New Delhi, Dec 1 : The Supreme Court said on Tuesday that the state must discard the colonial notion that it is a sovereign entity handing out doles at its will. The remarks from the top court came as it rapped the Jharkhand government for depriving an industrial unit of its legitimate entitlement under an industrial policy.
A bench comprising Justices D.Y. Chandrachud and Indu Malhotra said: “Both the accountability of the state and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of state power. The state must discard the colonial notion that it is a sovereign entity handing out doles at its will.”
The bench noted that the state having held out a solemn representation, it would be manifestly unfair and arbitrary to deprive industrial units within the state of their legitimate entitlement.
The bench emphasised that the state’s policies give rise to legitimate expectations that it will act according to what it puts forth in the public realm. “In all its actions, the state is bound to act fairly, in a transparent manner. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest,” noted the bench.
The dispute is connected to one of the clauses of the state’s 2012 Industrial Policy. The Clause 32.10 provided an exemption from the payment of 50 per cent of the electricity duty for a period of five years for captive power plants established for self-consumption or captive use.
The state had moved the top court challenging a high court order, which upheld the claim of Brahmputra Metallics Ltd that it was entitled to a rebate/deduction from electricity duty in terms of the representation held out in the Industrial Policy 2012, and that the denial of the exemption by the state government for FYs 2011-12, 2012-13 and 2013-14 was contrary to the doctrine of promissory estoppel.
The top court observed that in terms of Clause 35.7(b) of the Industrial Policy 2012, the entitlement ensues from the financial year following the commencement of production.
“The respondent commenced production on August 17, 2011. Hence, the order of the high court would have to be confirmed for FYs 2012-13 and 2013-14. In conclusion, we are in agreement with the conclusion of the high court that the respondent was entitled to an exemption from electricity duty, although for the reasons indicated in this judgment. Further, the relief granted would stand confined to FYs 2012-13 and 2013-14,” said the top court modifying the high court order.
The bench said that it is clear that the state had made a representation to the company and similarly situated industrial units under the Industrial Policy 2012. “This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years,” said the bench.
The bench noted that due to the failure of the state to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the state stood violated.
“Since the state has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, we hold that such a course of action by the state is arbitrary and violative of Article 14,” said the top court.
The court did not agree to the state’s contention and answered in the affirmative on whether a private company was entitled to a rebate in electricity duty under the industrial policy.