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S.V.A. Steel Re-rolling Mills Ltd. v. State of Kerala and Others

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 10103-10106 of 2010)Decided 6 Feb 2014
Civil Appeal Nos. 10103-10106 of 2010
Justice Anil R. Dave · Justice A.K. Sikri

Background

Businesses set up manufacturing units in Kerala relying on a promise of uninterrupted electricity and protected tariffs for five years. Power cuts reduced the benefit, but the State extended the incentive period only for days when supply had been cut by at least half. The businesses challenged that limited compensation.

Decision Breakdown

The Supreme Court allowed their appeals and set aside the High Court's order. Even a smaller interruption could disrupt a continuous manufacturing process and cause substantial losses, so the fifty-percent threshold had no adequate justification. Although electricity shortages could prevent immediate fulfilment of the promise, the State could compensate by extending the incentive period. The respondents were directed to calculate all days on which the promised full supply was not provided and issue consequential orders within two months.

Lesson Learnt

When people invest in reliance on a specific government incentive, compensation for its failure must address the promised benefit fairly. An arbitrary cutoff cannot exclude interruptions that also undermine that benefit.

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

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