M/S. KOTHARI INDUSTRIAL CORP. LTD. Vs. TAMILNADU ELECTRICITY BOARD & ANR.

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Date of judgment:
01/10/2010
Hon'ble Judges:
Markandey Katju, T.S. THAKUR

JUDGMENT

Markandey Katju, J.

1. These appeals have been filed against the common judgment and

order of the Madras High Court dated 06.12.2001 in Writ Appeals Nos. 421

& 488 of 1985 etc. The facts have been stated out in great detail in the

impugned judgment of the High Court in which the points contended by the

parties herein have been dealt with. Hence we are not repeating the same

here.
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2. The appellants have set up new industries in which a major raw

material is said to be power (electricity). It is alleged by the appellants that

due to large consumption of power, the economic viability of their project is

very sensitive to power tariffs. It is further alleged that the appellants were

attracted by the tariff concessions given under Tamil Nadu Revision of

Tariff Rates on Supply of Electrical Energy Act, 1978 (Tamil Nadu Act 1 of

1979). In the Schedule to the said Act, new industries were to be given the

benefit of concessional tariffs for the first five years of production. It is

alleged that on the basis of said promise the appellants proceeded in setting

up their projects and established their industrial units which commenced

production. The appellants were sanctioned the power supply by the

respondents and started production.

3. Subsequently, by notification dated 30.4.1982 the respondents by

revising the tariff introduced a new condition to the tariff concession,

namely, that the said concession was not to apply from the year when the

industry starts earning profits. On the basis of the above notification, the

appellants were asked by the respondents to give an undertaking, which they

gave, fearing disconnection of their power supply.
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4. It is alleged by M/s. Kothari Industrial Corporation Limited, which is

one of the appellants before us, that in the year 1982-83 they disclosed a net

profit of Rs.7,07,572/- which under Income Tax Act was available for set off

against carry forward losses which amounted to Rs.45,20,611/- . Hence it

was alleged that in fact the said appellant incurred losses. The appellant has

been served notice to pay Rs.2,09,433/- to avoid disconnection of power

supply.

5. The appellants have relied on the decisions of this Court in Pawan

Alloys & Casting (P) Ltd. vs. U.P. State Electricity Board & Ors. (1997) 7

SCC 251, Southern Petrochemical Industries Company Limited vs.

Electricity Inspector and E.T.I.O. & Ors. (2007) 5 SCC 447, Shri Bakul Oil

Industries & Anr. vs. State of Gujarat & Anr. (1987) 1 SCC 31 etc. On the

basis of the aforesaid decisions the appellants relied on the doctrine of

promissory estoppel and legitimate expectation.

6. On the other hand, the respondents have alleged that there is no

estoppel against the statute, and the amendment to the Schedule by which

the concession was restricted was a legislative act. They have relied on the

decisions of this Court in Union of India & Ors. vs. Godfrey Philips India
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Limited (1985) 4 SCC 369, State of Tamil Nadu vs. K. Sabanayagam &

Anr. (1998) 1 SCC 318 and Jalan Trading Co. (Pvt. Ltd.) vs. Mill Mazdoor

Union 1967(1) SCR 15. The respondents have also alleged that since the

appellants have given a specific undertaking to abide by the G.O. dated

30.4.1982 they are estopped from challenging the same vide Kasinka

Trading & Anr. vs. Union of India & Anr. (1995) 1 SCC 274 and Shrijee

Sales Corporation & Anr. vs. Union of India (1997) 3 SCC 398. The

respondents have also alleged that Section 4 of the 1978 Act empowered the

Government to amend the Schedule to the Act vide Tamil Nadu Electricity

Board vs. Status Spinning Mills Ltd. & Anr. (2008) 7 SCC 353.

7. We are of the opinion that there seems to be some difference of

opinion in the various decisions by different benches of this Court. Hence

the matter needs to be decided by a larger bench of this Court, on the issue

as to whether the principles of promissory estoppel and legitimate

expectation are applicable in this case. The larger bench may also consider

whether the undertaking given by the appellants acts as an estoppel against

them.
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8. Let the papers of this case be placed before Hon'ble the Chief Justice

of India for constitution of a larger bench.

.............................J.
(Markandey Katju)

........................
.......J. (T. S. Thakur)

New Delhi;
October 01, 2010
ENDSHERE