Supreme Court Upholds Govt's Power To Withdraw Promise Of Rebate In Larger Public Interest

While upholding the Goa Government's order to recover the previously granted electricity tariff rebates from several industrial companies, the Supreme Court today (February 14) reaffirmed the government's power to withdraw or modify economic incentives in the interest of public finances.

The Court held that the doctrine of promissory estoppel cannot be rigidly enforced in situations where the government's promises to provide incentives conflict with public interest. Specifically, if the rebates or incentives place an undue burden on the public exchequer or state finances, the doctrine may not be applicable.

Affirming the Bombay High Court's Goa Bench decision, the Court observed:

“we have no doubt in our minds that the High Court was right in holding that the appellant-companies before it are not entitled to the rebate and the impugned demand notices do not suffer from any vice including that of illegality.”

A bench of Justices Dipankar Datta and Sandeep Mehta heard the case where the Appellants were aggrieved by the demand notice sent by the Goa Government to recover previously offered electricity tariff rebates under its 1991 Notification, which provided a 25% rebate on electricity tariffs for industrial units.

The dispute arose when the Goa government rescinded its 1991 Notification. Although the rebate scheme was withdrawn on March 31, 1995, the appellants—industrial units that applied for power before this date—argued that they were still entitled to the benefit despite receiving power supply after the rescission.

Further complicating the matter, the government issued two amending notifications in 1996, which appeared to extend the rebate benefits. The Appellants demanded the continuation of the rebates in terms of such amendments. However, these amendments were later declared void ab initio by the Bombay High Court in 2001, a decision that was subsequently upheld by the Supreme Court.

In 2002, the Goa government enacted legislation known as the Goa (Prohibition of Further Payments and Recovery of Rebate Benefits) Act, 2002 (2002 Act) mandating the recovery of rebates wrongly granted under the 1996 amendments.

Following the dismissal of their case before the High Court, the Appellant approached the Supreme Court.

At the outset, the judgment authored by Justice Datta endorsed the view taken in the case of Goa Glass Fibre Limited v. State of Goa & Anr. (2010) 6 SCC 499 where the Court upheld the legality and constitutionality of the 2002 Act upholding the State government's power to recover the wrongly offered rebates to the industrial units.

Further, the Court rejected the Appellants argument that the demand notices sent by the state government were illegal as the government was bound by the principle of promissory estoppel to offer them rebate on electricity tariffs. Instead, the Court noted that the public interest overrides private commercial interests, limiting the applicability of promissory estoppel against government actions.

Reference was drawn to the case of Pawan Alloys & Casting (P) Ltd. v. UP SEB (1997) 7 SCC 251, where the Court denying relief to the Appellants upheld the withdrawal of incentives by the UP-State Electricity Board even before the expiry of the period of rebate. The Court held that the doctrine of promissory estoppel cannot be strictly enforced to override public interest.

Accordingly, the appeal was dismissed.

Case Title: PUJA FERRO ALLOYS P LTD. VS. STATE OF GOA AND ORS. (and connected matters)

Citation : 2025 LiveLaw (SC) 207

Click here to read/download the judgment

Appearance:

For Appellant(s) Mr. A. Raghunath, AOR Mr. Santosh Paul, Sr. Adv. Mr. Sriharsh Nahush Bundela, AOR Mr. Amaan Khan, Adv.

For Respondent(s) Ms. A. Subhashini, AOR Mr. Abhay Anil Anturkar, Adv. Mr. Dhruv Tank, Adv. Mr. Aniruddha Awalgaonkar, Adv. Mr. Sarthak Mehrotra, Adv. Ms. Surbhi Kapoor, AOR Mr. T. Mahipal, AOR