Promissory Estoppel Cannot Override Public Interest: Supreme Court Upholds Goa’s Power Tariff Rebate Withdrawal

Rebates Were Revoked Due to Financial Constraints; Industrial Consumers Cannot Claim Perpetual Benefits - Supreme Court Rejects Appeal Against Demand Notices. In a significant ruling on February 14, 2025, the Supreme Court of India dismissed multiple appeals challenging the withdrawal of 25% electricity tariff rebate granted to industries in Goa. The Court ruled that the Government of Goa was justified in rescinding the rebate scheme due to financial constraints, and industrial consumers could not claim a vested right to perpetual benefits based on promissory estoppel.

The bench of Justice Dipankar Datta and Justice Sandeep Mehta upheld the Goa High Court’s judgment, which had dismissed the petitions filed by Puja Ferro Alloys Pvt. Ltd., Karthik Alloys Ltd., Karthik Inductions Ltd., Global Ispat Ltd., and Sunrise Electromelt Ltd., challenging demand notices issued by the State of Goa for recovery of rebate amounts. The Supreme Court ruled, “The principle of promissory estoppel cannot be invoked when overriding public interest demands withdrawal of a financial benefit.”

The dispute arose from a 1991 notification issued by the State of Goa under Section 23 read with Section 51-A of the Indian Electricity Act, 1910, which granted a 25% rebate on electricity tariff for five years to industrial units applying for High-Tension or Low-Tension power supply. This rebate was rescinded on March 31, 1995, and a fresh notification in 1996 extended benefits to Extra High-Tension consumers.

The Government of Goa later enacted the Goa (Prohibition of Further Payments and Recovery of Rebate Benefits) Act, 2002, which sought to recover rebates granted under the 1996 amendments, stating that the scheme was financially unsustainable. Based on this law, the State issued demand notices in 2011, directing industrial consumers to refund the rebate amounts they had received.

The appellant companies filed writ petitions before the Goa High Court, arguing that they had established their industries in Goa based on the promise of electricity rebates, and the Government’s withdrawal of the benefit amounted to a breach of promissory estoppel. The High Court dismissed the petitions, leading to the present appeals before the Supreme Court.

 “Rebates Were a Policy Measure, Not a Perpetual Right”

Dismissing the appeals, the Supreme Court upheld the withdrawal of the rebate scheme, ruling that the State Government had a legitimate right to rescind financial incentives in the larger public interest. The Court stated, “Industrial consumers cannot claim a vested right in a discretionary government policy, especially when the policy is withdrawn due to financial constraints.”

Rejecting the promissory estoppel argument, the Court observed: “The doctrine of promissory estoppel cannot be applied to compel the Government to continue a financial incentive when it has been lawfully withdrawn in the larger interest.”

The Court relied on its earlier judgment in Pawan Alloys & Casting (P) Ltd. v. UP SEB (1997) 7 SCC 251, where it was held that promissory estoppel does not apply when overriding public interest requires withdrawal of an economic benefit.

“If a financial scheme is proving unviable, the Government has a legitimate right to discontinue it, even if certain entities had made investments based on past assurances.”

“Res Judicata Bars Re-litigation of the Same Claims”
The Supreme Court also ruled that the principle of res judicata applied to the case, as the issue had already been adjudicated in an earlier case, GR Ispat Ltd. v. Chief Electrical Engineer (1999 (1) Goa LT 218), where the Goa High Court upheld the withdrawal of the rebate scheme.

Quoting Satyadhyan Ghosal v. Deorajin Debi (1960) 3 SCR 590, the Court reiterated: “Once a matter is decided, parties cannot re-litigate the same issue under a different guise. The High Court’s previous decision upholding the withdrawal of rebates is binding on all industrial consumers in Goa.”

The Supreme Court further noted that in Goa Glass Fibre Ltd. v. State of Goa (2010) 6 SCC 499, it had upheld the validity of the 2002 Act, which authorized the Government to recover the rebates. “Since the law itself has been upheld, the demand notices issued under it are legally valid,” the Court ruled.

“Financial Constraints Justify Policy Change”
The Supreme Court found that the Government had provided ample justification for withdrawing the rebates, as it was facing severe financial constraints. The Court ruled that: “Governments must have the flexibility to modify or withdraw economic policies based on prevailing financial realities. Courts cannot interfere in policy decisions unless they violate constitutional principles.”

The Court further emphasized that economic policies must be dynamic and cannot be treated as permanent guarantees. “The rebate was an incentive, not an entitlement. Once withdrawn for valid reasons, it cannot be claimed as a right,” the Court observed.

After carefully analyzing the legal principles involved, the Supreme Court dismissed all the appeals, ruling: “The appeals are dismissed. The demand notices issued by the State of Goa are legally valid. The appellants must refund the rebate amounts as per the 2002 Act.”

The Court also dismissed the review petitions filed by the appellants, ruling that no error was found in the High Court’s reasoning. “The withdrawal of rebates was lawful, and no judicial intervention is warranted,” the Court concluded.

Supreme Court Upholds Government’s Right to Modify Economic Policies
This ruling reinforces the principle that financial incentives granted by the Government do not create an absolute right. The Supreme Court has clarified that policies can be withdrawn when economic realities demand it, and courts should not interfere in such decisions unless they are arbitrary or unconstitutional.

By upholding the withdrawal of electricity rebates in Goa, the Court has set a strong precedent for fiscal discipline, ensuring that governments retain the flexibility to modify incentive schemes based on financial viability.

“Public interest must prevail over individual commercial interests. No business can claim a permanent right to state subsidies when financial prudence demands otherwise.”

This judgment serves as a landmark ruling on government incentives, promissory estoppel, and fiscal policy, ensuring that industrial consumers cannot demand perpetual benefits based on past policies.

Date of Decision: February 14, 2025