Orissa High Court
Camma Textile Industries (P) Ltd. vs State Of Orissa And Ors. on 25 February, 1994
Equivalent citations: 1994(I)OLR429
JUDGMENT G.B. Pattnaik, J.
1. The question that arises for consideration in this writ application is whether 'the opp. parties have made any unequivocal promise to the petitioner to grant some amount as subsidy pursuant to which the petitioner started the industry and invested a huge sum and, therefore, the opp. parties are bound by the promise held out to the petitioner and are not entitled to back out from the promise on the ground that the Government of India itself reduced the amount of subsidy. In other words, whether the principle of promissory estoppel can at all be applied and could be enforced by way of a writ of mandamus.
2. The short compass within which the aforesaid principle arises for determination is that the Government of Orissa has been announcing several incentives in the form of tax concession as well as subsidy to those entrepreneurs who decide to set up industries within the State of Orissa and those are called the Industrial Policies. The industrial policies of the State announced in 1980 and 1986 brought an upsurge in the industrial climate of the State and even entrepreneurs from outside the State became anxious to set up industries within the State. To enhance the tempo of industrialisation in the State, the Government decided to further liberalise the package of incentives announced in the 1986 Policy with the twin objective of encouraging new industries and providing support to industries which have come up in the State during the last few years and, therefore, the new Industrial Policy of 1989 was allowed to operate with effect from 1-12-1989, the date on which the Policy was issued. The petitioner's case in nutshell is that prior to the issuance of the 1989 Policy and while the 1986 Industrial Policy was in force,the State-Level Committee held a meeting on 29-3-1B89 and sanctioned a capital investment subsidy of Rs. 25 lakhs in favour of the petitioner for the project of synthetic fabrics to be set up by the petition in the district of Balasore. Under the Industrial Policy of 1986, the capital investment subsidy in respect of new industrial units as well as expansion/modernisation/diversification projects in Zone-B for the district of Balasore was 25 per cent of the fixed capital subject to the limit of Rs. 25 lakhs. The Industrial Promotion and Investment Corporation of Orissa Limited (for short, IPICOL) to whom the petitioner had applied for financial assistance intimated the petitioner vide letter dated 10th of March, 1989 about the financial assistance sanctioned by the Corporation and indicated therein that the Central Subsidy of Rs. 25 lakhs has been taken into account while deciding the term-loan to be granted by the IPICOL. The Orissa State Financial Corporation (for short, OSFC), opp. party No. 4 in this writ application, also intimated vide letter dated 26-7-1989, annexed as Annexure-3, that the State-Level Committee in its 53rd meeting has sanctioned a Subsidy of Rs. 25 lakhs to the petitioner's unit at Sergarh and the sanction of Subsidy is subject to certain conditions in addition to the conditions prescribed. The petitioner avers that after receipt of the aforesaid unequivocal assurances from the OSFC and the IPICOL as well as the decision of the State Government taken by its State-Level Committee, the petitioner started making investments for setting-up the industrial unit in the district of Baiasore and by 30th of November, 1989, had invested a substantial amount for the civil works, water pump and purchase of some machinery. In November, 1989, the petitioner also deposited a sum of Rs, 1,25,255/- with the Industrial Infrastructure Development Corporation of Orissa Limited (for short, IDCO) towards the costs of the land to be allotted in favour of the petitioner and towards ground rent, cess etc. Between 1990 and 1992, substan- tial investment was made in civil construction, plant and machinery for setting-up the industrial unit within the district of Balasore and thereafter on 3-8-1992, opp. party No. 4, the OSFC intimated the petitioner that the Subsidy which had been sanctioned earlier in favour of the petitioner to the tune of Rs. 25 lakhs stands cancelled and only a sum of Rs. 15 lakhs has been sanctioned as subsidy by the State-Level Committee in its meeting on 4-7-1992, Since the petitioner had already mada a huge investment pursuant to the unequivocal assurance held out to it by the State Government, the OSFC and the 1PICOL with regard to the grant of Subsidy to the tune of Rs. 25 lakhs, on receiving the letter of the OSFC reducing the subsidy to the sum of Rs. 15 lakhs, a representation was made to the Joint Manager of the OSFC on 8-9-1932 and the matter was also brought to the notice of the Director of Industries vide letter dated 28-7-1993. But since the petitioner did not receive any favourable communication from either of them, it has approached this Court for enforcement of the promises held out to it by the opposite parties and for a declaration that the opposite parties are bound by the principle of promissory estoppel.
3. Opp. parties 1 and 2 have filed a counter affidavit stating therein that the Subsidy of Rs. 25 lakhs had not been sanctioned under the Industrial Policy Rasolution but was sanctioned in accordance with the Central Investment Subsidy Rules which scheme was being extended from time to time. It is conceded in the counter affidavit that the State-Level Committee in its metting held on 29 3-1989 had sanctioned Rs. 25 lakhs as Central Investment Subsidy to the petitioner's unit, but the Government of India having discontinued the scheme and having communicated the same to the State Government in its letter dated 21-7-1989, the amount could not be disbursed in favour of the petitioner. It is also contended that in fact, the Subsidy of Rs. 15 lakhs which the petitioner has received was sanctioned afresh under the Industrial Policy Resolution of 1989.
The OSFC (opp. party No. 4) has field a counter affidavit being sworn to by the Assistant Manager (Law). It has also been stated therein that no doubt Rs. 25 lakhs had been sanctioned in favour of the petitioner as Central Investment Subsidy, but that sanction was in anticipation pf the extension of the Central Subsidy. Later on, however, the Central Subsidy having been withdrawn, a sum of Rs. 15 lakhs was sanctioned and was paid to the petitioner. The IPICOL (opp. party No. 3) has also filed a counter affidavit more or less taking the same stands as that of the OSFC, namely, that reduction in the Subsidy was on account of withdrawal of the same by the Central Government.
4. In view of the stand taken by the rival parties and in order to find out whether the doctrine of promissory estoppel can at all be invoked by the petitioner, it is necessary for us to examine and find out whether any representation of assurance had been made by the opposite parties to the effect that a sum of Rs. 25 lakhs will be the Central Subsidy and secondly whether the petitioner relying upon the said representation has changed or altered its position, which is an indispens- able requirement of the doctrine. If it is found that the aforesaid two conditions have been fulfilled, then certainly, the Court would be entitled to compel the opposite parties to adhere to the representation which has been acted upon by the petitioner.
5. The principle of promissory estoppel is a principle evolved by equity to avoid injustice and, as has been said by the apex Court in the case of Ms. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh and Ors.. AIR 1979 SC 621, it is neither in the realm of contract nor in the realm of estoppel. According to the law laid down by the Supreme Court in the aforesaid case, the true principle of promissory estoppel is that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relation ship to arise in future knowing or intending that it would be acted upon by the other party to whom the promise is made and, in fact, it is so acted upon by the other party, the promise would be binding upon the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties. The learned Judges in the said case also observed that it is not necessary, in order to attract the applicability of the doctrine, that the promisee acting in reliance on the promise should suffer any detriment and what is necessary is that the promisee should have altered his position in reliance on the promise.
This principle was reiterated again in the case of The Gujurat State Financial Corporation v. M/s. Lotus Hotels Pvt. Ltd., AIR 198J SC 848, whereunder the Gujarat State Financial Corporation was compelled to perform its promise in relation to advancing loan to a Company acting upon which promise the Company proceeded to under- take and execute a project of setting-up a 4-Star Hotel. The learned Judge observed that the principle of promissory estoppel would certainly estop the Corporation from lacking out of its obligation arising from a solemn promise made by it to the respondent. The ratio of the aforesaid case, in our considered opinion, squarely applies to the facts and circumstances of the present case. The said question again came up for consideration in the case of Delhi Cloth & General Mills Ltd. v. Union of India, AIR 1987 3C 2414 and the learned Judge elaborating the principle observed ;
".........AH that is now required is that the party asserting the estoppel must have acted upon the assurance given to him. Must have relied upon the representation made to him. It means the party has changed or altered the position by relying on . the assurance or the representation. The alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damage, detriment or prejudice to the party asserting the estoppel. The Court, however, would compel the opposite party to adhere to the representation acted upon or abstained from acting. The entire doctrine proceeds on the promise that it is reliance based and nothing more," (quoted from headnote)
6. Bearing in mind the law laid down by the apex Court in the aforesaid cases, and examining the averments made in the writ application as well as the documents appended thereto, there cannot be any dispute that the opposite parties had sanctioned a Subsidy of Rs. 25 lakhs in favour of the petitioner-industry which was communicated to the petitioner by the IPICOL in its letter dated 10-3-1989 as Annexure-2, and also by the OSFC in its letter dated 26-7-1989, which has been annexed as Annexure-3. Even the State Government in its counter affidavit has conceded to the aforesaid position. It is also an admitted fact that the industry was set-up in the year 1989 and substantial investment was made by the petitioner during the period July, 1989 to January, 1990, as is apparent from Annexures-3, 5, 6 and 7. Though the State Government had taken a stand that the Government of India had withdrawn the Central Subsidy and communicated the same to the State Government in 1989, but the said fact had never been communicated to the petitioner until 3-8-1992, when the reduced amount of Subsidy was sanctioned again and was communicated to the petitioner by the OSFC under Annexure-8 and by that time the petitioner had made substantial investment in setting-up the factory. In view of the unequivocal promise and assurances to the petitioner under Annexures-2 and 3, and the petitioner having setup the industry pursuant to the promise in question and having made substantial exoenses for setting-up the industry, the opposite party as must be bound by the assurances given by them to the petitioner and cannot be permitted to back out from the share. In the facts pleaded and proved, the conclusion is irresistible that the petitioner has relied upon the assurances given to it under Amaxures 2 and 3 and acting on the said assurances has altered its position by way of making huge financial investment in setting-up the industry and, therefore, the opposite parties must adhere to the representation made by them to the petitioner by way of sanctioning Rs. 25 lakhs as Subsidy and intimating the same to the petitioner through the financial institutions of the State Government, namely the OSFC and the 1PICOL. In our considered opinion, the principle of promissory estoppel squarely applies and the opposite parties must be bound by the same. We accordingly hold that the opposite parties were not entitled to cancel the sanctioned amount of Subsidy of Rs. 25 lakhs to the petitioner communicated to it under letter dated 26-7-1939 and the said order is grossly detrimental to the petitioner's interest. In the aforesaid premises, we allow this writ application and issue a writ of mandamus calling upon the opposite parties to disburse the balance amount of Rs. 10 lakhs to the petitioner which they are bound by their earlier sanction and promise pursuant to which the petitioner has acted to its detriment. The amount in question representing the balance Subsidy should be paid to the petitioner within 2 months from the date of the receipt of our order. There will, however, be no order as to costs.
R.K. Patra, J.
I agree.