Andhra HC (Pre-Telangana)
Nagarjuna Fertilizers & Chemicals ... vs Union Of India (Uoi) Represented By Its ... on 25 July, 2003
Equivalent citations: 2003(4)ALD803, 2003(4)ALT750
Author: B. Sudershan Reddy
Bench: B. Sudershan Reddy
JUDGMENT B. Sudershan Reddy, J.
1. The petitioners invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India praying for issuance of a writ of Mandamus declaring the notification dated 4-6-2002, whereunder the Government of India fixed the policy parameters for 7th and 8th pricing periods commencing from 1st July, 1997 and 1st April, 2000 respectively, as unconstitutional and ultra vires the powers of the respondents. The petitioners also pray for issuance of a consequential declaration declaring the letter dated 21st August, 2002 for Plant-I and letter dated 17th September, 2002 for Plant-II issued by the respondents as illegal, void and unenforceable.
Factual Matrix:
2. The first petitioner herein is a public limited company incorporated under the provisions of the Companies Act, 1956. The company has set up a factory for the purpose of manufacture of Urea at Kakinada, East Godavari District in the State of Andhra Pradesh.
3. The industrial licence obtained by the petitioner-company from the Government of India for setting up an industry for manufacture of nitrogenous fertilizer in Kakinada provides that in the First Phase, the company will put up a 900 tons per day ammonia plant with a related urea capacity of 1500 tons per day based on fuel oil.
4. The petitioner-company had set up Plant-I for the purpose of manufacture of urea and ammonia and the commercial production commenced in August, 1992. Plant-I has a capacity to manufacture 900 tons per day of ammonia and 1500 tons per day of urea. The total annual capacity is thus 297,000 tons of ammonia and 495,000 tons of urea.
5. The petitioner-company established Plant-II also for the purpose of manufacture of urea in the year 1998 with manufacturing capacity of both ammonia and urea identical to that of the capacity of Plant-I.
6. It is unnecessary to notice the various details relating to paid up share capital of the petitioner-company and its borrowings from the financial institutions, nationalised as well as private banks etc. The fact remains that it is one of the leading manufacturers of fertilisers in India.
7. That fertiliser is one of the essential commodities and declared as such under the provisions of the Essential Commodities Act, 1955. The Central Government in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955, made the Fertiliser (Control) Order, 1985 (for short 'the Control Order') and notified the same by G.S.R. 758 (E), dated 25th September, 1985 and has been amended from time to time.
8. Clause 3 of the Control Order enables the Central Government, with a view to regulating equitable distribution of fertilisers and making fertilisers available at fair prices, to fix the maximum prices or rates at which any fertiliser may be sold by a dealer, manufacturer, importer or a pool handling agency. The Central Government may, having regard to the local conditions of any area, the period of storage of fertilisers and other relevant circumstances, fix different prices or rates for fertilisers having different periods of storage or for different areas or for different classes of consumers. It mandates that no dealer, manufacturer, importer or pool-handling agency shall sell or offer for sale any fertiliser at a price exceeding the maximum price or rate fixed by the Central Government.
9. That the Government of India has been fixing the sale price of urea from time to time. Once the prices are so fixed by the Government under the Control Order, it will be incumbent upon the manufacturers to sell the fertiliser only at such controlled rates. In the instant case, we are concerned with the manufacture, sale and fixation of maximum retail price and the retention price with regard to the urea alone. The fixation of the controlled maximum retail price of urea and the rate at which it to be sold at the market is not the subject matter of issue in this writ petition.
10. The case of the petitioner-company, like many other manufacturers of urea, is that the maximum retail price determined by the Central Government under the provisions of the Control Order is not remunerative and it is impossible for the manufacturer to produce and sell urea at the price fixed under the Control Order.
11. The Central Government, in order to introduce a rational system of pricing of Fertilisers with a view to ensuring a reasonable return on investment and facilitating the healthy development and growth of the Fertiliser industry, established a Committee under the Chairmanship of S.S. Marathe, Chairman of the Bureau of Industrial Costs and Prices which included the representatives of the Industry. The Committee submitted the first part of its report covering nitrogenous fertilisers in May, 1977. The Central Government after careful consideration of the report have decided to introduce a system of retention prices for units in the nitrogenous Fertiliser industry with effect from 1st November, 1977. It has been decided that the system will be administered by a Fertiliser Industry Coordination Committee to be set up for this purpose and the Committee will operate a Fertiliser Price Fund Account for purposes of administering the system. The system provides for a fair ex-factory retention price per ton of Urea for each plant based on a capacity utilisation of 80 per cent and a combination of norms and actuals in regard to the consumption of raw materials, utilities and other inputs, maintenance and other costs and provides for a post-tax return of 12 per cent on net worth. The retention prices have been worked out on this basis by the Marathe Committee for the period up to March 31, 1979 for each of the 21 Urea manufacturing plants in the country.
12. The scheme or the policy provides that the units whose retention prices, as fixed under the scheme, are lower than the ex-factory price mentioned in para 3 of the Scheme will be required to credit the difference to the Fund Account referred to in paragraph 1 of the Scheme in accordance with the procedural instruction to be issued for the purpose. Units, whose retention prices under the scheme are higher than the ex-factory price, will receive the difference from the Fund Account on the monthly submission of claims supported by excise clearance certificates. It may not be necessary to notice the further details in this regard. The scheme came into operation with effect from 1st November, 1977.
13. That even before the above scheme was notified, Government of India, Ministry of Fertilisers and Chemicals issued letters dated 24th October, 1977 to all the fertiliser producing units including the petitioner-company expressing its intention to bring the scheme of retention price in respect of the nitrogenous fertilisers into effect from 1st November, 1977 on the basis of the voluntary agreement on the part of the individual units to participate in the scheme. A draft of the undertaking to be singed by the competent authority on behalf of the company was enclosed along with the said letter.
14. The Ministry of Fertilisers and Chemicals accordingly constituted the Fertiliser Industry Coordination Committee (FICC) to be chaired by the Fertiliser Secretary and also comprising of various other members to operate the Fertiliser Price Fund Account to be created for the purposes of administering the system of retention prices, etc.; to review the retention prices periodically in consultation with the Bureau of Industrial Costs and Prices and to make adjustments in retention prices, wherever necessary, with the prior concurrence of the Government.
15. Accordingly, the retention prices were fixed in the following three stages by the Government based on the recommendations of FICC:
(a) Ad hoc retention price;
(b) Provisional retention price; and
(c) Final retention price.
The concept of provisional retention price was, however, discontinued from 1988.
16. It may be noted that the Vice-Chairman and Managing Director of the petitioner-company, on behalf of the company, filed an undertaking in respect of their Plant-II, which was commissioned in March, 1998. The petitioner-company undertook and promised to abide by the decisions of FICC, which would be final and binding on the petitioner-company "on all matters relating to the determination of retention prices, net realisation, equity freight, etc."
17. The Government of India, Department of Fertilisers issued letter dated 29-9-1980 to all manufacturers of nitrogenous and complex fertilisers, which includes the petitioner-company, circulating the procedure for submission of bills for payment/ recoveries in respect of urea and complex fertilisers under the retention price scheme. Such of the units, whose retention price is higher than the maximum retail price, are required to claim the difference from FICC and the units, whose retention price is lower than the maximum retail price, are required to refund the difference to FICC. Similar is the letter dated 26th October, 1998 issued by the Government of India, Department of Fertilisers to all the manufacturers of nitrogenous and complex fertilisers.
18. There is no controversy whatsoever that the retention price fixed for each unit is different from that of the retention price fixed for other units. The whole object of fixation of retention price is to ensure that the manufacturer is reimbursed of all costs, and also makes a reasonable return of 12% post tax on net worth at normative 80% capacity utilisation. The industries are required to submit their monthly returns of the total quantity of urea dispatched out from the factory and such monthly bills are to be settled based on provisional/ tentative/ad hoc retention price fixed earlier.
19. The costs that are factored for the purposes of determination of retention prices are classified as variable costs, costs of conversion, selling expenses and capital related charges. Various cost parameters are taken into consideration while determining the retention price of each unit. The retention price that is fixed is based upon a combination of actuals and normative values. The retention price working is as follows:
E. Retention Price Working:
i) The variable cost per MT of urea is worked out based on the consumption of raw materials and utilities, packing material, etc., as determined by FICC with the actual rates and inputs.
ii) Total conversion costs are arrived as per the methodology stated above (as notified by FICC) is divided by normative capacity (as notified by FICC) to determine per metric tonne conversion cost.
iii) Selling expenses is also worked out like conversion costs, subject to an overall ceiling of Rs. 95/- MT in the Sixth Pricing Period.
iv) Capital related charges are also worked out on the same basis like conversion costs.
The sum of the above four elements of costs is notified by FICC as the retention price of the urea manufactured by the unit.
20. So far as the first petitioner's Plant-I is concerned, ad hoc retention price was determined by proceedings dated 29th December, 1992 with effect from 1st August, 1992 at Rs.6,990/- per MT. Thereafter, FICC determined the provisional retention price of the first petitioner's Plant-I at Rs.9,186/- by proceedings dated November 19, 1993.
21. Insofar as Plant-II of the first petitioner-company is concerned the ad hoc retention price was determined for the first time at Rs.8385/- in terms of the proceedings dated 23rd September, 1998.
22. The petitioner-company has various grievances with the methodology of fixing of the retention price for its Plant-I and Plant-II and it is stated that many arbitrary disallowances were made by FICC in the determination of retention price for two plants of the petitioner-company. It is unnecessary for us to go into this controversy.
23. For whatever reasons, FICC had abandoned the practice of three-year pricing period after 1991. The 6th pricing period that was to be operational between 1-4-1991 and 31-3-1994 was extended firstly up to 31-3-1997 and thereafter till 30-6-1997. That as per the decision of the Government of India the policy parameters for the 6th pricing period have been circulated to all the manufacturers who were covered under the retention price scheme. It is the case of the petitioner-company that the company and other fertilizer manufacturers continued to raise bills on FICC on the basis of retention price fixed for the 6th Pricing Period till date and those were paid without any demur.
24. The whole controversy centers around the policy parameters for 7th and 8th pricing periods as per the decision of the Government of India. The said policy parameters have been communicated to all the manufacturing units including the petitioner-company by FICC vide its letter dated 4th June, 2002. The 7th pricing period covers the period from July 1, 1997 to March 31, 2000. The 8th pricing period covers the period from April 1, 2000 to March 31, 2003 or till a new pricing policy is announced, whichever is earlier. It is specifically stated in the policy parameters that for 7th and 8th pricing periods that based on the methodology of Alagh Committee, the capacity of 20 manufacturing units have been revised with effect from 1-4-2000. Capacities of those units as on 1-4-2000 are given in Annexure-I to the policy parameters. The normative levels of capacity utilisation are increased by 5 per cent with effect from 1-4-2002. Inter alia vintage allowance for capacity utilisation and consumption norms is also stipulated as follows:
i) 5 per cent vintage allowance during 1997-98;
ii) 4 per cent vintage allowance during 1998-99; and
iii) 2 per cent vintage allowance during 1999-2000.
No vintage allowance would be applicable beyond 31-3-2000. The units which are eligible for vintage allowance after 30-6-1997 would be allowed to avail of this allowance till 31-3-2000, as per rate applicable for the other units during the 7th pricing period.
25. The case of the petitioner-company is that in terms of the new policy parameters for calculating 12% return on net worth, as against normative capacity utilisation of 80% originally envisaged as per Policy Notification dated November 1, 1977 and subsequently modified to 90% as per the 5th pricing period notification, the normative capacity of Plant-I would be now reckoned at 95%. The retention price for urea produced from the Plant-II of the petitioner-company would be determined on the normative capacity utilisation of 95%, instead of 90% when Plant-II went into production in 1998. The vintage allowance that should have been available for Plant-I from August, 2002 and Plant-II with effect from the year 2008 would not be available.
26. The Ministry of Chemicals and Fertilizers, Department of Fertilizers, issued notification dated 21st August, 2002 revising the retention price of urea on account of escalation and de-escalation in the input prices, etc., so far as the petitioner-company is concerned and accordingly desired the company to prefer claims on the basis of the revised retention price in the proforma prescribed by the FICC. A statement showing the revised final retention price of urea including escalation and de-escalation in the input prices in respect of the petitioner-company has been enclosed.
27. That consequent on the introduction of 7th and 8th pricing periods, the Government of India, Ministry of Chemicals and Fertilizers, issued notification dated August 21, 2002 fixing the retention price for the first petitioner's plant-I for the period from July 1, 1997 to January 1, 2000 and April 1, 2000 till April 11, 2002. Similarly for the first petitioner's Plant-II, the Government of India issued letter dated September 17, 2002 fixing the Final Retention Price. The petitioner-company has been directed to file its claim on the basis of the revised retention price in the proforma prescribed by the FICC. The reduction in subsidy on account of downward reduction of retention prices is directed to be adjusted in the arrears bills or fresh bills to be preferred with FICC.
28. The case of the petitioner-company is that the entire exercise that has been now performed by the FICC in coming out with so-called 7th and 8th pricing periods and fixing the retention price after a lapse of more than five years insofar as 7th pricing period is concerned, and after lapse of more than two years insofar as the 8th pricing period is concerned, are highly arbitrary, irrational and without any authority of law.
29. It is implicit in the policy decision that the retention price has to be fixed so as to effectively operate in that financial year and the need to so fix the retention price within the financial year is obvious. To make the retention price operative retrospectively after a period of five years would obviously be arbitrary, unjust, unfair and unreasonable and is violative of Article 14 of the Constitution of India. The policy is liable to be struck down on the grounds of irrationality and arbitrariness.
30. It is also the case of the petitioner-company that it has carried on the business from the year 1997 to 2002 on the legitimate and valid expectation that at least the retention price as notified in the pricing period 6/6-A would continue.
31. The case of the Central Government as is evident from the averments made in the counter affidavit is that various actuals/ normative values, other parameters and ingredients that are taken into account for fixing the retention price are to be arrived at per metric tonne of urea produced. This is possible under the policy only by dividing the gross number of the sum total of various parameters by the normative production capacity of the petitioner's units and the total number arrived for per metric tonne cost is then multiplied by the total production dispatched from the factory.
32. It is specifically averred that for the purpose of claiming provisional subsidy, the petitioner-company has given the correct quantity of production, which was dispatched out of their factory. However, for the purpose of finalising the cost of production per metric tonne, the petitioner-company has deliberately projected the production capacity, which is far less than the actual production for which quantity the company had claimed the subsidy earlier. This device of giving one figure for the purpose of claiming provisional subsidy for the urea produced and dispatched and giving another figure for the purpose of finalising the cost per metric tonne has been deliberately indulged by the petitioner-company in order to boost the per metric tonne cost of production in its favour. This device was found out by the Department after several complaints were made in this behalf both in and out of Parliament.
33. That a Committee of Experts (Dr. Alagh Committee) was constituted for the purpose of-
i) Addressing the total issue of re-assessment of capacity with specific attention to:
(a) The method of re-assessment to be adopted;
(b) The effective cut-off date to be adopted for the purpose of recovery on the method of re-assessment;
(c) Quantification of total amount of unintended benefits that have accrued to each unit on the basis of (a) and (b) above.
ii) To suggest modalities to recover the amounts quantified.
The Committee submitted its report and the same was accepted by the Central Government.
34. It is explained that many of the units could not reach the maximum production capacity and it was, therefore, that the normative value for arriving at the production capacity was fixed at 80% of the installed capacity. Subsequently, it became known that many units in India, including the petitioner's both units, have been producing urea far more than the declared production capacity and the actual production was even in the region at 120 to 140%. It is under those circumstances, the Government of India increased the normative value from 80% to 90% and then to 95%. Even at 90%, the petitioner's two units are still placed in an advantageous position. That when it came to the question of finalising the subsidy they had deliberately lowered their actual production which they themselves declared and projected as the installed capacity originally given and does not represent the realities. It is stated that the petitioner's two units have drawn more amount of subsidy than they would be entitled to if only the actual production had been declared while finalising the subsidy.
35. It is the specific case of the Central Government that what has been granted is the fertilizer subsidy, which has been extended to the manufacturing units, not for their benefit but for the benefit of the farmers and the general public.
36. So far as the formation of the policy is concerned, it is averred, it was delayed only on account of the petitioner-company and other manufacturers who had adopted similar tactics in projecting the production capacity wrongly, which resulted in a Committee being appointed for the purpose of determination of the correct assessed capacity. The petitioner-company nowhere challenged the actual production capacity, which it itself had given at the time of claiming the provisional subsidy. That whatever subsidy amounts had been drawn prior to this pricing policy were regarded as only provisional and it is only after the submission of the various reports by the Committee appointed for that purpose that the actual production capacity has been arrived at in the case of the petitioner-company and other manufacturers. If the claim of the petitioner-company is countenanced, it may tantamount to doling out an undue advantage of subsidy for the manufacturers illegally out of the public exchequer.
37. That the retention price scheme is not a statutory scheme. It is based on voluntary agreements by the manufacturers of chemical fertilizers. It is an arrangement in the nature of stipulations worked out in such a manner that none of the manufacturers is put to loss for selling chemical fertilizers at the maximum controlled price fixed under the Control Order and also with a view to ensure that no manufacturer is permitted to make any additional or extra profit than what is provided for in the scheme.
38. Fixing the retention price from retrospective effect is inbuilt in the scheme. Retention price on final basis can be determined only after the respective units have furnished the requisite cost and operating data and its proper verification and scrutiny has been done by FICC. The manufacturers can furnish the data for relevant quarters only after they have consumed the raw materials during the said quarter. Therefore, retrospective application of retention price scheme is a necessity.
39. It is explained that the pricing period for determining the retention price was initially fixed as three years and the subsequent pricing periods were also notified accordingly. Subsequently, for the five pricing periods, the pricing periods were notified from time to time and were made effective up to 31-3-1991. The 6th pricing period was to commence from 1-4-1991 and was to remain in operation up to 31-3-1994. For variety of reasons, however, it could not be formulated and notified even up to December, 1994 and was notified in January, 1995 and made effective from 1-4-1991. It continued even beyond its initial notified period and was extended and approved for the period up to 31-3-1996. Later on, in March, 1997 it was further extended up to 30th June, 1997.
40. That after the expiry of 6th pricing period on 30-6-1997, the parameters for the next pricing period commencing from 1-7-1997 were to be notified. Pending the notification of the pricing parameters for the 7th pricing period from 1-7-1997 to 31-3-2000 and also the 8th pricing period from 1-4-2000 to 31-3-2003, as an ad hoc measure, the parameters and norms applicable for the 6th pricing period were continued to make subsidy payments to the urea unit. Later, on 4-6-2002, the parameters and norms for the 7th pricing period commencing from 1-7-1997 to 31-3-2000 and for the 8th pricing period from 1-4-2000 to 31-3-2003 or till a new pricing policy comes into effect, whichever is earlier, were notified.
41. It is further pleaded that before recommending the revised prices for each industry under the 7th and 8th pricing policy, the FICC called the representatives of each industry including the petitioners herein, explained to them as to how the figures have been arrived at, and to which the petitioners' representatives accepted and in token of such acceptance have affixed their signature. This aspect of the matter has been totally suppressed in the affidavit filed in support of the writ petition.
42. It is also the case of the Government that the difficulties and the resultant delay in the formulation of the 7th and 8th Pricing policy arose out of the deliberate misdeclaration by industries concerned including the petitioners herein regarding their installed capacity and the total actual production. While claiming immediate payment of the subsidy, whatever quantity that went out of the factory were furnished in their returns and the subsidy calculated on such quantities were immediately paid to them. When it comes to the question of regular returns by the industries concerned for final determination, the installed capacity alone were shown which was less than the actual production.
43. It is further explained that the norm for arriving at the retention price is 80% initially and subsequently 90/95% of the installed capacity as declared by the units, which is the dividing factor by which the total expenditure for each unit is divided and which only pushed up the retention price.
44. The question that falls for consideration in the instant writ petition is whether the fixation of norms/parameters for 7th and 8th Pricing Periods, which were notified by the Government of India vide notification dated June 4, 2002, suffers from any legal infirmities? Whether the action of the respondents in fixing the norms/parameters is ultra vires and unconstitutional?
Submissions:
45. Sri K. Parasaran, learned Senior Counsel appearing on behalf of the petitioners pressed into service the doctrines of (a) legitimate expectation and (b) promissory estoppel, and strenuously contended that the whole of the impugned action of the respondents in fixation of norms/parameters for the 7th and 8th Pricing Periods is vitiated. It was submitted by Sri K. Parasaran that the impugned action is highly arbitrary and irrational. The learned Senior Counsel submitted that the right to receive the sale price on the sale of Urea is vested in the Company on the respective dates of sales thereof. The fixation of norms/parameters with retrospective effect is ultra vires and unconstitutional. The nature of the power to fix the retention price even if it is to be held as an executive power, it cannot be exercised retrospectively adversely affecting the vested rights of the petitioners.
46. Sri V.T. Gopalan, learned Senior Counsel appearing on behalf of the respondents submitted that the pricing policies have been formulated either during the currency of the pricing period i.e. up to 5th pricing policy and from 6th pricing policy onwards the policies have been made only after the pricing period in question was over. There were no serious departures in the norms and parameters between the various pricing policies in that the actuals and normative values were only updated. It was further submitted that the pricing policy is an executive policy and in the absence of statutory rules, such policy decisions can be varied and changed by the Government at any time and a new policy can be made. The learned Senior Counsel submitted that the maximum retail price fixed under the Control Order alone is statutory. The Policy to have a separate retention price is not regulated by any statute or control orders. It was a complex and comprehensive economic policy decision taken by the Central Government based on the advise and opinion of expert bodies and specialists and such policy decisions are not normally interfered with by this Court in exercise of its judicial review jurisdiction. The Court does not sit in appeal over such policy decisions of the Government.
47. The learned Senior Counsel submitted that there is no question of any retrospectivity in formulation of policy since what has been paid is the provisional and the final subsidy is decided subsequently. The petitioners have voluntarily joined the scheme and undertook to abide by the decisions to be taken by the Central Government and FICC from time to time. They cannot be permitted to resile from their promise and invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. The learned Senior Counsel further submitted that the fertiliser subsidy is to the farmers through the industry and not to the industry itself. Therefore, there is no vested right as such to claim subsidy at a particular rate and much less in any particular formula. It was also contended that as a matter of fact, after the declaration of the production capacity pursuant to the reports of the Committees and announcement of pricing policies for 7th and 8th Pricing Periods, a meeting was convened by FICC to which the petitioners were invited and the representatives of the petitioners participated in the said meeting and they have agreed to fixation of retention price without any demur or protest.
48. In order to appreciate the submissions made before us, we think it fit to make a few observations about our general approach to the entire case:
49. In a situation where legal issues are inter-mixed with those involving determination of policy and a plethora of technical issues, the Courts are required to exercise their jurisdiction with circumspection for they must not transgress into the realm of policy making. It would be altogether a different situation if the policy itself is inconsistent with the Constitution and the laws. The Courts are required to show their deference on matters affecting policy and those that require technical expertise. The technical experts are more qualified to address the complex and economic issues, such as one on hand relating to fixation of retention price.
50. The Government of India, Ministry of Agriculture and Cooperation issued a notification under the Fertilizer (Control) Order, 1985 fixing the maximum retail price per tonne for urea and other fertilisers at which these are to be sold to the farmers. The Control Order itself was issued under the Essential Commodities Act, 1955. The fixation of the maximum retail price by the Government, undoubtedly, is with reference to exercise of power under Control Order. It is a statutory exercise of power. The Control Order does not provide for fixation of any retention price. The Central Government appointed various Committees from time to time in order to introduce a rational system of pricing of fertilisers with a view to ensuring a reasonable return on investment and facilitating the healthy development and growth of fertiliser industry. The Government accordingly decided to introduce a system of retention price for units in the nitrogenous fertiliser industry with effect from 1-11-1977. A Fertiliser Industry Coordination Committee has been set up for administering the system. The Government made substantial contributions of revenue for this purpose.
51. The retention price scheme and the parameters are in the nature of broad fiscal policy which truly cannot be the subject matter of any serious debate in a judicial review proceeding for the simple reason that we lack the necessary expertise. But even such complex economic policy decisions are sought to be transformed into questions involving broad constitutional principles in order to make them the concern of the Court.
52. In R.K. Garg v. Union of India, AIR 1981 SC 2138 the Supreme Court observed that while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the Courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is ".............another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straight jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, great play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved."
53. What applies to legislative judgment in the field of economic regulation equally applies to policy decisions by the executive.
54. That 'price fixation is neither the function nor the forte of the Court' said Justice Chinnappa Reddy in Union of India v. Cynamide India Ltd., AIR 1987 SC 1802. It was held:
"We start with the observation, 'Price fixation is neither the function nor the forte of the Court'. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the Legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assembling of the raw materials and the mechanics of price fixation are the concern of the executive and we leave it to them. And, we will not revaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination. That is a different 'cup of tea' altogether."
55. It was further observed that the price fixation is more in the nature of a legislative activity than any other.
56. Sri K. Parasaran, learned Senior Counsel appearing on behalf of the petitioners, however, laid emphasis on the observations made in the said judgment, which are to the following effect:
"A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character, not directed against a particular situation. It is intended to operate in the future. It is conceived in the interest of the general consumer public. The right of the citizen to obtain essential articles at fair prices and the duty of the State to so provide them are transformed into the power of the State to fix prices and the obligation of the producer to charge no more than the price fixed. Viewed from whatever angle, the angle of general application."
57. We wish to immediately clarify that the said observations were made in the context of notifications issued by the Central Government in exercise of the powers conferred by the Drugs (Prices Control) Order, 1979 fixing the maximum prices at which various indigenously manufactured bulk drugs may be sold by the manufacturers. Those observations aptly apply to the fixation of maximum retail price of urea and other nitrogenous fertilisers by the Central Government in exercise of the power conferred upon it under the Control Order. In the instant case, we are concerned with the fixation of retention price, which admittedly is a unit oriented one. The consumers of fertilisers and farmers have nothing to do with the fixation of retention price. The retention price is never notified for the information of the consumers. On the other hand, the fixation of retention price is directed against a particular situation. Though it is conceived in the interests of the consumer it is a specific industry oriented device intended to compensate and protect the specific manufacturing units with a view to ensure their existence as viable economic concerns. It is not a right but is in the nature of an economic welfare measure.
58. In M/s. Shri Sitaram Sugar Co. Ltd. v. Union of India, the Supreme Court observed:
"Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the "feel of the expert" by its own views..........Judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land..........Price fixation is not within the province of the courts. Judicial function in respect of such matters is exhausted when there is found to be a rational basis for the conclusions reached by the concerned authority."
59. The validity of policy parameters for the 7th and 8th Pricing Periods fixed by the Government of India may have to be considered in the aforesaid background.
60. It is a matter of policy and planning for the Central Government to decide as to what is the best for the fertiliser industry and in what manner the policy should be formulated and implemented, bearing in mind the fundamental object of the statute, viz., supply and equitable distribution of essential commodity at fair prices in the best interest of the general public and is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review unless the policy itself is unconstitutional. With these introductory observations, we may now proceed to examine the submissions in detail.
61. The first contention relates to the retrospectivity. It was submitted that even if the power to fix the retention price is only an executive power it cannot be exercised retrospectively at all in a manner effecting the vested rights. Reliance has been placed on the decisions of the Supreme Court in Shri Vijayalakshmi Rice Mills v. State of A.P., and Accountant General v. S. Doraiswamy, .
62. In Shri Vijayalakshmi Rice Mills (4 supra) a simple question had arisen before the Supreme Court whether for the supplies of rice made by the rice millers in January and February, 1964 they are to be paid price according to the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, 1964, dated March 23, 1964 or according to the rates specified in the Rice (Andhra Pradesh) Price Control Order as it stood in the year 1963. The Court took the view that the sales having been made by the Millers before the coming into force of the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, 1964, and the property in the goods having passed to the Government of Andhra Pradesh on the dates the supplies were made, the Millers had to be paid only at the controlled price obtaining on the dates the sales were effected and not at the increased price which came into operation subsequently. The Supreme Court interpreted the Rice (Andhra Pradesh) Price Control Order, 1964 and accordingly came to the conclusion that there is no deeming clause or some such provision in the Rice (Andhra Pradesh) Price Control Order, 1964 to indicate that it was intended to have a retrospective effect. It was held that "it is a well recognised rule of interpretation that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date it is issued and not from any prior date."
63. In Accountant General (5 supra), the Supreme Court reiterated the settled legal position that unless a statute conferring the power to make rules provides for the making of rules with retrospective operation, the rules made pursuant to that power can have prospective operation only.
64. In the instant case, we are not concerned with interpretation of any statute or statutory rule. The policy parameters of the pricing scheme to be administered by the FICC for the 7th and 8th pricing periods were notified on June 4, 2002. It is evident from the record that the period of first pricing period was fixed originally on 1st November, 1977. From 2nd to 5th Pricing Periods, the policy was notified during the currency of the pricing period. The 6th pricing period was notified on 24-7-1997 i.e. after the closure of the pricing period from 1-4-1991 to 30-6-1997. The policy for the 7th and 8th pricing periods was notified on 4-6-2002 i.e. after the 7th pricing period was over and during the currency of 8th pricing period. The policy parameters for the 6th pricing period were notified to all the urea producing units including the petitioners on 24-7-1997 clearly indicating that the 6th pricing period has been made effective from 1-4-1991 and will remain in force till 30-6-1997. All the units were clearly put on notice that new policy parameters are due to be announced with effect from 1-7-1997. A large number of parameters were changed during 6/6-A pricing period, which also had retrospective effect from 1-4-1991. Admittedly, the first petitioner's Unit-I came in operation from August, 1992. They have not chosen to challenge the changed parameters during the 6/6-A pricing period including the depreciation clause. So far as the depreciation is concerned, it was allowed on a straight-line method at the rate of 6.33% per annum considering the fertiliser plant as a whole and taking its life as 15 years. The said provision is retained even in 7th and 8th pricing periods.
65. Be that as it may, the minutes of the meeting held with the petitioners' representatives with regard to the implementation of 7th and 8th pricing period policies in respect of Unit-I of the first petitioner company reveals that the representatives of the company recorded their consent to the implementation of 7th and 8th pricing period policy parameters notified by the Government on 4-6-2002. Likewise, in the meeting held on 8-8-2002, the petitioners' representatives recorded their consent to the implementation of 7th and 8th pricing period policy parameters and the minutes thereof were duly signed by them.
66. It is thus clear that the petitioners having agreed to the fixation of retention price in respect of their plants, both Unit-I and Unit-II, for the 7th and 8th pricing periods are only making attempts to wriggle out of the consensus arrived at the said meeting. That apart, it is required to notice that the petitioner-company willingly joined to participate in the retention price scheme and undertaken to abide by the decision of the Committee, which is final and binding on all the matters relating to the determination of retention price, net realisation, equity freight, etc. The retention price scheme itself declares in categorical terms that the scheme is brought into operation with effect from 1st November, 1977 on the basis of voluntary agreements on the part of individual units to participate in the scheme. The petitioners cannot now make any grievance of change in the policy parameters for the 7th and 8th pricing periods.
67. It is required to notice that initial notification dated 1-11-1977 itself had provided that the Retention Price Scheme could be reviewed. The manufacturers could put their claim for payment for the past period in case their ex-factory price (RP) was found to be higher than the Maximum Retail Price. Similarly, it had also provided that if the ex-factory price of any manufacturer was lower than the Maximum Retail Price, the difference could be recovered from such manufacturer. It is thus clear that this exercise of making payment of a difference on account of higher ex-factory price (RP) or recovering the difference on account of the excessive amount paid on account of the lower ex-factory price (RP) vis--vis Maximum Retail Price, could be made only in respect of past periods. We have already noticed that whatever be the pricing policy, for any period including the periods in question, various actuals/normative values and other parameters and ingredients that are taken into account for fixing the retention price are to be arrived at per metric tonne of urea produced. This is possible under the policy only by dividing the gross number of the sum total of various parameters by the normative production capacity of the first petitioner's units and the total number arrived for per metric tonne cost is then multiplied by the total production dispatched from the factory.
68. Much is said on either side about the impact due to change in the policy parameters of 7th and 8th pricing periods. Attempts were made to point out many errors in the policy parameters in the 7th and 8th pricing periods. These are not the matters for investigation in a petition under Article 226 of the Constitution of India. Elaborate submissions were made by both the Counsel inviting our attention to go into facts and figures. But, we refrain ourselves from making any reference to such facts and figures as we consider it to be outside our province to do so.
69. Sri V.T. Gopalan, learned Senior Counsel invited our attention to the statement showing the estimated payments/recoveries from all urea units on account of implementation of 7th and 8th pricing policy. As per the statement, Government is required to make net payment of Rs.1316 crores to the industry on account of the revised policy notified on 4-6-2002. During the course of submissions details are furnished showing the estimated financial impact of revision of retention price of the first petitioner's plants due to implementation of 7th and 8th pricing policy and other reasons. The statement made available discloses that the petitioner-company would receive approximately Rs. 240 crores and pay to the FICC about Rs. 225 crores resulting in payment to the first petitioner's unit by about Rs. 15 crores instead of recovery of Rs. 80 crores on the date when the writ petition was filed. We do not propose to make any comment about the same.
70. We recall the observations made by Jagannatha Shetty, J., in Gupta Sugar Works v. State of U.P., :
"the court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem. The court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination."
71. It is for that reason, we do not propose to express any opinion whatsoever that the petitioners have been earning post-tax profits to net worth ranging from 22% to 30% as against the normative post tax profit of 12% given by the Government/FICC as part of the retention price scheme.
Promissory Estoppel and Legitimate Expectation:
72. It is submitted that the petitioners had legitimate expectation that they would get the price, which they were entitled on the basis of the parameters in force. The State having held out promise to the first petitioner that it would be entitled to a certain price by the application of certain parameters it cannot defeat the same by changing the rules of the game after the event of manufacture and sale has taken place.
73. The case of the State is that on the factual conspectus as projected there is no question of any promissory estoppel or legitimate expectation arising. In respect of any pricing policy, the updating of various costs and figures in respect of several parameters have been done periodically some of which are to the benefit of the industry and some of which have the effect of bringing down the capital assets and as such affecting the retention price cannot be denied. The petitioners have been benefited on a number of occasions and equally recoveries have been made from them on a number of occasions.
74. The learned Senior Counsel for the petitioners placed reliance upon the decision of the Supreme Court in M/s. Pawan Alloys & Casting Pvt. Ltd., Meerut v. U.P.S.E.B., in support of the submission made by him. The factual background based upon which the doctrine of promissory estoppel has been invoked in the said decision may have to be noticed.
75. The U.P. State Electricity Board by notifications dated 29th October, 1982, 13th July, 1984 and 28th January, 1986 in exercise of its power under Section 49 of the Electricity (Supply) Act, 1948 had held out a promise to new industrialists seeking to establish industries in different parts of the State, that on the charges of electricity consumed by them they will be given 10% rebate for a period of three years from the date of commencement of supply of electricity to them for the first time, but the Board had arbitrarily and prematurely withdrawn concession of the said rebate by a latter notification dated 31st July, 1986. It was, under those circumstances, found that relying upon the earlier notifications holding out promise by the Board to give development rebate by way of incentive to new industries for three years from the date of initial supply of electricity to them, all the appellants as new industrialists had walked in the territory catered to by the Board and had established their industries in State of Uttar Pradesh by spending huge amounts of moneys for constructing the factories wherein their industrial activities could commence. It was further found that a mere look at the three notifications which held the field from 29th October, 1982 to 28th January, 1986 clearly contained a representation by the Board to the consumers, who were to establish new industrial units in the territories of the State in which the Board was to supply electricity, that on the total bill of electricity consumed by them during the period of first three years of their taking supply they will be getting a rebate of 10% on the total amount of such bills for electricity consumption. The Court found that the new industries which got attracted to this region relying upon the promise had altered their position irretrievably. They had spent large amounts of money for establishing the infrastructure, had entered into agreements with the Board for supply of electricity and, therefore, had necessarily altered their position relying on these representations thinking that they would be assured of at least three years' period guaranteeing rebate of 10% on the total bill of electricity to be consumed by them as infancy benefit so that they could effectively compete with the old industries operating in the field and their products could effectively compete with their products. On these well established facts the Board can certainly be pinned down to its promise on the doctrine of promissory estoppel.
76. We fail to appreciate as to how the said judgment renders any assistance whatsoever to the case set up by the petitioners. The petitioners, in no manner, have altered their position by voluntarily joining the Retention Price Scheme. They have not made any new or extra investments by joining the scheme of retention price in respect of nitrogenous fertilisers. It is not as if the petitioner-company had set up its unit for manufacture of urea on account of any promise made under the retention price scheme.
77. The whole controversy so far as the petitioners is concerned had arisen on account of alleged device of giving one figure for the purpose of claiming provisional subsidy for the urea produced and dispatched and giving another figure for the purpose of finalising the cost per metric tonne in order to boost the per metric tonne cost of production in favour of the petitioners. This device was detected by the department after several complaints were made in this behalf both in and out of Parliament. The production capacity had been taken into account in the case of the petitioners and few others by appointing a Committee under the Chairmanship of Dr. Y.K. Alagh. This exercise has naturally resulted in a wide difference between the amount already drawn by them by way of subsidy as against the actual production and the amounts that are legitimately due to them taking into account the very same actual production projected by the petitioner-company earlier.
78. In the circumstances, we are unable to agree with the submission as to the applicability of doctrine of promissory estoppel. There is no factual foundation as such laid in the affidavit filed in support of the writ petition as to how the doctrine of promissory estoppel is applicable so far as the petitioner-company is concerned.
79. In Kasinka Trading v. Union of India, the Supreme Court had to consider the question whether the notification issued under Section 25 of the Customs Act 1962 granting complete exemption from payment of customs duty to PVC resin imported into India by manufacturers of certain products requiring the said resin as one of the raw materials, which was issued in public interest and which had stated that it would remain in force up to and inclusive of 31st March, 1981 could be withdrawn before the expiry of the said period by fresh notification issued by the Government in exercise of the very same power.
80. The Court speaking through Dr. Anand, J., (as he then was) took the view that "as the said notification was issued in public interest it could be withdrawn even before the time fixed therein for its operation also in public interest and while issuing such a notification no promise can be said to have been held out or any representation made to the importers in general on the basis of which they could insist on the doctrine of promissory estoppel that the customs duty exemption granted earlier by the first notification could not be reduced by the second one". It was held:
"It has been settled by this Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the Courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the Court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance of representation."
81. It is clear that the change in parameters for the 7th and 8th pricing periods was notified in public interest in view of the fact that certain discrepancies were noticed with regard to the correct quantity of production for the purpose of finalising the cost of production per metric tonne and for the purpose of claiming subsidy. It has become just and necessary to take the actual production capacity into account. Therefore, in our considered opinion, even if there was any promise, the Government had rightly withdrawn the same in public interest.
82. Jeevan Reddy, J in State of H.P. v. Ganesh Wood Products, while explaining the 'doctrine of promissory estoppel' observed:
"The rule of promissory estoppel being an equitable doctrine, has to be moulded to suit the particular situation. It is not a hard and fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them.......The doctrine should not be reduced to a rule of thumb. Being an equitable doctrine it should be kept elastic enough in the hands of the Court to do complete justice between the parties. Anything and everything done by the promisee on the faith of the representation does not necessarily amount to altering his position so as to preclude the promisor from resiling from his representation. If the equity demands that the promisor is allowed to resile and the promisee is compensated appropriately, that ought to be done.......It is a matter of holding the scales even between the parties to do justice between them. This is the equity implicit in the doctrine."
83. In P.T.R. Exports (Madras) Pvt. Ltd., v. Union of India, the Supreme Court observed:
"The power to lay policy by executive decision or by legislation includes power to withdraw the same unless in the former case, it is by mala fide exercise of power or the decision or action taken is in abuse of power. The doctrine of legitimate expectation plays no role when the appropriate authority is empowered to take a decision by an executive policy or under law. The court leaves the authority to decide its full range of choice within the executive or legislative power. In matters of economic policy, it is a settled law that the court gives a large leeway to the executive and the legislature.......Government would take diverse factors for formulating the policy.......in the overall larger interest of the economy of the country. It is, therefore, by exercise of the power given to the executive or as the case may be, the legislature is at liberty to evolve such policies. A prior decision would not bind the Government for all times to come. When the Government is satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved."
84. In Sales Tax Officer v. Shree Durga Oil Mills, the Supreme Court held that "the Court will not interfere with any action taken by the Government in public interest. Public interest must override any consideration of private loss or gain."
Doctrine of Legitimate Expectation:
85. In National Buildings Construction Corporation v. S. Raghunathan, the Supreme Court observed:
"The question whether the expectation and the claim is reasonable or legitimate, is a question of fact in each case. This question had to be determined not according to the claimants' perception but in larger public interest."
86. It is further held that the issue of legitimate expectation is a question of fact in each case and foundation must be laid in the pleadings for such a plea being advanced before the Court.
87. On the factual conspectus the question of any promissory estoppel or legitimate expectation as such does not arise in the instant case. The mere change in parameters periodically, some of which are undoubtedly to the benefit of the industry and some of which have the effect of bringing down the capital assets, which may ultimately affect the retention price, by itself does not attract either the doctrine of legitimate expectation or promissory estoppel. The statement revealing the financial impact of revision of retention price of the first petitioner's plants due to various reasons and the details thereof are furnished for our perusal. It is unnecessary for us to go into those details and figures, but they, undoubtedly reveal that on account of the change in parameters, both the recoveries have been made from the petitioners on a number of occasions and as well as the petitioners have received the benefit.
88. However, the learned Senior Counsel placed reliance upon the decision in R v. North and East Devon HA, (2000) 3 All ER 850 in support of the submission that the promise made by the respondents herein by clearly indicating the parameters for fixation of the retention price induced the legitimate expectation of a substantive benefit so far as the petitioners are concerned, whose frustration would be so unfair and may amount to abuse of power.
89. The Court of Appeal speaking through Lord Woolf MR observed that it is for the Court to decide in an arguable case to strike a proper balance between the public and private interest. While adverting to the issue as to the Court's role whenever the doctrine of legitimate expectation is invoked by a member of the pubic, as a result of promise or other conduct, has a legitimate expectation that he will be treated in one way and the public body wishes to treat him or her in a different way held:
"The starting point has to be to ask what in the circumstances the member of the public could legitimately expect....... Where there is a dispute as to this, the dispute has to be determined by the court, and the same can involved a detailed examination of the precise terms of the promise or representation made, the circumstances in which the promise was made and the nature of the statutory or other discretion."
90. In such a situation, the Court observed that there are at least three possible outcomes. (a) The court may decide that the public authority is only required to bear in mind its previous policy or other representation, giving it the weight it thinks right, but no more, before deciding whether to change course. Here the court is confined to reviewing the decision on Wednesbury grounds (see Associated Provincial Picture Houses Ltd. v. Wednesbury Corp (1947) 2 All ER 680, (1948) 1 KB 223). This has been held to be the effect of changes of policy in cases involving the early release of prisoners (see Findlay's case; R v Secretary of State for the Home Dept, ex p Hargreaves (1997) 1 All ER 397, (1997) 1 WLR 906). (b) On the other hand the court may decide that the promise or practice includes a legitimate expectation of, for example, being consulted before a particular decision is taken. Here it is uncontentious that the court itself will require the opportunity for consultation to be given unless there is an overriding reason to resile from it (see A-G of Hong Kong v Ng Yuen Shiu (1983) 2 All ER 346, (1983) 2 AC 629) in which case the court will itself judge the adequacy of the reason advanced for the change of policy, taking into account what fairness requires. (c) Where the court considers that a lawful promise or practice has induced a legitimate expectation of a benefit which is substantive, not simply procedural, authority now establishes that here too the court will in a proper case decide whether to frustrate the expectation is so unfair that to take a new and different course will amount to an abuse of power. Here, once the legitimacy of the expectation is established, the court will have the task of weighing the requirements of fairness against any overriding interest relied upon for the change of policy.
91. It is observed that a public authority not only must it remain free to change policy; its undertakings are correspondingly open to modification or abandonment. The recurrent question is when and where and how the courts are to intervene to protect the public from unwarranted harm in this process. The court's task in such cases "is not to impede executive activity but to reconcile its continuing need to initiate or respond to change with the legitimate interests or expectations of citizens or strangers who have relied, and have been justified in relying, on a current policy or an extant promise. The critical question is by what standard the court is to resolve such conflicts. It is when one examines the implications for a case like the present of the proposition that so long as the decision making process has been lawful, the court's only ground of intervention is the intrinsic rationality of the decision, that the problem becomes apparent......In the ordinary case there is no space for intervention on grounds of abuse of power once a rational decision directed to a proper purpose has been reached by lawful process. The present class of case is visibly different. It involves not one but two lawful exercises of power (the promise and the policy change) by the same public authority, with consequences for individuals trapped between the two. The policy decision may well, and often does, make as many exceptions as are proper and feasible to protect individual expectations. The departmental decision in Ex p Hamble (Offshore) Fisheries Ltd., is a good example. If it does not, as in Ex p Unilever plc, the court is there to ensure that the power to make and alter policy has not been abused by unfairly frustrating legitimate individual expectations. In such a situation a bare rationality test would constitute the public authority judge in its own cause, for a decision to prioritise a policy change over legitimate expectations will almost always be rational from where the authority stands, even if objectively it is arbitrary or unfair."
(Emphasis is supplied).
92. A close reading of the decision, undoubtedly, makes it clear that the doctrine of legitimate expectation has emerged as a distinct application of the concept of abuse of power in relation to substantive as well as procedural benefits. The doctrine of legitimate expectation is rooted in fairness.
93. It is recognised that the policy being for the public authority alone, both it and the reasons for adopting or changing, it will be accepted by the courts, as not ordinarily open to judicial review. The court's task - and this is not always understood - is then limited to asking whether the application of the policy to an individual who has been led to expect something different is a just exercise of power.......it is for the court to say whether the consequent frustration of the individual's expectation is so unfair as to be a misuse of the authority's power.
94. In Punjab Communications Ltd., v. Union of India, Punjab Communications Ltd. v. Union of India, the Supreme Court after surveying the cases, both English and Indian, observed:
".....the doctrine of legitimate expectation in the substantive sense has been accepted as part of our law and that the decision maker can normally be compelled to give effect to his representation in regard to the expectation based on previous practice or past conduct unless some overriding public interest comes in the way. The judgment in Raghunathan's case (1998 AIR SCW 2954) : (AIR 1998 SC 2279) requires that reliance must have been placed on the said representation and the representee must have thereby suffered detriment."
95. It is further observed:
"The more important aspect, in our opinion, is whether the decision maker can sustain the change in the policy by resort to Wednesbury principles of rationality or whether the Court can go into the question whether decision maker has properly balanced the legitimate expectation as against the need for a change? In the latter case the Court would obviously be able to go into the proportionality of the change in the policy."
96. The Court concluded that the change in policy can defeat a substantive legitimate expectation if it can be justified on Wednesbury reasonableness. It is observed:
"We have noticed that in Hindustan Development Corporation case also it was laid down that the decision maker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of the policy is for the decision maker and not for the Court. The legitimate substantive expectation merely permits the Court to find out if the change in policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made......In sum, this means that the judgment whether public interest overrides the substantive legitimate expectation of individuals will be for the decision-maker who has made the change in the policy and the Courts will intervene in that decision only if they are satisfied that the decision is irrational or perverse."
97. In Union of India & another v. International Trading Co. & another, 2003 (4) Supreme 114 the Supreme Court observed:
"Doctrines of promissory estoppel and legitimate expectation cannot come in the way of public interest. Indisputably, public interest has to prevail over private interest. The case at hand shows that a conscious policy decision has been taken and there is no statutory compulsion to act contrary."
98. The Court approvingly referred to the observations in Attorney General for New Southwale v. Quin (1990 (64) Australian LJR 327) that to strike the exercise of administrative power solely on the ground of avoiding the disappointment of the legitimate expectations of an individual would be to set the courts adrift on a featureless sea of pragmatism. Moreover, the negotiation of a legitimate expectation (falling short of a legal right) is too nebulous to form a basis for invalidating the exercise of a power when its exercise otherwise accords with law; "If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased gross abuse of power or violation of principles of natural justice, the same can be questioned on the well known grounds attracting Article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider, but the court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends very much on the facts and the recognised general principles of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recruit to a long list of concepts fashioned by the courts for the review of administrative action must be restricted to the general legal limitations applicable and binding the manner of the future exercise of administrative power in a particular case. It follows that the concept of legitimate expectation is 'not the key which unlocks the treasure of natural justice and it ought not to unlock the gates which shuts the court out of review on the merits', particularly, when the element of speculation and uncertainty is inherent in that very concept........Otherwise, a resourceful litigant having vested interest in contract, licences, etc., can successfully indulge in getting welfare activities mandated by directing principles thwarted to further his own interest. The caution, particularly in the changing scenario becomes all the more important."
99. It is further held:
"If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed.
Reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly. In determining whether there is any unfairness involved; the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing condition at the relevant time, enter into judicial verdict. The reasonableness of the legitimate expectation has to be determined with respect to the circumstances relating to the trade or business in question."
100. We have already noticed the facts and the reasons for change in the parameters leading to determining the production capacity of various industries including those belonging to the petitioners. The revision in capacity, undoubtedly, affected the retention price fixed for the petitioner's units. But the production capacity and as well as the capital related charges by themselves are nothing to do with the pricing policies only of the 7th and 8th periods and the rest of the parameters, which were updated for the 7th and 8th period are nothing to do with the said two factors resulting in recovery. The fact remains that the petitioners never questioned the capacity as well as the capital related values. The petitioners cannot be permitted to say that the respondents should continue to recognise the wrong quantity of production capacity projected by them for the purpose of final assessment and not to take into account the actual production for the purpose of claiming immediate monthly subsidies at the normative values and that the capital related value for which every year the depreciation has been paid to them should not be brought down.
101. We have noticed the reasons that led to the change in pricing parameters and such a change in the policy, cannot, in our opinion, be said to be irrational or perverse according to Wednesbury principles. In the circumstances, on the basis of the clear principles laid down in the decisions referred to hereinabove, the Wednesbury principle of irrationality or perversity is not attracted and the revised policy cannot be said to be in such gross violation of any substantive legitimate expectation of the petitioners which warrants interference in this judicial review proceedings.
102. The petitioners have wrongly invoked the doctrine of promissory estoppel and legitimate expectation. The decision revising the parameters for 7th and 8th pricing periods, by no stretch of imagination, could be characterised as irrational or unfair.
103. Be it noted that if the retention price is to be fixed leaving a reasonable margin of profit, there is never any question of infringement of fundamental right to carry on business by imposing reasonable restrictions. The question of maximum retention price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the manufacturer's return are kept in the fore-front. The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes of the Control Order. If the prices of urea are fixed in such a way as to enable the manufacturer to recover his cost of production and secure a reasonable margin of profit, no aspect of infringement of any legal right much less any fundamental right can be said to arise.
104. In Shree Meenakshi Mills v. Union of India, the Supreme Court observed:
"In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law will not render the law unreasonable. By its very nature, industry or trade or commerce goes through periods of prosperity and adversity on account of economic and some times social and political factors."
105. The policy makers in changing the parameters for the purpose of fixation of retention price have definitely kept in view the cost of production and reasonable return to the manufacturer of fertilisers and accordingly fixed the retention price, which is fair, and it is not shown that the retention price is so grossly inadequate that it not only results in huge losses but also a threat to the supply position of the fertilisers. The retention price so fixed is neither arbitrary nor an unreasonable restriction.
106. It is unnecessary to burden this judgment by referring to various pronouncements of the Supreme Court to restate that every action of the State and its decisions based on and taken in pursuance of a policy decision must be fair and free from arbitrariness. But, it is equally well settled that this Court in exercise of its judicial review jurisdiction cannot substitute its own view for that of the State in the matter of formulation or modification of economic policy decisions. The Court refrains itself to enter into the merits of any policy decision and does not undertake to judicially review such policy decisions unless the policies so formulated themselves are unconstitutional. If two views are possible and the State takes one of it, it would not be amenable to judicial review on the ground that the other view, according to the Court, is a better view.
"It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, Court should avoid embarking on uncharted ocean of public policy." (See: Krishnan Kakkanth v. Govt. of Kerala, ).
107. This is, broadly speaking, the Indian constitutional heritage - even though there are no jurisdictional limitations upon the Court. The Courts have always recognised the unique position of the State in the matter of economic policy choices and have often be quite cautious in interfering with them. It would seem to us unwise for the courts to venture into 'uncharted minefield' lest the cure be more damaging to the wider investing institutions than the disease. The courts may have to adopt a cautious approach to substantive review. As Ogus (points out:
"If the gates are open too widely the administrative cost of regulation may escalate and private interest will have an incentive to exploit the process for tactical purposes, thereby frustrating the implementation of public interest goals."
108. The government obviously revised its policy parameters for 7th and 8th pricing periods in order to make sure that, the benefits under the scheme do not go disproportionately to the better off and that poorer consumers are protected. The government while changing the pricing parameters properly determined its objectives and created a framework consistent with the objectives sought to be achieved. Wider public concerns are taken into account.
109. In view of our conclusion that the change in parameters for the 7th and 8th pricing periods does not suffer from the vice of irrationality, the policy decision is neither unreasonable nor arbitrary.
110. For the aforesaid reasons, we do not find any merit whatsoever in this writ petition. The same shall accordingly stand dismissed. No order as to costs.