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Kothari Oil Products Company vs Government Of Gujarat

Dated:- 16-7-1981 - B Divan And N Bhatt, JJ. JUDGMENT Divan, 1. The first petitioner before us is a partnership firm and the second petitioner is one of the partners of the first petitioner firm. The firm carries on business of manufacture of Vanaspati ghee, edible oil. de-oiled cakes, cotton seed oil, cotton lints and cotton seed oil extraction and for that purpose it has set up a factory at Jetpur Road, Gondal, in Rajkot District. The petitioner firm went into production and started its factor .....

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this oil mill the petitioner firm used to crush groundnuts and there from the raw material, namely, groundnut oil, for, the manufacture of Vanaspati ghee was obtained. Thus by setting up the oil mill the petitioners were starting what may be called a vertical integration. Somewhere in the year 1973 the petitioner firm erected cotton seed plant and the said cotton seed plant was for the manufacture of cotton seed oil by crushing cotton seeds. At that time the Government of India had started givi .....

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1977-78 there was a heavy shortage of edible oil in Gujarat and the Central Government banned the use of groundnut oil in the manufacture of Vanaspati ghee in order to encourage use of minor oil seeds like cotton seeds, soyabean seeds, rice-bran, etc. As a result of this encouragement the first petitioner firm was compelled to stop its activities of using groundnut oil for the purpose of manufacturing Vanaspati ghee and thus at present the petitioner firm is mainly engaged in the activities of .....

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; contention that the cash subsidy as mentioned in the resolution of 22nd Dec., 1977 is available to the first petitioner firm. It may be pointed out that no time limit was laid down so far as the cash subsidy part of it was concerned under the resolution of Dec. 22, 1977 which is the first resolution in Annexure 'A' to the petition. The other two benefits which were mentioned in the other resolution of 22nd Dec., 1977 were a tax-free loan for the purpose of paying sales tax by the units .....

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, so far as the scheme for the exemption from sales tax was concerned, be is not claiming any relief against the State Government. As regards the scheme for interest-free sales tax loans, that scheme is to be found set out in Cls. 8 to 14, both inclusive, of the second resolution, part of Annexure 'A' to the petition. Both the schemes, namely, the scheme for exemption from sales tax and the scheme for tax-free sales tax loans, were to be in operation for a period of five years from lst N .....

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to get the aforesaid two incentive benefits, namely, cash subsidy and interest-fee sales tax loan, though the cost for the said expansion was very high. Thus there is a specific case of the petitioners that relying on the two resolutions, both dated 22nd Dec., 1977, collectively marked Annexure 'A', they have erected the plant by spending considerable amount in that behalf. So far as the cash subsidy is concerned, it may be pointed out that it was recognised that the cotton delinting pl .....

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f cotton delinting plant it appears that out of this amount of ₹ 6,43,891/- an aggregate amount of ₹ 5,79,828/- has admittedly been received by the petitioners, and the balance of ₹ 64,063/- has yet to be received from the Government. The General Manager of the District Industrial centre, Rajkot has, by Annexure 'G' to the petition, certified on Jan. 2, 1980 that the cotton delinting plant of the petitioners is a new plant. 2. The Government of Gujarat passed a resoluti .....

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for the manufacture of edible oils and manufacture of Vanaspati, would not be available to such units falling outside the cooperative sector. It was stated that this order, of 26th Sept., 1979 would be enforced immediately. In the case of private units in whatever cases benefits have been sanctioned, cash subsidy which has already been sanctioned was to be paid but after the date of the resolution, 26th Sept., 1979, any further cash subsidy or exemption from sales tax or, interest-free sales ta .....

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s by way of an explanation to the resolution of 26th Sept., 1979 and by the resolution, Annexure 'I' dated Feb. 27, 1980 it was clarified that the three types of edible oils, namely, groundnut oil, cotton seed oil and castor oil, and th3 industry of Vanaspati manufacture, were to be reserved for co-operative sector and it was further declared that for the units failing outside the co-operative sector, so far as the above-mentioned reserved areas were concerned, the benefits of the scheme .....

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hat on complying with the necessary formalities, the balance of the cash subsidy may be., made available to them. As regards the exemption from sales tax, there is no claim on behalf of the petitioners and as regards the claim for interest-free sales tax loans, the case of the Government is that because the cotton seed delinting plant of the petitioners falls in Items 12 and 13 of Clause 6 of the second resolution of Dec. 22, 1977 the petitioners are not entitled to interest-free sales tax loans .....

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the affidavit-in-reply, the petitioners are not entitled to the benefit of the scheme for interest-free sales tax loans, though under the notification of Dec. 22, 1977 the scheme was to remain in force for the period of five years from 1st Nov., 1977. 4. Mr. Trivedi for the petitioners has relied upon the doctrine of promissory estoppel and contended that inasmuch as a large sum of nearly forty-three lakhs rupees has been invested by the petitioners in their cotton delinting plant relying on th .....

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sisted of two learned Judges, namely, Fazal Ali and Kailasam, JJ. and Kailasam, J. speaking for the Supreme Court, summed up the legal position as follows, in para 39 of the judgment at page 1302. The position has been culled out after examination of all the relevant decisions having a bearing on the point and the principles laid down are as follows: "(1) The plea of promissory estoppel is not available against the exercise of the legislative functions of the State. (2) The doctrine cannot .....

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ing on that representation put, himself in a disadvantageous position, the Court is entitled to require the officer to act according to the scheme and the agreement or representation. The officer cannot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the Prejudice of the person who had acted upon such representation and put himself in a disadvantageous position. (5) The officer would be justified in changi .....

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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 can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of th .....

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t certain, specific promises as inducements for its employees, to move into a newly created department and the Supreme Court held, applying the doctrine of promissory estoppel, that the employees having believed the representations of the State Government and having acted thereon could not be denied the rights and benefits promised to them. Under these circumstances, it is clear that even in the field of purely executive functions of the State, the doctrine of promissory estoppel has been applie .....

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representation a party has altered its situation, then, it is not open to the Government to resile from that position and at the instance of the party who has altered its situation to its disadvantage, the Court is entitled to direct the Government or the authority to carry out its promises as its scheme. 7. Mr. Mehta for the respondent State has relied on certain observations of a Bench consisting of Goswami, Jaswant Singh and Kailasam JJ. in Bihar Eastern Gangetic Fishermen Co-operative Societ .....

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he doctrine of promissory estoppel because he was unable to show that relying on the representation of the Government, he had altered his position to his prejudice. The Court accepted the view of this Court expressed in Ram Kumar's case (AIR 1976 SC 2237) and held that there cannot be any estoppel against the Government in the exercise of its sovereign, legislative or executive functions." 8. The legal position being very clear in the light of proposition No. (4) and in the light of the .....

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