“Before laying down any policy which would give benefits to its subjects, the state must think about pros and cons of the policy and its capacity to give the benefits,” a bench comprising Justices A R Dave and A K Sikri said.
“Without proper appreciation of all the relevant factors, the state should not give any assurance, not only because that would be in violation of the principles of promissory estoppels but it would be unfair and immoral on the part of the state not to act as per its promise," it said.

The remarks were made in the judgement in which Kerala government was found lacking to meet the promise made by it in 1990 policy assuring continuous supply of electricity without power cut for five years to certain new manufacturing units.
The policy declared by the government order of May 21, 1990 had also assured that such new units would be given certain exemption regarding payment of electricity duty for a period of five years.

The Apex Court set aside the judgement of the Kerala High Court, which had rejected grievances ventilated by such units that they did not get real benefit of the policy because their production was adversely affected whenever there was power cut and the five-year period of exemption from power cut was not extended by government which was in violation of the promise.

While allowing the appeals of such units, the Apex Court said, “In the instant case, no case had been made out by the state that the appellants (industrial units) had committed any breach or were not entitled to any of the benefits or concessions which had been offered to them by the state.”
"In the circumstances, the state was bound to give the benefits which had been assured to the appellants," the bench said.

The Apex Court also noted that the state could not show any justifiable reason for deciding as to why it decided to give the benefit of extended period only when the power cut was 50 percent or more.
"If an assurance was given to the appellants and similarly situated persons that they would be given 100 percent electricity supply for five years, the state cannot wriggle out of their liability by making a policy to the effect that the benefit by way of incentive would be extended only if the electricity supply was reduced to less than 50 percent on a particular day," the bench said.

"It is pertinent to know that the cases where the consumer is having a continuous process industry, even power cut below 50 percent would adversely affect the manufacturing unit. It is a matter of common knowledge that in several industries, the manufacturing process cannot be stopped abruptly. Many a times, restarting of the machines or boilers take lot of time and energy, this results in manufacturer’s loss. The fact ought to have been considered by the state while taking the afore-stated decision," the bench said.
It said the law, which enables state governments to regulate supply, distribution and consumption of electricity for the purpose of maintenance and supply of equitable distribution of energy, was not applicable in the instant case.

"For the reason that in the instant case, the state had given an assurance with regard to uninterrupted supply of electricity and, therefore, the respondents ought to have made provision for uninterrupted supply of electricity to the appellants and other similarly situated persons by regulating electricity supply in a proper manner," the bench said.
"Framing such policies and doing the needful for its implementation are administrative functions of the state and, therefore, normally this Court would not like to interfere with its policies but looking at the peculiar facts of the case, where an assurance had been given for uninterrupted supply of electricity, one would presume that the state must have made necessary arrangements to provide 100 percent uninterrupted supply of electricity for five years to the new unit," the bench added.

The Apex Court further said that if for any reason it was not possible to supply electricity as assured, the state ought to have extended the period of five years by the period during which assured electricity was not supplied.

“By doing so, the state could have made an effort to fulfill its promise and satisfied the people, who acted on an assurance given by the state and set up their manufacturing units in Kerala,” the bench said.
The Apex Court also noted that the state was conscious about the fact that there was a problem with regard to supply of electricity in Kerala and possibly for that reason industries which depended much upon electricity as a source of power were not inclined to establish new industries.
“Before setting up an industry, the entrepreneur or the industrialist considers several factors and thereupon takes several decisions like place of business, capacity at which production should be made, type of raw-material, etc. After considering all these factors, a final decision is taken with regard to setting up of an industry,” the bench said.

“For a new entrepreneur, such a decision is of vital importance because if he fails in his estimates or in consideration of all the relevant factors, there are all chances that he would fail not only in his business but he would completely ruin himself. Thus, one can very well appreciate that the appellants must have thought about relevant factors, including the incentives offered by the respondent-state and might have decided to set up their industries in the state,” the bench said.

“While deciding this case, this Court would invariably keep in mind the circumstances in which the appellants had set up their industries in Kerala," the bench added.


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