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M/s. Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board & Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 9748 of 2003)Decided 29 Jan 2016
Civil Appeal No. 9748 of 2003
Justice Ranjan Gogoi · Justice Arun Mishra · Justice Prafulla C. Pant

Background

A caustic soda manufacturer in Tamil Nadu was promised a concessional electricity tariff for five years from the start of commercial production under a 1976 government letter and a later tariff statute. A 1982 government order amended the tariff schedule to withdraw the concession once a unit started earning profits, and the electricity board then billed the appellants at the normal (non-concessional) rate on the ground that they had turned profitable. The companies challenged this in the High Court, arguing the State was bound by its earlier promise (promissory estoppel) and, alternatively, that they had not actually made profits, and after losing, a two-judge Bench of the Supreme Court referred the core estoppel question to this larger bench.

Decision Breakdown

The Supreme Court held that promissory estoppel cannot be invoked to prevent the State from withdrawing a tariff concession, because a concession granted under a statute is not an enforceable right but a defeasible privilege that can be withdrawn by the same statutory power that granted it, relying on earlier rulings that there can be no estoppel against a statute and that recipients of a concession only have a right to enjoy it while it lasts. The Court also rejected the appellants' alternative argument that they had not actually earned profits, holding that profitability was properly assessed on an industry-wide basis (not isolated to one unit) and that it is for the State, not the courts, to decide tariff policy. All three connected appeals were accordingly dismissed as without merit.

Lesson Learnt

A business cannot rely on "promissory estoppel" to permanently lock in a government concession or subsidy: concessions granted under statutory power remain subject to being withdrawn by that same power once the conditions attached to them (such as the business becoming profitable) are met.

Official source (sci.gov.in)View Judgment (PDF)

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