Apex court to govts: retain faith of people by sticking to promises

The Supreme Court has asked the Centre and states to fulfil their promises in order to keep the faith of people...

The Supreme Court has asked the Centre and states to fulfil their promises in order to keep the faith of people in the Government. The apex court advice has come with respect to offering concessions on various taxes or duties or any other benefits for attracting investors and then withdrawing the same.

“In this 21st century, when there is a global economy, the question of faith is very important,” remarked a Bench comprising Justices A K Mathur and Markandeya Katju, as it mentioned how the Government offers certain benefits to attract entrepreneurs and, consequently, entrepreneurs act on it. Thereafter if the Government withdraws those benefits, “it will seriously affect the credibility of the Government and would show the short-sightedness of governance”.

“Therefore in order to keep the faith of people and maintain good governance, it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith,” said the judges.

The observations were made while pursuing an appeal filed by the UP Power Corporation Ltd which had challenged an Allahabad High Court order of May 2000 that struck down two notifications by the power firm, where it had reduced the concession in electricity bills to new industrial units from 33.33 per cent to 17 per cent. The concession named as ‘hill development rebate’ was introduced for luring new units to be set up in hill areas through notifications passed in 1992 and then gradually extended till 1997.

The apex court observed that the general principle that emerged was that once one party had made a representation and other party acted on it and made investment and thereafter the other party resiled, “such acts cannot be stated to be fair and reasonable”. “In this context, the Corporation’s act in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government.”

Although it held that the state had the right to revoke any such benefit, it also said if the other party had suffered on that account then such representation would be against the public policy and morality.

Disagreeing with A M Singhvi, senior advocate who appeared for the power corporation, that tariff was not revoked completely but modified in public interest, Justice Mathur who wrote the judgment said, “So far as the public interest is involved, we have found that there was no overwhelming evidence to revoke the benefit granted to industrial units in hill areas.”

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Consequently, upholding the High Court order, the Supreme Court directed that the concession granted earlier to all such firms would survive till the UP Electricity Reforms Act, 1999 came into force.