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Joshi Technologies International Inc. Versus Union of India & Others

2015 (5) TMI 521 - SUPREME COURT

Entitlement to benefit of Section 42 - business for prospecting, etc., for mineral oil. - discrepancy in the agreement - allowances, as stipulated in the Section, were not specifically mentioned in the agreement - Whether benefit under Section 42 was envisaged in the 1992 NIT and in the PSCs, but due to oversight or mistake, the same was not included and mentioned in the written contract, and if so, the effect thereof? - Held that:- Keeping in mind principles as concluded from situations/aspects .....

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gned after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. In the two PSCs, no provision is made for making admissible the aforesaid allowances to the assessee. It is obvious that the Assessing Officer could not have granted these allowances/deductions to the assessee in the absence of such stipulations, a mandatory requirement, in the PSCs. The appellant is presumed to have knowledge of the legal provision, namely, in the abse .....

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f may not give any right to the appellant to claim a relief in the nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder. - Having considered the matter in the aforesaid prospective, we come to the irresistible conclusion that the appellant is not entitl .....

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assessee. - Civil Appeal No. 6929 of 2012 - Dated:- 14-5-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Petitioner : Mr. Bharat Sangal For the Respondent : Mrs. Anil Katiyar JUDGMENT A. K. Sikri, J. Present appeal impugnes the judgment and order dated 28.05.2012 passed by the High Court of Delhi, thereby dismissing the writ petition which was filed by the appellant. It so happened that the appellant had entered into two contracts dated 20.02.1995 with the Union of India, through Minis .....

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(hereinafter referred to as the 'Act'). Section 42 is a special provision for deductions in the case of business for prospecting, etc. for mineral oil. It provides for certain additional allowances as are specified in the agreement, details thereof would be taken note of hereinafter. We may, however, point out here itself that such allowances, as stipulated in the Section, are to be specifically mentioned in the agreement as well, which is entered into with the Central Government and it .....

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signed between the Central Government and the appellant and in the absence of such stipulation in the agreement, the appellant was not entitled to the benefit of deductions under Section 42 of the Act. Realising that the Agreements did not contain such a provision, the appellant wrote to the MoPNG stating that though there was such an arrangement agreed to as per the understanding between the two parties, non-inclusion thereof was an inadvertent omission in the Contracts that were signed. The M .....

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t may be pleased to issue:- (I) A writ, direction or order declaring that the petitioner is entitled, in respect of the two Production Sharing Contracts dated 20.02.1995 executed with the petitioner for the Dholka and Wavel Oil Fields in Gujarat, to the benefit of the said deductions (set forth in Article 16 of the MPSC and reproduced in Annexure P1) under Section 42 of the Income-Tax Act, 1961, from the date of these Production Sharing Contracts, as has been stated and declared by the responden .....

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2; 2002-2003 and 2003-2004 and the notice dated 01.05.2008 for re-opening the assessment for the Assessment Year 2004-05; and (iii) Such other writ order or direction as this Hon'ble Court may deem just and proper in the circumstances of the case and in the interest of justice, be passed in favour of the petitioner. 3) This writ petition which has been dismissed by the High Court vide impugned judgment dated 28.05.2012 holding that the appellant is not entitled to any deductions under Sectio .....

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other States. Article 16 of the above-mentioned MPSC contained a specific provision, which provided certain financial benefits and deductions in relation to taxes etc. that would be allowed to contractors/developers, as per the requirements of Section 42 of the Act. 5) The MoF by its Office Memorandum dated 18.06.1992, raised an issue that Section 293-A of the Act would not apply to contracts of the nature mentioned above, and that benefits under the special provisions of Section 42 of the Act w .....

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2 should be extended to foreign companies in order to make their participation in these oil fields viable. 7) The appellant (along with its erstwhile joint venture partner Larsen and Toubro Ltd., whose stake was also subsequently acquired by the appellant) submitted its bid dated 29.03.1993 in response to the 1992 NIT. 8) The appellant was allotted the Dholka abnd Wavel Oil Fields in Gujarat near Ahmedabad, by the MoPNG. Two production sharing contracts, each dated 20.02.1995, were executed by t .....

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from the Dholka and Wavel Oil Fields (delayed on account of the UOI's delay in handling over the fields) and availed the benefits of Section 42 Deductions provided in Article 16 of the MPSC, which were duly allowed by the concerned Income Tax Officer at Ahmedabad. The UOI's share of petroleum profit was also determined in accordance with the assumption that, and on the consideration that the appellant was entitled to the benefit of the Section 42 deductions and the UOI consequently also .....

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ally contain the fiscal benefits and the deduction envisaged by Article 16 of the MPSC, the Income Tax Authorities questioned the basis on which such assesses had claimed deduction/ allowances under Section 42. This move of the Income Tax Authorities prompted the MoPNG to write OM dated 17.06.2005 to the MoF, Department of Revenue to clarify to the relevant Income-Tax Authorities that the provisions of Section 42 of the Income-Tax Act would be applicable to all PSCs, including those thirteen (13 .....

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is stage we reproduce the said provisions hereunder: 42. Special provision for deductions in the case of business for prospecting, etc., for mineral oil.-[(1)] For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation to which the Central Government has entered into an agreement with any person for the association or participation 90[of the Central Government or any person authorised by it in such b .....

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ee, whether before or after such commercial production, in respect of drilling or exploration activities or services or in respect of physical assets used in that connection, except assets on which allowance for depreciation is admissible under Section 32: [Provided that in relation to any agreement entered into after the 31st day of March, 1981, this clause shall have effect subject to the modification that the words and figures "except assets on which allowance for depreciation is admissi .....

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the terms of the agreement: [(2) Where the business of the assessee consisting of the prospecting for or extraction or production of petroleum and natural gas is transferred wholly or partly or any interest in such business is transferred in accordance with the agreement referred to in sub-section (1), subject to the provisions of the said agreement and where the proceeds of the transfer (so far as they consist of capital sums)- (a) are less than the expenditure incurred remaining unallowed, a .....

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l be chargeable to income-tax as profits and gains of the business in the previous year in which the business or interest therein, whether wholly or partly, had been transferred: Provided that in a case where the provisions of this clause do not apply, the deduction to be allowed for expenditure incurred remaining unallowed shall be arrived at by subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed. Explanation.-Where the business .....

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ent year or years: [Provided that where in a scheme of amalgamation or demerger, the amalgamating or the demerged company sells or otherwise transfers the business to the amalgamated or the resulting company (being an Indian company), the provisions of this sub-section- (i) shall not apply in the case of the amalgamating or the demerged company; and (ii) shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged compa .....

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(3) also issued another notice to the appellant under Section 142(1) of the Income-Tax Act, seeking various details and data relevant to the said Assessment Year. The case was later transferred to the Assistant Director of Income-Tax (International Taxation), Ahmedabad ( ADIT ). The ADIT also raised the question of applicability of the Section 42 deductions to the two PSCs executed by the appellant for the reason that such a clause was not specifically included in these two PSCs. 13) A Joint Sec .....

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diture. Besides it would be difficult to justify different standards for different PSCs signed under one regime. (emphasis supplied). A clarification was also sought from the MoF to the revenue authorities that the Section 42 deductions should be uniformly granted irrespective of whether the PSCs contained the relevant clause or not. It is pertinent to note that in this letter, the appellant was listed by the MoPNG as having the provision for Section 42 deductions in its two PSCs, which though f .....

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2006, on the ground that a specific reference to the Section 42 deduction has not been made3 expressly in the two PSCs (hereinafter the ADIT's Order ). As a result, the ADIT issued a demand notice under Section 156 of the Income Tax Act to the appellant, demanding payment of ₹ 1,24,45,509.00 (rupees one crore twenty four lakhs forty five thousand five hundred and nine only) by way of additional tax, interest and penalty. The appellant preferred an appeal against the ADIT's order be .....

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propriate clarification/amendment with respect to the two PSCs executed with the appellant, taking a stance that it was always the intention of the Union of India, at all stages, to give the benefits of Section 42 Deductions of the Income Tax Act, read with Article 16 of the MPSC, to all the entities who had entered into PSCs with it, including the appellant with the plea that the non-inclusion of this provision in the two PSCs signed with the appellant was a clerical error/oversight. This was f .....

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cture, the Secretary, MoPNG, wrote communication dated 28.04.2008 to the MoF pointing about the said accidental omissions again in the contract. The MoF was, accordingly, requested to extend the benefits of Section 42 Deductions to the 13 PSCs (including the appellant's two PSCs) in line with all other signed PSCs. 17) As, in the meantime, the ADIT was going ahead with the proceedings pursuant to the notice under Section 148 of the Act deciding to reopen the assessment of the appellant in re .....

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of the High Court of Delhi and also raising the ground of alternate remedies available in the law in the form of appeal before the ITAT which had already been preferred by the appellant. Rejoinder thereto was filed by the appellant. Thereafter, another counter affidavit on merits was filed by the respondent no. 1. In this counter affidavit, stand was taken by the respondents that MPSC would not apply to appellant's two PSCs. The appellant filed rejoinder to this counter affidavit controverti .....

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to the supplementary affidavit which has been filed by respondent no. 1. The appellant also filed additional affidavit dated 28.02.2012 giving details of other small sized discovered oil fields PSCs, who were awarded contracts under 1992 NIT, submitting that they were identical to the appellant and in their case clause was inserted giving benefit under Section 42 of the Act. It was pleaded that since they were identically situated as the appellant herein, denying such a benefit to the appellant .....

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better and increased profit sharing to the Government as well. 18) The matter was ultimately heard by the High Court which has dismissed the writ petition by passing detailed judgment on 28.05.2012. Before we come to the arguments of the appellant challenging the correctness of this judgment, it may be appropriate to take note of reasons which have been given by the High Court in support of the view it has taken. IMPUGNED JUDGMENT 19) The High Court took note of the basic and primary contention .....

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in its communications when the dispute regarding admissibility of deduction under Section 42 of the Act arose, the appellant should not be allowed to suffer. More so, when it was not responsible for the said error. 20) It may be pertinent to point out that the High Court did not accept the preliminary objections raised by the respondent and after repelling the same, it adverted to the subject matter of the writ petitions. On the merits of the issue involved, the High Court formulated two questi .....

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t after incorporating the said clause? 21) Dealing with the first question, High Court rejected the plea of the appellant that 1992 NIT included and referred to the MPSC as incorrect. It is pointed out that the 1992 NIT did not refer to the MPSC and did not stipulate that MPSC shall form part of the tender documents. It is further stated by the High Court that in 1992 NII, there was no reference to MPSC or that the terms and conditions of the MPSC shall be included in, or be a part of, the PSCs. .....

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on 20.,02.1995. Clause 15 of these contracts which pertain to Taxes, Royalties, Rentals, Customs duties etc. though mentions about the applicability of fiscal, there is no reference to Section 42 of the Act in this Clause. 22) The High Court further pointed out that there was no letter or correspondence written by the appellant from 1995 onwards stating that non-inclusion of Section 42 benefit was due to oversight. Insofar as three letters written by the MoPNG, namely, letters dated 17-06-2005, .....

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signed. 23) The High Court has also commented that though in these letters it is mentioned that Section 42 deductions were omitted by oversight in fact there was no such oversight in as much as the MoPNG itself in its counter affidavit has specifically stated that no such benefit was envisaged, considered or granted at the time when the PSCs were negotiated and awarded. Averments made in this behalf in the counter affidavit filed by the MoPNG are extensively quoted. To verify this position, the .....

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ation and finalization of tender documents. They were produced before us on 21st February, 2012. We examined the original records and found that under the terms and conditions, as well as in the notes, no benefit under Section 42 of the Act was envisaged or was required to be granted. We also recorded the statement of the learned Additional Solicitor General that the three letters mentioned above were factually incorrect and, therefore, no legal right on the basis of the letters accrues/arises. .....

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espect of small oil fields which had already been discovered and, therefore, the risk factor was less. On the other hand, other PSCs were in respect of undiscovered oil fields and for this reason benefit under Section 42 had been granted to them. 25) On the aforesaid reasoning, the High Court concluded that appellant was fully aware of Clause 16.2 of MPSC which specifically makes reference to benefit under Section 42 of the Act, but did not advert to and refer to the same in their tender bid and .....

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r the averments made by respondent no. 1 in the additional affidavit dated 23-03-2012 where respondent no. 1 even denied the fact that petroleum profits were not shared between the Government and the appellant after making the calculations with reference to benefit under Section 42 of the Act. In letter dated 11.11.2009 written by the MoF, Department of Revenue this fact is specifically admitted and, therefore, respondent no. 1 should have been careful in making such averments in the said additi .....

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oresaid provision was predicated on the following grounds: (a) The Ministry of Petroleum & Natural Gas (MoPNG) had invited bids for the said oilfields on the basis of a Model Production Sharing Contract (MPSC) which specifically and unequivocally provided that the benefit of Section 42 would be granted. (b) The appellant's bids for the said two oilfields were clearly and indisputably submitted on the footing that the MPSC would govern the contract between the parties. In fact, in its bid .....

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onfirmed by respondent no. 1 itself in its three letters dated 17-06-2005, 11-04-2007 and 28-04-2008. (d) It was, thus, argued that as held in the case of Godhra Electricity Co. Ltd. And Another v. State of Gujarat (1975) 1 SCC 199, it is the mutual understanding of the parties to a contract which determines the construction that the court will place on it and this principle squarely applied in the present case. (e) The accounts of the venture were drawn up on the footing that the deductions und .....

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beginning was to grant the benefit of Section 42. (g) The I.T. Department itself granted the deductions under Section 42 for several years right upto Assessment Year 2004-05 and then suddenly and unaccountably changed its mind and turned a somersault. (h) The benefit of Section 42 was, in fact, granted to several other small-sized discovered oilfields. The appellant had filed an additional affidavit dated 28.02.2012 giving particulars of at least 11 other small-sized discovered oilfields to whic .....

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he High Court on the contents of a file which was produced by respondent no. 1 relating to the preparation of tender documents. However, this file was not shown to the appellant or its counsel and the appellant was, thus, denied any opportunity of dealing with the same. He pointed out that the appellant had specifically filed an application dated 28-02-2012 praying that the Court should not consider the contents of the said file or alternatively the copies of the documents in the file be supplie .....

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ntemporaneous letters. His submission was that right upto the year 2005, the benefit of Section 42 was extended to the appellant and, therefore, there was no occasion for the appellant to approach respondent no. 1 to ask for such a clarification. He further submitted that reliance placed by the High Court on certain paras of the counter affidavit of respondent no. 1 was totally erroneous as such a stand taken in the counter affidavit was contrary to the letters which were addressed by the respon .....

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s, whether large, medium or small sized, and whether discovered or exploratory, were given the benefit of Section 42 of the Act. Therefore, the respondents had acted in a grossly arbitrary and discriminatory manner. 30) Last submission of Mr. Ganesh was that the issue regarding Mandamus to be issued to the respondents for amending the contract and including the clause for granting the benefit of Section 42 of the Act was not even gone into, though, it was specifically argued. He further submitte .....

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i) Kumari Shrilekha Vidyarthi Vs. State of U.P. (1991) 1 SCC 212 (iv) ABL International Ltd. Vs. Export Credit Guarantee Corpn. (2004) 3 SCC 553 31) Mr. Arijit Prasad, Advocate, who appeared for all the respondents countered the aforesaid submissions emphatically and passionately. He argued that insofar as income tax department is concerned it could extend the benefit of deductions admissible under Section 42 of the Act only when the assessee, namely, the appellant in the instant case, fulfilled .....

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was pending before the ITAT and it was for the ITAT to go into the submissions made by the appellants on the admissibility of deduction under Section 42 of the Act. 32) In respect of the three letters which were written by the respondent no. 1, his submission was that no reliance could have been placed on those letters and the matter had to be examined on the basis of record. The High Court had, for this purpose, examined the original files on the basis of which it was clearly found that the ave .....

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aken in the matters of contract in private law field. 34) Reacting to the relief of mandamus sought by the appellant seeking directions against Respondent No. 1 to amend the contract, his plea was that such a prayer, in the realm of contractual relationship between the parties, was inadmissible. He pleaded that PSCs are in the nature of contract agreed to be between two independent contracting parties and each of the PSCs are distinct from the other and is not a copy of MPSC. He also pointed out .....

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hat the doctrine of fairness and reasonableness applies only in the exercise of statutory or administrative actions of a State and not in the exercise of a contractual obligation and that the issues arising out of contractual matters will have to be decided on the basis of the law of contract and not on the basis of the administrative law, he referred to and relied upon the judgments in Pradeep Kumar Sharma v. U.P. Finance Corporation (2012) 100 SCC 424 and A.B.L. International Limited (supra). .....

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tion which the appellant sought was to declare that the appellant is entitled to such deductions in terms of the two PSCs dated 20-02-1995. Incidental issues, while deciding the aforesaid primary issue, which arises relate to the construction of the terms of the said PSCs and also the nature of the contracts which the parties intended to. Another issue relates to the jurisdiction of the High Court under Article 226 of the Constitution to pass Mandamus for amending the PSCs. All these issues are .....

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e appellant for giving benefit of deductions under Section 42 of the Act? (iv) If so, whether non-inclusion of such a provision in the contract can be treated as accidental and unintentional omission. (v) If the answer to question no. (iv) is in the affirmative, whether mandamus can be issued by the Court to the parties to amend the contract and incorporate provisions to this effect? 36) We would now proceed to answer these questions seriatum. 37) Answer to question No. (i) - First and foremost .....

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the assessee who is claiming those deductions. In other words, the Assessing Officer is supposed to find out as to whether the assessee fulfills the eligibility conditions in the said provision to be entitled to such deductions. We have already reproduced the language of Section 42, which deals with special provisions of deductions in the case of business for prospecting, etc. for mineral oil. Since, the appellant herein, in its income tax returns for the assessment year in question, i.e., Asses .....

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neral oil in the mining area. In order to be eligible to the deductions, certain conditions are stipulated in this very section which have to be satisfied by the assessees. As is clear from the reading of this Section, these conditions are as under: (a) it grants such special allowances to those assessees who carry on business in association with the Central Government or with any person authorized by it; (b) business should relate to prospecting for, extracting or producing mineral oils, petrol .....

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ified in this provision, it is clear that such allowances are otherwise inadmissible on general principles, for e.g. allowances relating to diminution or exhaustion of wasting capital assets or allowances in respect of expenditure which would be regarded as on capital account on the ground that it brings an asset of enduring benefit into existence or constitutes initial expenditure incurred in setting up the profit earning machinery in motion. It is for this reason this Section itself clarifies .....

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on Oil and Gas India Limited (2008) 15 SCC 33). Thus, by virtue of this Section, it is the PSC which governs the field as without it, such deductions are not permissible under the Act. IF PSC also does not contain any stipulation providing for such allowances, the Assessing Officer would be unable to give the benefit of these deductions to the assesee. 39) We would also like to point out, at this juncture itself, that this Court held in CIT v. Enron Expat Service Inc. (2010) 327 ITR 626 that the .....

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e Act are not fulfilled. In the two PSCs, no provision is made for making admissible the aforesaid allowances to the assessee. It is obvious that the Assessing Officer could not have granted these allowances/deductions to the assessee in the absence of such stipulations, a mandatory requirement, in the PSCs. 41) The appellant is conscious of this position. It is for this reason the attempt of the appellant was to read the provisions of MPSC into the agreement. That bring us to the second issue. .....

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ts opinion dated 21-07-1997 opining that benefit of both Sections 293(A) and Section 42 of the Act should be extended to the foreign companies in order to make their participation in these oil fields viable. As per the appellant, it was also made abundantly clear by the Ministry of Law that it was in relation to foreign companies to be engaged in exploration, development and production of oil ion small sized oil and gas fields under the proposed Production Sharing Contract , thus, drawing no dis .....

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Government and the appellant. We would like to mention here that when this argument was being advanced by the learned senior counsel for the appellant the Court asked him to produce the copy of PSCs, which were otherwise not brought on the record as the Court wanted to find out as to whether there was any such intention expressed in the agreement, namely, to incorporate the provisions of MPSC or the correspondence exchanged between the parties earlier to the signing of this agreement. On our as .....

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erred to in Appendices A & B of this Contract on the terms and conditions herein set forth. Article 1 - In this Contract, unless the context requires otherwise, the following terms shall have the meaning ascribed to the then hereunder: xxx xxx xxx Article 1.18 Contract means this agreement and the Appendices mentioned herein and attached hereto and made an integral part hereof and any amendments made thereto pursuant to the terms hereof. Article 32 - ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND .....

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or more obligations or defaults by any other Party in the performance of this Contract shall operate or be construed as a waiver of any other obligations or defaults whether of a like or of a different character. 32.4 The provisions of this Contract shall inure to the benefit of and be binding upon the Parties and their permitted assigns and successors in interest. 32.5 In the event of any conflict between any provisions in the main body of this Contract and any provision in the Appendices, the .....

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, therefore, impermissible for the appellant to take the aid of MPSC or the clauses contained therein while construing the terms of PSCs. Therefore, it was not even open to the Income Tax Authorities to go beyond the stipulations contained in the PSCs while making the assessment and had to exclusively remain within the provisions of the Agreement. On that touchstone, the Assessing Officer had no option but to deny the benefit of deductions/allowances claimed by the appellant in its income tax re .....

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above, it becomes apparent that the question of any intention to the contrary between the parties does not arise. It is because of the reason that Article 32 of the Agreement specifically supersedes any understanding between the parties prior to the effective date of this contract. 46) The matter is, however, compounded by certain acts of respondent no. 1 and made complex to some extent by the Income Tax Authorities in giving benefit of these allowances/deductions under Section 42 of the Act to .....

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eduction was permissible as per the PSCs in the present form, even if such deduction was given wrongly in the earlier years that would not amount to a wrong act on the part of the Income Tax Authorities and, therefore, would not enure to the benefit of the appellant in the Assessment Year in question as well. The appellant cannot say that merely because this benefit is extended in the previous years; albeit wrongly, this wrong act should continue to perpetuate. There is no estoppel against law. .....

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e situation in Enron Expat Service Inc. (Supra)] and instead the tax authorities have extended the benefit wrongly to the assessee. 47) With this, we come to more crucial aspect, namely, the three letters written by the MoPNG in response to the appellant's communications seeking its clarification. Undoubtedly, in these three letters the MoPNG has accepted that intention between the parties was to give the benefit of allowances under Section 42 of the Act to the appellant herein. So much so, .....

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d gone by the stand taken in the counter affidavit filed by respondent no. 1 where, in para 4 of the counter affidavit, respondent no. 1 pleaded to the contrary. Clearly, the said stand taken in the counter affidavit filed in the High Court was contrary to the contents of the three letters dated 17.06.2005, 11.04.2007 and 28.04.2008. Significantly, respondent no. 1 neither disowned those letters nor tried to explain away those letters. No plea was raised to the effect that the person who wrote t .....

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rds. We do not know whether the High Court is correct in its conclusion as to whether the contents of the three letters are contrary to records and the averments made in para 4 of the counter affidavit are in conformity with the records, in as much as these records have not been produced for our perusal. However, on going through the terms of the PSCs it becomes apparent that such an exercise is not even required. 49) It is stated at the cost of repetition that Article 32 of the contract superse .....

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also conscious of such a limitation and is aware of the fact that unless there is a clear stipulation in the PSCs for grant of benefit of special allowances under Section 42 of the Act, it would be difficult, nay impossible, for the appellant to sail through. It is for this reason Mr. Ganesh, learned senior counsel for the appellant made a fervent plea that respondents be directed to carry out the amendment in the contract to include stipulation with regard to Section 42 as well. That bring us .....

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ade in the writ petition. Obviously, no prayer for issuance of Writ of Mandamus or direction of this nature is specifically made. Prayer clause shows that there are two prayers made in the writ petition. First relates to directing the Authorities to grant benefit under Section 42 of the Act in terms of PSCs dated 22.02.1995, i.e. it is confined within the scope of the said contracts. Though, the appellant wants that while construing these contracts MPSCs and other several communications between .....

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should be culled out from prayer no. (iii) which is residual in nature. Ordinarily, it would be difficult to read into this prayer clause a relief of substantive nature of issuing the writ of mandamus. However, we find that there are specific averments to this effect in the body of the writ petition as well as in the grounds. More pertinently this relief was specifically pressed and argued in the High Court which was even entertained by the High Court without any objections from the respondent t .....

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eded as mentioned in Article 32.1, Article 32.2 which is crucial to answer this question, bars any amendment, modification etc. to the said contract except by an instrument in writing signed by all the parties. Thus, unless respondents agree to amend, modify or varied/supplemented the terms of the contract, no right accrues to the appellant in this behalf. 55) We have to keep in mind that the contract in question is governed by the provisions of Article 299 of the Constitution. These are formal .....

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in the absence of a contract according to the requirements of Article 299 of the Constitution, doctrine of promissory estoppel can still be invoked against the Government. However, no such case is pleaded by the appellant. To dilate upon the aforesaid proposition further, we take along third facet of this issue as, to some extent, they are over-lapping. Fact remains that even when MoPNG requested MoF for giving consent to amend the contract, no such authorisation came from MoF. Whether, in such .....

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the approval of both the parties. Therefore, a contracting party cannot claim to be oblivious of the provisions of the law or the contents of the contract at the time of signing and, therefore, later on cannot seek retrospective amendment as a matter of right when no such right is conferred under the contract. Even the doctrine of fairness and reasonableness applies only in the exercise of statutory or administrative actions of the State and not in the exercise of contractual obligation and issu .....

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medy of writ under Article 226 or Article 32 of the Constitution cannot be invoked. However, in a limited sphere such remedies are available only when the non-Government contracting party is able to demonstrate that its a public law remedy which such party seeks to invoke, in contradistinction to the private law remedy simplicitor under the contract. Some of the case law to bring home this cardinal principle is taken note of hereinafter. 58) Significantly, in Andi Mukta Sadguru Shree Muktajee Va .....

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) First case which needs to be referred is Bareilly Development Authority Vs. Ajai Pal Singh and others [1989] 1 SCR 743. That was the case where Appellate Authority had undertaken construction of dwelling units for people belonging to different income groups and the cost at which such flats were to be allotted to the allottees. However, it was mentioned that the cost stated was only estimated cost and subject to increase or decrease according to rise or fall in the price at the time of completi .....

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he writ petition by observing as under :- "It has not been disputed that the contesting opposite party is included within the term other authority' mentioned under Article 12 of the constitution. Therefore, the contesting opposite parties cannot be permitted to act arbitrarily with the principle which meets the test of reason and relevance. Where an authority appears acting unreasonably, this court is not powerless and a writ of mandamus can be issued for performing its duty free from a .....

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ad sent their written acceptance and it was on the basis of the written acceptance that name of first respondent was included in the draw and he was successful in getting allotment of a particular house. The court observed that respondents were under no obligation to seek allotment of house/ flats even if they had registered themselves. Notwithstanding, the voluntarily registered themselves as applicants only after fully understanding the terms and conditions of the brochure including relating t .....

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hended in 'other authority' for the purpose of Article 12 of the constitution, while determining price of the houses/flats constructed by it and the rate of monthly installments to be paid, the Authority or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. I .....

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to compel the authorities to remedy a breach of contract pure and simple Radhakrishna Agarwal Vs. State of Bihar (Supra), Premi Bhai Parmar Vs. Delhi Development Authority and DFO Vs. Biswanath Tea Company Ltd." 61) Next case of relevance is the Divisional Forest officer Vs. Bishwanath Tea Co. Ltd. [1981] 3 SCR 662In that case respondents took on lease certain land from the Government. Initially, period of lease was 15 years. The lease was to be extended for cultivation and raising tea gar .....

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226 of the Constitution in the High Court alleging that upon a true construction of the relevant clauses of the Grant as also proviso to Rule 37 of the Settlement Rules, it was entitled to cut and remove timber without payment of royalty and, therefore, the recovery of royalty being unsupported by law, the appellant was liable to refund the same. A preliminary objection was taken by the appellant to the maintainability of the writ petition on the ground that claim of the respondent flows from t .....

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jurisdiction a petition to issue any of the prerogative writs for any other purpose. But such writ can be issued where there is executive action unsupported by law or even in respect of corporation there is a denial of equality before law or equal protection of law. The Corporation can also file a writ petition for enforcement of a right under a statute. As pointed out earlier, the respondent company was merely trying to enforce a contractual obligation. To clear the ground let it be stated that .....

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ther such contractual obligation can be enforced by the High Court in its writ jurisdiction. 9. Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed, or the party may sue for damages. Such a suit would ordinarily be cognizable by the Civil Court. The High Court in its extraordinary jurisdiction would entertain a petition either for specific performance o .....

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all the Districts of the State of U.P. were terminated w.e.f. 28.2.1990, irrespective of the fact whether the term of the incumbents had expired or was subsisting. Validity of this G.D. was challenged by many of these Government Counsels whose appointments were terminated and one of the issues to be determined by the court was as to whether writ petition was maintainable challenging this G.D., as according to the Respondent State the appointment of these Government Counsel was purely contractua .....

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uch vice. In the ultimate analysis, it is the challenge of arbitrariness which the circular must challenge of arbitrariness withstand in order to survive. This really is the main point evolved for decision by us in the present case". 63) The Court then examined the nature of appointment of the Government counsel in the Districts with reference to the various legal provisions including legal Remembrance Manual and Section 24 Code of Criminal procedure as well as decision of Supreme Court in .....

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purely contractual with no public element attaching to it, which may be terminated at any time at the sweet will of the Government excluding judicial review. We have already indicated the presence of public element attached to the 'office' or post of District Government Counsel of every category covered by the impugned circular. This is sufficient to attract Article 14 of the Constitution and bring the question of validity of the impugned circular within the scope of judicial review. 18 .....

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sideration in the present case. 19. Even otherwise and sans the element so obvious in these appointment and its concomitants viewed as purely contractual matters after the appointment is made, also attract Art. 14 and exclude arbitrariness permitting judicial review of the impugned state action. This aspect is dealt with hereafter. 20. Even apart from the premises that 'office' or post of D.G.Cs. has a public element which alone is sufficient to attract the power of judicial review for t .....

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cast off its personality and exercise unbridled power unfettered by the requirements of Art. 14 in the sphere of contractual matters and claim to be governed therein only by private law, principles applicable to private individuals whose rights flow only from the terms of the contract without anything more ? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Art. 14 does not undergo such a radical change after .....

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ples of State Policy' which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in part III for protection against excesses of State action, to realise the vision in the preamble. This being the philosophy of the constitution, can it be said that it contemplates exclusion of Art. 14 non arbitrariness which is basic to rule of law from State action .....

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such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern t rend is also to examine the unreasonableness of a term in such contractual where the bargaining power is unequal so that these are not negotiated contracts but standard from contracts between unequal. 22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private part .....

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judicial review in respect of disputes scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Art. 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the disput .....

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pinion, the wide sweep of Art. 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointments, and assuming for the purpose of this cas .....

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r deciding the question of arbitrariness alleged in the present case" 64) Similarly, in State of Gujarat v. M.P. Shah Charitable Trust (194) 3 SCC 552, this Court reiterated the principles that if the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, for example, where the matter is governed by a non-statutory contract. 65) At this stage, we would like to discuss at length the judgment of this C .....

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ction has some public law character attached to it. The following passage from the said judgment was relied upon by the respondents: If the action of the State is related to contractual obligations or obligations arising out of the tort, the court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the priv .....

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the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company, like any other shareholder." This Court dealt with this judgment in .....

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itution is ousted. On the contrary, the use of the words "court may not ordinarily examine it unless the action has some public law character attached to it" itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available." 66) Insofar as the argument of the respondents in the said case that writ petition on contractual matter was not maintainable unless it is shown that the authority performs .....

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writ could have been issued against the said industry. But it was the contention of the writ petitioner in that case that the said industry was obligated under the concerned statute to perform certain public functions, failure to do so would give rise to a complaint under Article 226 against a private body. While considering such argument, this Court held that when an authority has to perform a public function or a public duty if there is a failure a writ petition under Article 226 of the Const .....

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eld: The impact of every State action is also on public interest. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the .....

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irement of Article 14 then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent." 67) The Court thereafter summarized the legal position in the following manner: 27. From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition :- (a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation .....

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ts under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power [See: Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. [1998 (8) SCC 1]. And this plenary right of the High Court to issue a prerogative writ will .....

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ut above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, can refuse to exercise. It also follows that under the following circumstances, 'normally', the Court would not exercise such a discretion: (a) the Court may not examine the issue unless t .....

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their determination. (d) Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. 69) Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under: (i) At the stage of entering into a contract, the State acts purely in its executive capacit .....

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s of which can only be tested satisfactorily by taking detailed evidence, Involving examination and cross- examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit etc. (iv) Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred. (v) Writ petition wa .....

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pedient to conduct his business. (vi) Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages. (vii) Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if can be shown that action of the publ .....

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gh Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction. (ix) The distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract. This Court has maintained the position that writ petition is not maintainable. Dichotomy between public law and private law, rights and remedies would depend on the factual matr .....

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to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary. (x) Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this i .....

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espective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded. 71) As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 .....

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