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The State of Jharkhand & Ors. v. Brahmputra Metallics Ltd., Ranchi & Anr.

Civil Appeal · 2020 INSC 667Decided 1 Dec 2020
Civil Appeal Nos. 3860-3862 of 2020
Dr. Justice D.Y. Chandrachud · Justice Indu Malhotra

Background

Jharkhand's Industrial Policy 2012 promised industries that set up captive power plants a 50% rebate on electricity duty for five years, and promised that the government would issue the formal notification implementing this within one month. The state took nearly three years to issue the notification (on 8 January 2015) and then made it apply only prospectively from that date, instead of from when the policy took effect. Brahmputra Metallics, which had set up a captive power plant, was denied the rebate for FYs 2011-12, 2012-13 and 2013-14 as a result and challenged this before the Jharkhand High Court, which ruled in its favour. The State of Jharkhand appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the State's delay and its decision to make the exemption only prospective amounted to an arbitrary and unfair breach of a solemn representation made in its own Industrial Policy, violating Article 14 of the Constitution. The Court traced the evolution of the doctrines of "promissory estoppel" (where a party is held to a promise it induced another to rely on) and "legitimate expectation" (where fairness requires a public authority to honour expectations it created, independent of private-law estoppel concepts), holding that India's law has often conflated the two but that both support relief here since the government offered no justification for the delay. The Court rejected the State's technical defences, that the company had not formally claimed the rebate in its tax returns, that the petition was filed too late, and that granting relief would amount to unjust enrichment, finding none of these persuasive on the facts. However, the Court clarified the entitlement should run only from FY 2012-13 (the year after actual commercial production began), not FY 2011-12 as the High Court had allowed, so the High Court's order was upheld for FYs 2012-13 and 2013-14 only.

Lesson Learnt

When a government makes a clear, specific promise in an official policy, including a promise about when it will implement that policy, citizens and businesses are entitled to rely on it, and unexplained bureaucratic delay or bad faith in honouring that promise can be struck down as "arbitrary" state action under the Constitution.

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

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