TMI Blog1983 (8) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... elief in electricity duty, octroi duty, etc., has been in force in Maharashtra since 1964. That scheme was modified and the period of the scheme, as modified from 1st August, 1966, expired on 31st October, 1979. The Government having applied its mind to the question of revising and integrating the scheme and making it more broad-based formulated a modified scheme of incentives with effect from 1st August, 1979, for the period 1st August, 1979, to 31st March, 1983. Under this scheme the area of the State of Maharashtra was grouped under four groups A, B, C and D with reference to the nature of the development that had already taken place. The petitioners in Writ Petition No. 988 of 1983 are from Bhusaval in Western Maharashtra and they are in Bombay Division, District Jalgaon, being in group C. The scheme notified that incentives under it would be available to eligible units in the private sector also along with the State public sector/joint sector and the co-operative sector. Clause 2.1 of the scheme dealt with the "data of effect of eligibility under Part I" of the 1979 scheme and provided that the eligibility certificate under Part I of the 1979 scheme would be issued effective f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete all the effective steps (that is, both initial and final effective steps) on or before 31st March, 1983. It is not in dispute that the petitioners have completed both the initial and final effective steps before making the application for eligibility. Clause 4.6 which is headed "Claim for incentives" reads follows: "4. 6. No right or claim for any incentives under this scheme shall be deemed to have been conferred by the scheme merely by virtue of the fact that the unit has fulfilled on its part the conditions of the scheme. The incentives under the scheme cannot be claimed unless the letter of intent/eligibility certificate has been issued under the scheme by the implementing agency concerned and the unit has complied with the stipulations/conditions of the letter of intent/ eligibility certificate." Clauses 5.1 to 5.10 deal with sales tax incentive Part I and clauses 6.1 to 6.6 deal with sales tax incentive Part II. Then there are other incentives such as special capital incentives, M.I.D.C. incentive, octroi incentive, subsidy on industrial housing and other incentives specified in clauses 11.1 and 11.2. We are not concerned with the details of these incentives and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilling the conditions/stipulations/ requirements as set out in the 1979 scheme and the procedure framed thereunder and also as detailed in the annexure hereto." 5.. According to the petitioner, they have commenced production on 27th October, 1982, and thereafter by letter dated 16th December, 1982, asked for issue of the eligibility certificate under the scheme. An averment has been made in the petition that the eligibility certificate has been withheld by respondent No. 2 on account of pressure being exerted by old and established oil mills who have not taken kindly to new units being started. It is also stated in the petition that some oil mills have already been granted eligibility certificates and such certificates have been given to the new units in other industries also. A list of such industries to whom eligibility certificates have been issued is filed along with the petition an exhibit H, in which reference is made to two oil mills at Jalgaon. According to the petitioners, relying on the representations made in the 1979 incentive scheme, they have invested a large amount of Rs. 1,95,000 for the establishment of the oil mill at Bhusawal and for commissioning the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the units in the backward areas. The case of the Government was that in view of the said Government Resolution, the petitioners' grievance did not survive any longer and the petition was liable to be rejected. 7.. When this matter came up for hearing before the Division Bench and naturally reliance was placed on behalf of the State Government on the decision in S.K. Oil and Pulses Mill case [W.P. No. 770-A of 1982 decided on 5th April, 1983-Bombay High Court (Aurangabad Bench) ], the petitioners took a stand that the decision of the Division Bench needed reconsideration. We shall refer to the view taken by the Division Bench which needed reconsideration a little later. But as it was found that the view taken by the Division Bench with regard to the nature of the right created under the 1979 scheme and on the question of enforceability of the right under the scheme under article 226 of the Constitution of India, as well as the view taken on a similar grievance made by the petitioners in the Aurangabad case with regard to the violation of the right under article 14 of the Constitution, because there was also a grievance was made that the petitioners have been discriminated agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cause of action, it has become necessary to consider whether the view taken by the Division Bench in S.K. Oil and Pulses Mill case [Writ Petition No. 770-A of 1982 decided on 5th April, 1983-Bombay High Court (Aurangabad Bench)]that the scheme creates no enforceable rights in favour of an industrial unit which has acted upon the representations made in the incentive scheme, is correct or not. 9.. It is, therefore, necessary to briefly refer to the decisions in S.K. Oil and Pulses Mill case [Writ Petition No. 770-A of 1982 decided on 5th April, 1983 -Bombay High Court (Aurangabad Bench)]. The scheme under which the petitioners in that case were also claiming eligibility certificate was the 1979 incentive scheme in question in the present case. The petitioners in that case had obtained a provisional registration of small-scale industry from the Director of Small Scale Industries and had completed all the initial and final effective steps and had, therefore, applied for the eligibility certificate on 18th February, 1981. The petitioners in that case had alleged that they had also obtained sanction for the grant of a loan of Rs. 14,42,000 and had commenced production on 26th Janu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the Division Bench summarised the principles of promissory estoppel as follows: "(1) the principle of promissory estoppel can be attracted even in the case of the Government acting in its executive capacity; (2) there must be sufficient representation made; and (3) the person must have acted on that representation to his detriment on the faith of the representation, then the doctrine of promissory estoppel becomes applicable irrespective of the fact whether the Government is a party to the transaction." It may be pointed out that while referring to the decision in the Anglo Afghan case AIR 1968 SC 718, the Division Bench observed that the scheme in that case was made under the provisions of the Imports and Exports (Control) Act and that it was based on this Act. The Division Bench also made a reference to the decision of the Gujarat High Court in Kothari Oil Products Co. v. Government of Gujarat AIR 1982 Guj 107, and a general observation was made with regard to all the cases cited that "after having gone carefully through all the judgments, including the judgment of the Supreme Court in Jit Ram's case AIR 1980 SC 1285, it is not possible to hold that these cases have g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners having satisfied the requirements for an eligibility certificate, the power to grant the eligibility certificate has now turned into a duty to grant the certificate to the unit. 13.. The Division Bench then referred to clause 4.6 and on a construction of that clause took the view that the clause clearly indicated that "no right or claim will be conferred on any unit even if such a right came into existence". In other words, the Bench took the view that even if a right had accrued because of the fulfilment of the conditions required for getting the certificate of eligibility because of the clear provision in clause 4.6, the petitioners were not entitled to claim any right whatsoever including the right to claim the incentive or any claim for incentive. In paragraph 46 of the judgment, the Bench positively took the view that "assuming that the principle of promissory estoppel is attracted and available to the petitioner, however, in view of the provisions of the scheme, especially those contained in clause 4.6, it is difficult for us to grant any relief to the petitioner in this case as claimed by him". The Division Bench further took the view that the implementing agency u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminatorily and confers no rights on citizens. (4) By the mere satisfaction of the conditions laid down in the scheme, automatically no right accrues in favour of the manufacturing unit to get the eligibility certificate. (5) The satisfaction of the conditions under the scheme does not necessarily require the implementing authority to grant the certificate, which has a discretion in the matter. Each one of these findings have been very vehemently challenged on behalf of the petitioners in this petition. 16.. It has been contended before us by Mr. Kothari that the case that the scheme is not made under any law does not prevent the petitioners from contending that there is an enforceable right because the principle of promissory estoppel is available against even executive action of the State. In other words, it is contended that it is not necessary for invoking the doctrine of promissory estoppel to trace the right to any action of the Government under a legislative enactment and even an executive action of the State could in given circumstances give rise to a right which a person is entitled to enforce under article 226 of the Constitution of India. 17.. Now, so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex Parte appraisement of the circumstances in which the obligation has arisen." 18.. The scope of the concept of promissory estoppel was once again considered by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 44 STC 42 (SC); AIR 1979 SC 621. The scheme in that case was also similar to the scheme in the present case. There was a news item which appeared in newspaper National Herald, in which it was stated that the State of U.P. had decided to give exemption from sales tax for a period of three years under section 4-A of the U.P. Sales Tax Act, to all new industrial units in the State with a view to enabling them to come on firm footing in developing stage. This news item itself was based upon a statement made by the Secretary in the Industries Department of the Government. The M.P. Sugar Mills on the basis of this announcement addressed a letter to the Director of Industries stating that in view of the sales tax holiday announced by the Government, they intended to set up a hydrogenation plant for manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 SC 718, the Supreme Court in paragraph 23 pointed out that that case laid down that a party who has, acting in reliance on a promise made by the Government, altered his position, is entitled to enforce the promise against the Government, even though the promise is not in the form of a formal contract as required by article 299 and that the article does not militate against the applicability of the doctrine of promissory estoppel against the Government. The Supreme Court further observed in paragraph 24 as follows: "The law may, therefore, now be taken to be settled as a result of this decision (reference is to Anglo Afghan Agencies case AIR 1968 SC 718), that where the Government makes a promise knowing or intending that it would be acted on by the promisee and in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by article 229 of the Constitution. It is elementary that in a repub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.. It is undoubtedly true that in Jit Ram Shiv Kumar v. State of Haryana AIR 1980 SC 1285, the limitations on the applicability of the doctrine of the promissory estoppel have been laid down, but that decision does not dilute the authority of the decisions of the Supreme Court in the Anglo Afghan Agencies case AIR 1968 SC 718 and the M.P. Sugar Mills case [1979] 44 STC 42 (SC); AIR 1979 SC 621. If we refer to the observation of the Supreme Court in Jit Ram's case AIR 1980 SC 1285 in paragraph 50, it will be clear that the decision does not lay down anything different from the two earlier decisions of the Supreme Court. In paragraph 50 it is observed as follows: "On a consideration of the decisions of this court it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of his authority. The court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in respect of sales tax, which could be referable to the provisions of section 41 of the Bombay Sales Tax Act, the State Government was not exercising any powers regarding the other exemptions under any statutory law, but the absence of a statute did not prevent the State Government from granting other benefits which it thought necessary to grant for the purpose of development of the backward regions of the State. Such an action was clearly executive in nature. When some representations are made by the State Government that unless a manufacturing unit complied with the conditions specified in the scheme, it would not be entitled to certain exemptions or certain benefits, the manufacturing unit or a person interested is entitled to take these promises and representations at their face value and act upon it. The scheme is really being given effect to by the State Government itself because it is not in dispute that in the case of the implementation of the scheme, the eligibility certificates and incentives have been made available to other persons who have claimed those benefits expressly under the scheme. If the petitioners acting on the representations made in the scheme incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 confers a right by enacting a prohibition which in form, at least, is absolute." (paragraph 9.14) The right of equality under article 14 is a very valuable fundamental right and any violation thereof can be challenged under article 226 of the Constitution of India. The guarantee of equal protection clearly extends to purely executive or administrative order unsupported by any statute: (see Satwant Singh v. Assistant Passport Officer, New Delhi AIR 1967 SC 1836). Any arbitrary exercise of power of discretion is clearly challengeable under article 226 of the Constitution of India. As observed by the Supreme Court in Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh AIR 1977 SC 2149, the claim in the case of Anglo-Afghan Agencies AIR 1968 SC 718 was itself founded upon the equity which arose in their favour as a result of the representations made on behalf of the Government in the scheme in question and yet such a claim was held to be enforceable. 25.. We may also point out that the Division Bench seems to have taken the view that the representation for the purpose of invoking the principle of promissory estoppel must be accompanied by a specific assura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the package of incentives was being offered with a view to achieve dispersal of industries outside the BombayThane-Belapur belt and if a person satisfies the conditions laid down in the scheme and has acted on the promises and the representations made in such scheme, they could validly be relied upon for the purposes of invoking the principle of promissory estoppel. 26.. Coming to the nature of the scheme, it is also difficult for us to agree with the view of the Division Bench that no right is created under clause 4.6 of the scheme and that the implementing authority has still discretion, even if all the conditions are satisfied, not to issue the eligibility certificate. Clause 4.6 provides that no right or claim for any incentives under this scheme shall be deemed to have been conferred by the scheme merely by virtue of the fact that the unit has fulfilled on its part the conditions of the scheme. The clause then proceeds further to say that the incentives under the scheme cannot be claimed unless the letter of intent/eligibility certificate has been issued by the implementing agency concerned and the unit has complied with the stipulations/conditions of the letter of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive steps though the further requirement of the grant of the eligibility certificate is that the final effective steps must also be completed before the 31st March, 1983. The effect of clause 4.6 and the effect of introducing the fiction is obviously to rule out a claim that merely because the conditions of the scheme have been fulfilled, the industrial unit would be entitled to incentives. The object of the deeming fiction is a very limited object and the use of the deeming fiction is only to rule out the claim which could have been made by an industrial unit, for incentives without obtaining eligibility certificate on the ground that he has satisfied all the conditions in the scheme. As a matter of fact the eligibility certificate and the claim for incentives are two different things as contemplated in the scheme itself. Incentives are given after the grant of eligibility certificate because the latter part of clause 4.6 makes it very clear that incentives under the scheme cannot be claimed unless the eligibility certificate has been issued under the scheme and the unit has complied with the stipulations or conditions in the eligibility certificate. It is difficult for us to read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to acting arbitrarily and once again such a conduct of the implementing agency would be subjected to scrutiny under article 226 of the Constitution as being the conduct of a public authority. 28.. In view of what we have said above, we must overrule the decision of the Division Bench in S.K. Oil and Pulses Mill case [W.P. No. 770-A of 1982 decided on 5th April, 1983-Bombay High Court (Aurangabad Bench)]. 29.. Before us the State Government has totally relied on the decision of the Division Bench in S.K. Oil and Pulses Mill case [W.P. No. 770-A of 1982 decided on 5th April, 1983-Bombay High Court (Aurangabad)]. None of the grounds on which the claim of the petitioners in the S.K. Oil and Pulses Mill case [W.P. No. 770-A of 1982 decided on 5th April, 1983-Bombay High Court (Aruangabad Bench)] was rejected is, as already pointed out, sustainable. Mr. Gumaste was, therefore, not in a position to resist the contention that the rights claimed by the petitioners for an eligibility certificate were enforceable on the ground of promissory estoppel and indeed he has conceded that if the decision of the Division Bench in the S.K. Oil and Pulses Mill case [W.P. No. 770-A of 1982 decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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