity and good conscience. A person is enriched ifGhe has received a benefit, and he is unjustly enriched if retentionof the benefit would be unjust. Unjust enrichment of a personoccurs when he has and retains money or benefits which in justiceand equity belong to another.”

Applying this definition to the facts of the case at hand, the doctrineof unjust enrichment could have been attracted if the respondent hadpassed on the electricity duty to its customers and then retained therefund occasioned by the 50 per cent rebate in its own pocket. This isnot demonstrated to be the factualposition and hence, the respondentcannot be denied relief on the application of the doctrine.

I. Conclusion

51. The narrow issue is whether the respondent is entitled to arebate/deduction from electricity duty which is answered in theaffirmative. It is necessary,however, to clarify that the respondent wouldnot be entitled to a rebate/deduction for FY 2011-12. In terms of Clause35.7(b)of the Industrial Policy 2012, the entitlement ensues from thefinancial year following the commencement of production. The respondentcommenced production on 17 August 2011. Hence, the order of theHigh Court would have to be confirmed for FYs 2012-13 and 2013-14.In conclusion, we are in agreement with the conclusion of the HighCourt that the respondent was entitled to an exemption from electricityduty, although for the reasons indicated in this judgment. Further, therelief granted would stand confined to FYs 2012-13 and 2013-14. Theappeals shall stand disposed of in the above terms. There shall be noorder as to costs.

52. Pending application(s), if any, stand disposed of.

Ankit Gyan

Appeals disposed of.

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