Gujarat vs State on 7 May, 2011

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Gujarat High Court

Gujarat vs State on 7 May, 2011

1. Present appeal under Clause 15 of Letters Patent is directed against the judgment dated 24.06.2008, whereby the learned Single Judge has rejected the writ petition preferred by present appellants against the order dated 13.03.2000 passed by respondent No.2-the Registrar, Cooperative Societies directing the petitioners to deposit a sum of Rs.44.60 lacs towards the principal amount of loan and to also deposit a sum of Rs.81,04,175/- towards interest as per the conditions contained in the resolution dated 19.11.1991. The amount payable towards principal amount was modified/corrected to Rs.71 lacs vide the order dated 31.03.2000. The said order dated 31.3.2000 also was challenged.

1.1 Heard Mr.Mihir Joshi, learned Senior Counsel who has appeared with Mr.S.N.Thakkar, learned advocate for the appellants-petitioners and Mr.U.A. Trivedi, learned Additional Government Pleader who has appeared for the respondents. Having regard to the rival contentions, Rule.

Mr. Trivedi, learned Additional Government Pleader has waived service of notice of Rule on behalf of the respondents. The appeal is, taken up and heard for final decision.

We have perused the record.

2. The facts involved in present appeal can be summarized thus:

2.1 The appellant-Cooperative Union is a State Level Body setup for the promotion and development of cooperative movement in the State and is, inter-alia, engaged in imparting education and training pertaining to co-operative sector. In this context, it is further claimed by the appellants that the appellants are wholly dependent on the State Government for funds for effectively discharging its functions and duties and for its smooth functioning.

2.2 It transpires from the record that in view of the shortage of funds, the Chairman of the appellants had asked for additional grant and after rigorous fallow-up and lot of persuasion, the Government had passed resolution (hereinafter referred to as "GR") dated 31.03.1989 sanctioning a sum of Rs.20 lacs. Subsequently in November-1989, the respondent-Government passed another GR dated 18.11.1989 and sanctioned loan in the sum of Rs.51 lacs.

2.3 The respondent-Government claims that the said amounts were sanctioned and paid as "loan", while the appellants want it to be treated as "grant".

2.4 While making and issuing the said GRs dated 31.03.1989 and 18.11.1989 sanctioning the loans, identically worded Clause No.2 to the effect that the terms of the loans will be conveyed subsequently, was incorporated in the said G.Rs.

2.5 It appears that the above referred two GRs were followed by the GR dated 26.10.1990 wherein it was stipulated and declared that the loans in the sum of Rs.20 lacs and Rs.51 lacs sanctioned vide GRs dated 31.03.1989 and 18.11.1989 respectively were "interest free loan".

2.6 About one year thereafter another GR dated 19.11.1991 was issued whereby the State Government, purportedly, prescribed the conditions applicable to the said loans which included the Clause No.1 which provided that the loans will carry interest @ 12% p.a. 2.7 It appears that on the strength of the GR dated 19.11.1991, the respondent-Government demanded payment of the loan amount (principal amount) with interest calculated at the rate of 12% per annum.

2.8 The appellants could not and did not comply the demand. Hence a show cause notice dated 22.01.1999 was issued by the respondent-Government. The appellants requested for personal hearing, which, allegedly, was granted in such a manner that the appellants could not attend the hearing due to very short gap between the receipt of the intimation and the date of hearing. Hence, request for another date for personal hearing was made by the appellants. However, instead of any reply, the appellants received the order dated 13.03.2000 which was followed by the order dated 31.03.2000 modifying the previous order dated 13.03.2000. Aggrieved by the said orders, the appellants preferred the writ petition which has been rejected by the judgment dated 24.06.2008. The said decision is impugned in present appeal.

3. It appears that at the time of admission hearing of the petition and while making the order for interim relief, the appellants were directed to make the payment of the principal amount. During the hearing, it has been submitted that the principal amount has already been paid. Now, the dispute survives only qua the "interest liability".

4. Mr.Joshi, learned Senior Counsel has contended that the appellants have no independent source of income, hence the appellants are wholly dependent upon the funds from the State Government. It is contended by the appellant that it has been entrusted with the duty of discharging the function which, as such, is State's obligation. The State is, thus, obliged to provide sufficient funds. The funds were being made available by way of grant and also from the contribution paid by the cooperative societies towards the education fund. However during the period from July-1984 to August-1997 the said share was not available therefore, the appellants had to request the State Government for additional grant which came to be sanctioned vide the GRs dated 31.03.1989 and 18.11.1989. He has submitted that the controversy has arisen because the respondents have treated the "grant" as "loan" and that too as "interest bearing loan" whereas by virtue of the GR dated 26.10.1990 it was made abundantly clear that the sanctioned amount was "interest free loan". He has submitted that having sanctioned the amount without interest burden, the respondents cannot subsequently modify the terms. He has also submitted that, even otherwise, the impugned decision to charge and claim interest is unjustified and that the impugned orders could not have been passed, in exercise of the provisions under Section 157 of the Act, without proper adjudication. He also assailed the impugned orders on the ground of violation of principles of natural justice.

4.1 Per contra, Mr.Trivedi, learned Additional Government Pleader has submitted that the amount sanctioned and paid to the appellants was by way of loan and that it was made abundantly clear by virtue of Clause No.2 of the said two GRS that the terms and conditions of the loan would be prescribed and conveyed subsequently. In pursuance of the said provisions, the terms of the loan were specified vide the GR dated 19.11.1991 and that therefore, the appellants cannot deny the liability to pay the amount towards interest. He submitted that in light of the said Clause No.2 of the said two GRs, the doctrine of promissory estoppal is not attracted or applicable in present case. With regard to the GR dated 26.10.1990, Mr.Trivedi referred to and relied upon the affidavit made by the Deputy Secretary and submitted that the said GR dated 26.10.1990 and particularly the phrase "interest free loan" was an inadvertent mistake and that therefore, the appellants cannot take disadvantage of such mistake. He submitted that the respondent-Government never intended to sanction "interest free loan". He also submitted that for almost 9 years the appellants did not challenge, the GR dated 19.11.1991 and that therefore also, the challenge should fail. He submitted that the petition has been rightly rejected by the impugned judgment.

5. At the outset, it deserves to be noted that the real cause of the dispute is the GR dated 19.11.1991 imposing the liability to pay interest on the loan amount.

Re:-

"Grant" or "Loan".

6. The appellants' contention that the amounts in the sum of Rs.20 lacs and Rs.51 lacs sanctioned vide GRs dated 31.03.1989 and 18.11.1989 should be considered as "grant" and not as "loan"

because the appellants are a non-profit organization and have no independent source of income except the funds from the Government and because it is discharging State's function, does not appeal to us. Though, on first encounter the reasons urged in support of the submission sound interesting and captivating, actually they are equally unconvincing in view of the clear language and terms of the said resolutions and in our view, they are not sustainable.

6.1 True it is that the appellants had requested for "grant", however undisputedly the said request was not accepted. The Government agreed to make funds available with clear stipulation that the amounts were to be made available by way of "loan". The appellants-petitioners with full knowledge and consciousness accepted the amounts, as "loan".

6.2 Furthermore, unless there is any statutory obligation cast on the respondent-State to make available any amount by way of "grant" or in the cases where the Government has, on its own, agreed to make funds available by way of "grant", with clear and specific stipulation, such obligation cannot be presumed, much less foisted upon the State Government.

6.3 In present case, neither any statutory obligation of such nature is cast on the respondent-State nor the amount in question was paid by way of "grant". It is not permissible to the Court to change mutual obligations and/or the character of the transaction and to direct the respondent-State to treat the amounts in question as "grant". Therefore, the said submission or the request is unsustainable and cannot be entertained.

Re:- Promissory estoppal.

7. In light of these facts the appellants would contend that the said GR dated 26.11.1990 was issued in furtherance of the Clause No.2 in the said two GRs dated 31.03.1989 and 18.11.1989, hence the stipulation and declaration in the said GR dated 26.10.1990 would constitute the condition in respect of the loans sanctioned vide GRs dated 31.03.1989 and 18.11.1989, as contemplated under Clause No.2 of the said two GRs. The appellants would further contend that having made such clear stipulation the Government subsequently cannot turn around and claim interest on the loan amount. The contention based on the doctrine of promissory estoppal is misconceived and not acceptable.

7.1 There is nothing on record to establish that at any point of time prior to the GRs dated 31.03.1989 and 18.11.1989 and/or while sanctioning the said loans, in March-1989 and November-1989, the respondent-Government had in any manner, either in writing or by conduct, represented and/or promised that the loans would be "interest free" loan. Even in the said GR dated 31.03.1989 and/or 18.11.1989 also, it is nowhere stated that the loan is "interest free loan". Besides this when the appellant, so as to tie-up its own financial difficulties, requested for funds and when the respondents, in response to such request but without any such promise, sanctioned the loan the principle of promissory estoppal would not be attracted. Furthermore, the said loan amount came to be sanctioned and paid at the request of the appellants and while accepting the loan amounts (which was granted at the appellants' request) the appellants did not change nor alter its position in any manner, much less to its prejudice nor the appellant was required to, or made to, change or alter its position. Lastly, in the facts of the case, it also cannot be said that while claiming or accepting the loans the appellants had acted, in any manner, on the representation or promise by the respondent-State Government and there is nothing on record to establish that the appellant was made to believe (by the respondent-State by words or by its conduct) that the loans being made available were to be "interest free". Above all, there are even no pleadings that the appellant had acted on respondent's representation and promise and had changed its position to its prejudice.

7.2 Under the circumstances, since none of the ingredients necessary to invoke and apply the doctrine, exists in present case the doctrine of promissory estoppal will not come to the aid of the appellants. The said contention, being devoid of merits, does not deserve to be entertained and is hereby rejected.

Re:- The GRs dated 26.10.1990 and 19.11.1991.

8. This takes us to the contention that the appellants cannot be burdened with the liability to pay interest on the amounts in question, when the loan advanced in favour of the appellants was "interest free loan". In this context, the appellants have heavily relied on the GR dated 26.10.1990. According to the appellants, the said GR is abundantly clear and the respondent-State has, in clear terms, stipulated, declared and clarified that the amounts in question have been sanctioned as "interest free loan".

8.1 The submission brings in picture the Clause No.2, which is identical in both the GRs dated 31.03.1989 and 18.11.1989. The said Clause read thus:

"The conditions for the said loan of Rs.20 lacs will be informed subsequently"

8.2 The said two GRs were followed by the GR dated 26.10.1990. The relevant portion of first paragraph of the said GR (which was issued almost 12 months after the said two G.R.s containing Clause No.2) reads thus:

"Resolution:

The State Government has sanctioned interest free loan of Rs.20/- lakhs and Rs.51 lakhs to the Gujarat State Cooperative Union, Ahmedabad vide Government Resolution dtd. 31-3-89 and dtd. 18-11-89 cited at Sr.No.1 & 2 above respectively. In preamble as a new sub head is required to be opened for debiting this expenditure separately the Government is pleased to accord sanction to the opening of a new sub head of account as given below."

(emphasis supplied)

9. It is necessary to also take into account the GR dated 19.11.1991 which reads thus:

"With reference to above preamble No.(1) and (2) Government resolution Government of Gujarat has sanctioned loan of Rs.71.00 (rupees Seventy Lac only) to Gujarat State Co-operative Union, Ahmedabad. The question regarding the conditions and bids for the loan sanctioned to Gujarat State Co-operative Union was under the consideration of the Government.

Resolution:

With reference to loan sanctioned to Gujarat State Co-operative Union, Ahmedabad the conditions and bids as stated in Schedule-a attached herewith this resolution are held by the Government after careful consideration.

This order as issued under Notes dated 18-10-91 and 26-10-91 respectively of Financial Adviser and Financial department on file of even no. of this department."

9.1 The said GR dated 19.11.1991 refers to Schedule-A which contains the diverse terms purportedly prescribed in respect of the loans granted under the two GRs dated 31.03.1989 and 18.11.1989. The relevant clause is Clause-1 of the said Schedule-A of the said GR which reads thus:

" The loan will carry interest at the rate of 12% and shall be paid on the outstanding principal from time to time commencing after three years from the date of payment." (emphasis supplied) 9.2 In this backdrop, it is relevant to recall that the GR dated 26.10.1990 stipulated and declared that "State Government has sanctioned interest free loan of Rs.20 lacs and Rs.51 lacs......." whereas by the GR dated 19.11.1991, it is stipulated and declared that the loans sanctioned vide the said GRs dated 31.03.1989 and 18.11.1989 (referred to in the former GR dated 26.10.1990) would be "interest bearing loan".

9.3 It also emerges from the record that either before or even while issuing the G.R. date 19.11.1991, the earlier G.R. dated 26.10.1990 is not formally withdrawn or cancelled. Meaning thereby, two GRs containing two completely opposite or contrary and conflicting decisions are issued.

Re:- Circular dated 26.3.1992 and "Mistake"

10. It is in backdrop of the aforesaid factual aspects that the respondent's defence, which is based on the theory of "mistake" so far as the GR dated 26.11.1990 is concerned, has to be examined.

10.1 So as to overcome the anomaly and predicament which arises on account of the parallel operation of two GRs containing two contrary and conflicting decisions, the respondent Government tried to wriggle out of said GR dated 26.11.1990 and its lethal effect by advancing, the theory of "mistake" by relying on a circular allegedly issued on 26th March, 1992 (i.e. almost 16 months after the GR dated 26.11.1990) stating, inter-alia, that in the GR dated 26.10.1992, the words "interest free" was mentioned by mistake and it was clarified by the said circular dated 26.03.1992.

10.2 It is pertinent to note that even though the respondents have heavily relied on the said circular, interestingly, a copy of the said circular is not placed on record - either along with the affidavit in the petition or even in present appeal - and the exact contents thereof are also not mentioned. Hence, it is not possible to appreciate the actual effect of the said circular.

10.3 Besides this, the reference about alleged circular dated 26.03.1992 is made only in the affidavit made by Mr.Patel, Deputy Secretary in March-2007. Until then, the respondents do not appear to have made reference of and/or relied upon the alleged circular and had not claimed that there was "mistake" in the GR dated 26.11.1990. Except stating, for the first time, by way of Dy. Secretary's affidavit, that loans in question were mistakenly described as "interest free loan" in the GR dated 26.11.1990, the respondents have not produced any material to support the said explanation or plea of so-called "mistake".

10.4 On this count, it is also relevant to note that though it was after a gap of almost 12 months that the GR dated 19.11.1991 came to be issued neither in the interregnum nor even in said GR dated 19.11.1991 it is anywhere stated that the description of the loans i.e. reference to the loans in the GR dated 26.11.1990 as "interest free"

was a mistake.

10.5 In present case the respondent State has failed to produce any contemporaneous communication or notings or other material/record to demonstrate that right from inception, it was clear at the end of respondent State that the loan shall be interest bearing loan. The respondent has also failed to establish, by producing such contemporaneous record/material, that the G.R. dated 26.11.1990 was a solitary instance wherein inadvertently the words "interest free loan" were mentioned and contemporaneous contrary material/notings is available on record.

10.6 Merely pleading "mistake", in such cases, is, ordinarily, not enough. Such plea or allegation or defence must be duly supported and established by contemporaneous material. Ordinarily such plea cannot be substantiated and pressed in service, merely by making an affidavit without supporting contemporaneous material. In present case the respondent has raised the plea on ground of "mistake"

but has not produced any contemporaneous material in support of such plea, except the affidavit made by the Deputy Secretary. Even the averments made in the said affidavit raising the plea on the ground of "mistake" are not supported by any contemporaneous material. Actually, by the said affidavit the respondent State has tried to supplement and add an explanation to escape the effect of the resolution dated 26.11.1990. The manner in which the said plea is raised for the first time in the affidavit made in 2007 it appears that it is only by way of afterthought that the affidavit is made with a view to wriggle-out of the effect of G.R. dated 26.11.1990, more particularly because any material, much less contemporaneous material-even the so-called circular dated 26.3.1992-is not placed on record along with the affidavit, 10.7 The respondent-State has sought to rely on the alleged circular without producing copy thereof and without establishing its existence, however, in absence of the said circular and without examining its contents we cannot take cognizance of the said circular and it cannot be taken into consideration. In absence of the circular on the record, and unless its existence is duly established and its contents are examined, with reference to the controversy and in the context of the said plea, the said submission cannot be accepted and benefit of any nature on the strength of the alleged circular cannot be given. The respondents have failed to establish, by cogent material, the so-called "mistake" and that the G.R. dated 26.11.1990 i.e. the stipulation therein was mentioned by mistake.

11. Now, so far as the GR dated 19.11.1991 is concerned, it deserves to be noted that the said GR dated 19.11.1991 has been issued without formally withdrawing/cancelling the earlier GR dated 26.11.1990 and while the G.R. dated 26.11.1990 is in existence and continues to be in operation.

12. Ordinarily two opposite and conflicting decisions and direction having conflicting effect cannot coexist and operate simultaneously. The GRs dated 26.11.1990 and 19.11.1991 are of such nature i.e. the said G.R.s contain opposite and conflicting decisions and yet without withdrawing/cancelling or even without modifying the earlier GR dated 26.11.1990, the GR dated 19.11.1991 has been issued. The said GR dated 19.11.1991 is not issued in modification of or in supersession of the earlier GR dated 26.11.1990. Such is not even the case and defence of the respondents.

12.1 Actually what is pleaded is "mistake", and if "mistake"

occurred then the "mistake" has to be "corrected". A plea on ground of mistake is antithesis of implied withdrawal/modification more so when it entails i.e. has resulted into or is likely (by virtue of its continuance or by its rectification) to result into civil consequences, such as financial liability/burden. The respondent seem to be aware of the position, hence they claimed that the "mistake" was corrected by issuing the so-called circular dated 26.3.1992.

12.2 There is nothing on record to establish that before the GR dated 19.11.1991 came to be issued, the GR dated 26.11.1990 was actually withdrawn/cancelled. Even the GR dated 19.11.1991 does not contain such direction or clarification i.e. it does not stipulate and/or declare that the earlier GR dated 26.11.1990 is withdrawn or stands cancelled by virtue of the very GR dated 19.11.1991, and as noted above, that is not even the case urged by the respondent.

12.3 If at all the stipulation and declaration in the GR dated 26.10.1990 was contrary to any existing, operating and binding decision already obtaining on the record and the said G.R. was issued by mistake, then for nullifying the effect of the declaration and stipulation made vide GR dated 26.11.1990, the said GR should have been formally withdrawn and cancelled, either before issuing the contrary GR or it could have been simultaneously withdrawn by incorporating necessary stipulation and clarification in the GR dated 19.11.1991.

12.4 However, as noted above, the earlier GR dated 26.10.1990 is not formally withdrawn. Meaning thereby, the GR dated 26.11.1990 was alive and continued to be in operation and while the effect of the stipulation and declaration therein continued to be in operation, the GR dated 19.11.1991, containing completely opposite and contrary decision and direction came to be issued. Consequently though two GRs containing opposite and conflicting stipulations and/or directions, ordinarily, cannot co-exist, the respondents have, by issuing two such GRs - one after another and without withdrawing the former - brought about such situation.

Re:- The disputed order

13. In this backdrop it is pertinent that the relevant aspects-viz. whether the G.R. dated 26.11.1990 was withdrawn or not and which out of the two G.R.s is to prevail and operate and whether the loans were "interest free" or not, could have been clarified only by the loan granting-sanctioning authority i.e the Government and not by the adjudicating (who passed the order) authority.

13.1 What is more relevant and vital is the fact that in the aforesaid situation and in absence of clarification by the respondent government as regards the aforesaid aspects, the Adjudicating Authority (who has passed the impugned orders) could not have, on its own, ignored and overlooked the GR dated 26.11.1990 and that too despite the fact that the appellant had, in its reply dated 20.07.1999 (in response to the demand notice) expressly relied on the GR dated 26.11.1990. The Adjudicating Authority, on its own, could not have assumed that the GR dated 19.11.1991 would be applicable, more so when before it the plea on ground of "mistake" was not even raised (the impugned order does not contain such contention by the respondent). The said aspects could have been clarified only by the State Government/Competent Authority and the Adjudicating Authority could never have adorned the cap of the State Government.

14. In such situation all that the Court can hold is that the two GRs (i.e. dated 26.11.1990 and 19.11.1991) containing two conflicting and opposite decisions and directions cannot coexist and without formally withdrawing/cancelling the earlier GR dated 26.11.1990 (purportedly prescribing the conditions applicable to the loans in question and stipulating that the loans are "interest free") and while such earlier stipulation is in operation, new stipulation or new condition- that too which are contrary to the condition which is in operation - could not have been, issued. In absence of necessary and appropriate clarification by the State, the Court (much less the adjudicating authority) cannot take any decision in preference of one G.R. or against the other G.R. 14.1 Despite such position, the Adjudicating Authority, who has passed the impugned orders, has done so and that too even without addressing and without taking into account the aforesaid aspects and that too when the theory of "mistake" was not even urged before it whereas the appellants had specifically referred to and relied on the GR dated 26.11.1990. The Adjudicating Authority, on its own, decided to rely on/take into account the GR dated 19.11.1991, and the authority has simply ignored the GR dated 26.11.1990. Not only this, the Adjudicating Authority has not even recorded such decision, much less reasons for such decision.

14.2 It cannot be denied that in the event of mistake (provided "mistake" is duly established) it is always open to the respondent-State to take necessary corrective measures in accordance with law.

However, in absence of any such corrective measures by the Government, the Adjudicating Authority could not have assumed either way and ought not have passed the impugned order by simply ignoring the GR dated 26.11.1990 and/or on assumptions regarding the GR dated 19.11.1991 and on such assumption ought not have issued directions for recovery of the amounts in question in absence of corrective measures by the State Government and/or before or without obtaining clarification in this regard.

15. The impugned orders are, therefore, unsustainable. The relevant aspects have not been addressed and have not been taken into account by the authority while passing the order, which vitiates the impugned order.

16. In such facts and circumstances i.e. when the two resolutions containing contrary and conflicting stipulations and opposite directions are simultaneously in operation, the Court would refrain from pronouncing any decision or view on the above mentioned issues. When the respondents have failed to establish and prove, by cogent material, that the GR dated 26.11.1990 was issued by mistake and when the respondents have also failed to establish that either before issuing the GR dated 19.11.1991 and/or by virtue of the said GR dated 19.11.1991, the earlier GR dated 26.10.1990 was formally withdrawn and when there is no clarification or order by the competent authority, the Court is left with no option but to remit the matter to the Adjudicating Authority who may after taking into account the aforesaid discussions and after taking such steps, in accordance with the law, as may be necessary so as to get the aforesaid controversy clarified and settled by proper and competent authority, pass appropriate order.

In view of the forgoing discussions, the impugned orders dated 13.3.2000 and 31.3.2000 are set aside. The order passed by the learned Single Judge, therefore, would not survive. The case is remitted to the Adjudicating Authority who shall, after taking into account the aforesaid discussions and after taking such steps, in accordance with the law, as may be necessary so as to get the aforesaid controversy and dispute clarified and settled, pass appropriate order after hearing the petitioners. The appeal stands disposed off. No order as to costs.

(S.J. Mukhopadhaya, C.J.) (K.M. Thaker, J.) rakesh/ Top

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