The Supreme Court on Tuesday said the State must discard the colonial notion that it is a sovereign handing out doles at its will and must conform to its policies announced earlier due to legitimate expectations of people.
"In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. Deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in the public interest," a bench presided over by Justice D Y Chandrachud said.
In a judgement, the top court termed as "arbitrary and violative of Article 14" the decision by the Jharkhand government to delay implementation of 50% rebate in next five years on electricity duty to industrial units against the announcement made under the 2012 Industrial Policy.
It said the expectation and trust in the State stood violated due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively.
The court said, "Representations by public authorities need to be held to scrupulous standards since citizens continue to live their lives based on the trust they repose in the State. In the commercial world also, certainty and consistency are essential to planning the affairs of a business."
The court said when public authorities failed to adhere to their representations without providing an adequate reason to the citizens for their failure, it violated the trust reposed by citizens in the State.
"The generation of a business-friendly climate for investment and trade is conditioned by the faith which can be reposed in government to fulfil the expectations which it generates," the court added.
The court rejected the Jharkhand government's plea against exemption from electricity duty allowed by the HC to Brahmputra Metallics Ltd, Ranchi and others. It said the relief would, however, be confined to Financial Years 2012-13 and 2013-14 as the company commenced production on August 17, 2011.