[Promissory Estoppel] Govt Subsidy Cannot Be Withdrawn With Retrospective Effect Particularly When Other Party Takes Steps: Kerala High Court

The Kerala High Court recently observed that action of taking away the benefits of concession/ subsidy promised by the government can only be done prospectively. 

Justice Amit Rawal observed that,

Principle of promissory estoppel arises while extending the promise if steps have been taken where the benefit cannot be taken away after expiry of number of years. There is no bar for the Government to stop the concession or benefit of subsidy prospectively for the units which have already raised to construction with a project considering the factor of subsidy. In case such subsidy is not paid to such persons, the affected parties would be liable to pay the charges along with interest for no rhyme and reasons.

The dispute arose after State Government retracted an order date 26.09.2000 whereby it had declared concession in electricity charges for industrial units like Five Star Hotels as a part of promoting the "Tourism" industry. The Government had undertaken to pay the difference to State Electricity Board. Taking this into account, the Petitioner had established a Five Star Hotel unit and claimed tariff concession for five years from 2013 to 2018 for the electricity consumed by them at the rate offered as in the government order.

However, in February 2019 the State Government withdrew the concession granted from March 2015.

Aggrieved, the petitioner argued that the action of taking away benefits of concession by promulgating a subsequent order is inappropriate as all administrative orders are to be considered prospectively and not retrospectively.

State Counsel however submitted that tariff concession were promised only for the first five years from the date of effective certification by the department of tourism. Tourism units were required to have undertaken expansion and modernization after five years of availing concessional tariff for the further period of 5 years and in 2017 to avoid additional financial commitments, Government had taken a decision to take away with the current subsidies in line with the new tourism policy.

At the outset, the High Court referred to Kusumam Hotels (P) Ltd. v. KSEB, whereby the Apex Court had reiterated that the doctrine of promissory estoppel applies to the State and all administrative orders ordinarily are to be considered prospective in nature. "When a policy decision is required to be given a retrospective operation, it must be stated so expressly or by necessary implication. The authority issuing such direction must have power to do so. The Board, having acted pursuant to the decision of the State, could not have taken a decision which would be violative of such statutory directions," Top Court had said.

The Court observed that the intention of the Government was to attract the persons like that of the petitioner in Alappuzha district and give the financial benefits. Moreover, the contents of the subsequent Government order did not reveal any retroactive operation. It was neither published in any gazette nor uploaded on the website.

Thereby, the order was quashed. The Court dismissed the Writ Petition directing the respondent to disburse the electric tariff concession to the petitioner along with the interest @ 6% within a period of two months.

Case Title: Vasu Coco Resorts Private Limited v. State of Kerala and Ors. 

Citation: 2023 LiveLaw (Ker) 27

Click Here To Read/Download The Order