The Rajasthan High Court pronounced a significant judgment recently holding that UltraTech Cement Limited (“UltraTech”), which established captive solar power plants pursuant to Rajasthan Solar Energy Policy, 2019 ( “Solar Policy”), is exempted from payment of electricity duty for a period of 7 years from the commissioning of the RE Plant. The Hon’ble Rajasthan High Court further clarified that the amendment made to the Solar Policy, withdrawing the exemption from payment of electricity duty, cannot divest UltraTech of its accrued rights.
The High Court found that the Solar Policy, though executive in nature, constituted sovereign representation designed to induce substantial investment in solar generation. Since UTCL incurred substantial capex under this representation to set up plants, all the essential ingredients of promissory estoppel were met.
The Court rejected the State’s argument that no enforceable right could stem from a non-statutory executive policy and that exemptions could only be granted via statutory notification under the ED Act. It reasoned that the State cannot justify breaking a promise it consciously made by relying on its own failure to issue a notification. Additionally, the Court dismissed the claim of financial constraints as a valid reason for withdrawal, citing the lack of substantive evidence.
Furthermore, the Court connected the promotion of renewable energy with the constitutional right to a clean and healthy environment under Article 21. It emphasised that arbitrarily or unfairly withdrawing such incentives damages investor confidence.
The Judgment thus establishes that the State offered time-bound fiscal incentives to attract investment in priority sectors, which carry enforceable rights and cannot be withdrawn mid-stream arbitrarily. State accountability in economic policy is essential to maintaining investor confidence and the rule of law.
The JSA team was led by Abhishek Munot, Partner, supported by Kunal Kaul, Partner, and Samikrith Rao, Principal Associate.
Abhishek is a part of Disputes group of JSA and anchors the Regulatory Practice of JSA in Western India. Abhishek handles sector specific commercial litigation, arbitration constitutional & administrative law litigation and regulatory proceedings before statutory authorities, tribunals and courts.