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Report No. 199

Pawan Alloys Case, AIR 1997 SC 3910:

We shall next refer to a business transaction where section 23 of the Contract Act was applied. In M/s Pawan Alloys & Casting Pvt. Ltd. Meerut v. U.P.S.E.B., the three notifications of Electricity Board giving incentive development rebate to new industries in the State of UP in exercise of its statutory powers under section 49 of the Electricity (Supply) Act, 1948 read with section 78A were challenged. The appellant industries established on basis of said promise in the notification by signing standard agreement for supply of electricity.

The Board then arbitrarily and prematurely withdrew this rebate. The court held that incentive to new industries by way of tax holiday or tax exemption could validly form the subject matter of promissory estoppel as it would not be against public policy but in so far as any representation seeks to enable the promisee to get refund of the collected sales tax it would remain unconstitutional being violative of the taxation scheme and would be contrary to public policy and thus void under section 23 of Contract Act.

Unfair (Procedural and Substantive) Terms in Contract Back

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