Supreme Court Upholds Withdrawal of Industrial Rebate: “Public Interest and Financial Constraints Justify Rescission, No Entitlement After April 1, 1995”

Court’s Decision

The Supreme Court dismissed appeals by industrial companies challenging the recovery of rebates granted under a rescinded notification. The Court held that the appellants could not claim the benefit of a 25% rebate on electricity tariffs under the notification dated September 30, 1991, as it was rescinded before they availed electricity. The judgment also upheld that financial constraints and overriding public interest justified the withdrawal of the rebate policy.

Facts

1. Background of the Notification:
   • A notification dated September 30, 1991, granted a 25% rebate on electricity tariffs for industries that availed power for bona fide industrial purposes. The rebate was applicable for five years from the date of power supply.
   • The notification aimed to attract industrial investments in Goa.
2. Rescission and Amendments:
   • The notification was rescinded on March 31, 1995, effective from April 1, 1995.
   • Subsequent notifications in 1996 sought to amend the rescinded notification, but they were declared void ab initio due to non-compliance with procedural rules.
3. Introduction of the Goa (Prohibition of Further Payments and Recovery of Rebate Benefits) Act, 2002:
   • This Act mandated the recovery of rebates granted under the earlier notifications. The respondents issued demand notices to the appellants for the recovery of the rebate amounts.
4. Litigation History:
   • The appellants challenged the demand notices in writ petitions before the High Court, arguing their entitlement to the rebate under the notification of 1991. The High Court dismissed the petitions, and review applications were also denied.

Issues

1. Were the appellants entitled to claim the 25% rebate under the notification dated September 30, 1991?
2. Did the demand notices issued under the 2002 Act violate the appellants’ rights or any legal provisions?

Petitioner’s Arguments

1. Entitlement Under Notification (1991):
   • The appellants argued that their entitlement to the rebate crystallized when they applied for power under the notification, regardless of when the electricity supply began.
   • They claimed that rescission of the notification could not apply retrospectively to invalidate their rights.
2. Promissory Estoppel:
   • The appellants contended that they had set up industries and made investments in reliance on the promise of the rebate. The state was estopped from withdrawing the rebate as they had altered their position based on this promise.
3. Improper Application of the 2002 Act:
   • They argued that the 2002 Act only applied to benefits granted under the 1996 notifications, which were later invalidated. Their claims were based on the original 1991 notification.
4. Unjust Recovery:
   • The demand notices were termed illegal, arbitrary, and in violation of natural justice, as the appellants believed they were entitled to rebates during the promised period.

Respondent’s Arguments

1. No Entitlement Post-Rescission:
   • The respondents asserted that the 1991 notification was rescinded with effect from April 1, 1995. As the appellants availed electricity connections after this date, they were not eligible for the rebate.
2. Validity of the 2002 Act:
   • The 2002 Act was upheld as constitutional by the Supreme Court in earlier cases, and the demand notices issued under it were valid.
3. Public Interest Justification:
   • The rebate scheme was unsustainable due to financial constraints and overriding public interest. The withdrawal of the scheme was justified, and the appellants’ claims lacked merit.
4. Prior Rulings Binding:
   • The High Court in GR Ispat Ltd. v. Chief Electrical Engineer (1999) had already clarified that the rebate benefit could not extend beyond April 1, 1995, for new industrial units. This decision was binding on the appellants.

Analysis of the Law

1. Scope of Notification (1991):
   • The notification granted rebates for five years from the date of power supply. However, as the notification was rescinded on April 1, 1995, industrial units availing power after this date could not claim the rebate.
2. Invalidity of 1996 Amendments:
   • The amendments to the 1991 notification in 1996 were declared void in Manohar Parrikar v. State of Goa, as they violated procedural rules under Article 166(3) of the Constitution.
3. Promissory Estoppel and Public Interest:
   • While promissory estoppel protects promises made by the state, it does not apply when overriding public interest justifies a change in policy. The Court emphasized financial constraints and public equity as grounds to deny the rebate.
4. Principle of Res Judicata:
   • The appellants’ claims were barred by res judicata, as the issues had been settled in GR Ispat Ltd. and upheld by the Supreme Court. Relitigating the matter was impermissible.

Precedent Analysis

1. Pawan Alloys & Casting (P) Ltd. v. UP SEB (1997): Promissory estoppel cannot be enforced if public interest demands withdrawal of a promise.
2. GR Ispat Ltd. v. Chief Electrical Engineer (1999): Established that the rescission of the 1991 notification barred claims by new industrial units post-April 1, 1995.
3. Goa Glass Fibre Ltd. v. State of Goa (2010): Upheld the constitutionality of the 2002 Act and validated the recovery of rebates.
4. Hope Plantations Ltd. v. Taluk Land Board (1999): Res judicata applies to writ petitions under Article 226 to prevent relitigation of settled issues.

Court’s Reasoning

1. Timing of Electricity Supply:
   • The appellants availed power connections after April 1, 1995, when the 1991 notification was no longer in force. Their claims under the rescinded notification were invalid.
2. Rebate Withdrawal Justified:
   • The Court reiterated that public interest and financial viability justified the withdrawal of the rebate scheme. This rationale had already been accepted in prior rulings.
3. Bar of Res Judicata:
   • The issues raised by the appellants were identical to those decided in earlier cases, which had attained finality. Relitigating these issues was barred.
4. No Legal Basis for Claims:
   • The appellants’ reliance on the void 1996 notifications and the rescinded 1991 notification was misplaced. The demand notices under the 2002 Act were valid.

Conclusion

The Court dismissed the appeals, holding that the appellants were not entitled to the 25% rebate under the rescinded notification. It also upheld the validity of the demand notices issued under the 2002 Act. Review applications filed by the appellants were deemed meritless, and no grounds for interference were found.

Implications

This judgment reinforces the principle that public interest can override state promises under the doctrine of promissory estoppel. It highlights the importance of adhering to procedural rules in policy amendments and demonstrates the binding effect of res judicata in preventing repetitive litigation.

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