Oswal Chemicals And Fertilizers Ltd. ... vs Union Of India (Uoi) And Anr. on 6 January, 2006

[Cites 22, Cited by 0]

Delhi High Court

Oswal Chemicals And Fertilizers Ltd. ... vs Union Of India (Uoi) And Anr. on 6 January, 2006

1. Petitioner No. 1 is a limited company engaged in the business of manufacture of fertilizers and other related activities. The petitioners are aggrieved by the action of the respondents in formulating the retention price Page 219 for fertilizers manufactured by the petitioner company thereby affecting the subsidy element. The petitioner company claims hostile discrimination and violation of policy, which has resulted in the petitioner company being deprived of subsidy running into crores of rupees.

2. Respondent No. 1/Union of India has promulgated The Fertilizer (Control) Order, 1957 (hereinafter to be referred to as, the said Order) exercising powers under The Essential Commodities Act, 1955 (hereinafter to be referred to as, the said Act). The price of urea is controlled under the said Order. Thus, there is a statutory fixation of the price at which the fertilizer can be sold to farmers. The unit manufacturing the fertilizer is granted subsidy in view of the price, which is fixed statutorily to ensure due return to the manufacturing unit. In order to determine the quantum of subsidy, a retention price is fixed for each of the unit and the difference between the retention price and the price at which urea is sold to the farmers is reimbursed to each unit as a subsidy. The retention price takes into consideration various factors like the actual costs of raw material, utilities, conversion cost, capital related charges and marketing cost. The capital related charges are stated to cover interest on borrowed funds, depreciation and a 12% return on the net worth at normative level of capacity utilization. The norms for fixation of this retention price are stated to be broadly prescribed vide Government Resolution dated 01.11.1977.

3. The Government of India issued a Letter of Intent to M/s. Oswal Agro Mills Ltd. on 12.07.1989 for grant of industrial license for setting up a gas-based fertilizer plant at Shahjahanpur in Uttar Pradesh. This Letter of Intent was subsequently transferred to M/s. Bindal Agro Chemicals Ltd., which changed its name to M/s. Oswal Chemicals and Fertilizers Ltd., petitioner No. 1 herein. The industrial license prescribed a number of conditions and additional conditions. The relevant additional conditions are reproduced hereunder:

(v) The promoters share capital contribution in the new company shall not be less than 10% of the project cost;

(vi) The debt equity ratio for this project will be 2.5:1 as agreed to by the company;

(xv) The subsidy payable to the unit would be subject to the capital cost of Rs. 695 crores as proposed and the further increase in the subsidy will be agreed to. However, the new Government policy regarding the normative retention price for the new gas based plants as and when it is notified would be applicable to this Unit also.

4. The project was undertaken by the petitioner company, but there were delays in the project. The petitioner company alleges that the reasons for delay were solely attributable to the Government, which included delay in - grant of deemed export benefits, grant of special imprest license, issue of customs notification for import of duty exempt material; allocation of foreign exchange; permissions to the petitioner company to open Letters of Credit; and issue of bulk import license. Representations are stated to have been made by the petitioner company on 26.07.1991 and 18.05.1992 bringing forth these issues.

5. The petitioner company received a communication dated 07.01.1993 from respondent No. 1/UOI in response to the request of the petitioner Page 220 company dated 18.05.1992 for revision in capital cost, which was original fixed at Rs. 695 crores. The said communications are as under:

May 18, 1992 Revision in Capital Cost - Shahjahanpur Fertilizer Project I would like to thank you for the kind courtesy extended to me when I called on you on 14.05.1992 to discuss the matter of revision of capital cost in respect of Shahjahanpur Fertilizer Project being implemented by us. You were kind enough to appreciate the reasons due to which the implementation of the project had suffered till very recently thereby pushing up the cost of the project beyond originally envisaged.

As brought out in our various communications, the Financial Institutions are not willing to take a view on financing of this project due to the fact that as per the Letter of Intent issued to us by the Department of Fertilizers, the subsidy payable to us is to be calculated on a fixed capital cost of Rs. 695 crores. As is well known, the project is not likely to cost less than Rs. 1,250 crores as per todays estimates and as per the information available in respect of similar projects being executed by other promoters presently. The fact that the cost overrun beyond Rs. 695 crores will not be considered for giving any return to us makes this project economically unviable and therefore renders it unfit for financing. A letter dated 15.05.1992 from the Industrial Credit and Investment Corporation of India Limited (ICICI) is enclosed for your kind consideration.

While we expect that due to circumstances explained in our various communications, we are treated at par with other promoters for calculation of subsidy, in the interest of early and amicable disposal of this matter by the Government of India, we are agreeable to fixing our capital cost at Rs. 1,225 crores for this project. The significant assumptions while arriving at this cost are:

1. Availability of foreign exchange at official rate to the extent of 40% of their requirements to our vendors who are importing their requirements of raw materials and components for supply of equipment to our project.

2. FE rates prevailing as under:

- Official rate of one US Dollar = Rs. 6.00

- Market rate of one US Dollar = Rs. 30.50 Variations beyond the above rates will have a suitable impact on the capital cost.

3. Mechanical completion by December, 1993.

I would like to take this opportunity to reassure you that we are fully determined to complete this project at the earliest possible and request you to help clear the hurdles in our way so that we can take our country a step forward towards self reliance in production of nitrogenous fertilizers.

Should you require any further information, we shall be pleased to furnish the same to you.

Page 221 New Delhi, January 7, 1993 Subject: Shahjahanpur Fertilizer Project - Removal of the ceiling on capital cost for the purpose of subsidy entitlement.

Sir, I am directed to refer to your letter dated 18th May, 1992, on the above mentioned subject and to state that in modification of the conditions laid down in the Letter of Intent dated 12th July, 1989 and 31st August, 1989, it has been decided that for the purpose of calculating the cost escalations, only those cost escalations which pertain to delays attributable solely to the Government, will be recognized for the purpose of subsidy as long as subsidy scheme continues and that the actual retention price and the consequent subsidy will be determined by the Fertilizer Industry Coordination Committee on the completion of the project on the basis of principles applicable at that time to other fertilizer manufacturing units, without applying the ceiling of the capital cost of Rs. 695 crores for the purpose of subsidy in respect of your fertilizer project at Shahjahanpur. You are further informed that in any case the retention price as finally determined for your project shall not exceed the retention price determined for either of the two fertilizer projects presently under execution along the HBJ pipeline.

6. The petitioners were, however, aggrieved by this letter of 07.01.1993 insofar as it imposed the condition of linking the retention price of the petitioner company's unit with either of the two units under execution at that point of time being M/s. Tata Chemicals Limited (for short, TCL) and M/s. Chambal Fertilizers and Chemicals Limited (for short, CFCL). The petitioner company wanted that the retention price must be fixed on the basis of the petitioner companys capital cost calculated on the basis of delays attributable to the Government without being fettered by the capital cost of Rs. 695 crores mentioned in the Letter of Intent. In this behalf, the petitioner company addressed communications dated 28.01.1993, 11.02.1993 and 21.01.1994.

7. The petitioner company thereafter received a communication dated 21.01.1994 from respondent No. 1/UOI to the following effect:

D.O. No. 182/3/88-FS.II/175 21st January, 1994 Kindly refer to your letter No. BACL/ND/93 dated 21st January, 1994, whereby you have asked for a confirmation that for the purpose of calculation of subsidy, the actual capital cost will be considered by FICC.

2. The position in this regard has already been conveyed to your company vide this Department's letter of even number dated 7th January, 1993.

3. This is to further clarify that the question of recognition of capital cost will be taken up by the Fertilizer Industry Coordination Committee (FICC) after the completion and commissioning of the Shahjahanpur project as per the extant policy of the Government regarding subsidy. This is the practice which is followed by the FICC in the case of all fertilizer projects covered under the Retention Price-Cum-Subsidy Scheme of Fertilizers.

Page 222

8. The petitioners, thus, understood the aforesaid communication to convey that the revision price in the case of the petitioner unit would be fixed after the petitioner project was commissioned and the capital cost for the same would be determined by Fertilizer Industry Coordination Committee (for short, FICC) as per the principles applied to other fertilizer units. The petitioner company's plant was finally completed and commissioned in December, 1995.

9. It may be noticed that there are two stages for fixation of the retention price. It is fixed provisionally and also finally. Till fixation of the final retention price (for short, FRP), subsidy payments are made on the basis of the provisional retention price (for short, PRP). The PRP in the case of the petitioner company was calculated adopting the criteria of TCL and CFCL and taking into consideration the lower of the figures in case of the said two units. There has been numerous communications thereafter on this issue. It is not necessary to go into details of these communications, but suffice it to say that the petitioner company claimed that it was getting a return of only about 7% as against the required 12% to be achieved at normative production levels under the Government Resolution dated 01.11.1977.

10. A detailed representation was sent by the petitioner company on 24.08.2000 making the following request:

6. We therefore request you to kindly

a) Remove the ceiling on retention price payable to our unit.

b) Delink the fixation of retention price of our unit from Chambal Fertilizers and Tata Chemicals;

c) Calculate the capital cost permissible to our unit as per the extant policy as promised to us in letter dated 21.01.1994 and calculate the retention price with reference to such capital cost to give us 12% post-tax return as per the Government policy.

d) Make good to us the differential amount denied to us from December, 1995 till date.

11. The petitioner company was thereafter given opportunity of hearing and subsequent communications with respondent No. 1/UOI and FICC have been placed on record. The petitioner company furnished information about the actual cost of the project and the various components of such cost.

12. The petitioner company has stated that in January, 1993, Project and Development India Ltd. (A Government of India Undertaking) (for short, PDIL) had prepared a revised feasibility report of the project whereby the estimated capital cost of the petitioner companys project was Rs. 1,284 crores.

13. ICICI Ltd., the lead financer of the petitioner companys project, had prepared its own appraisal report working out the capital cost to Rs. 1,325 crores, which was subsequently revised to Rs. 1,367.80 crores. In the discussions with FICC, the petitioners came to understand that FICC was introducing an element of selective disallowance while arriving at the capital cost of the petitioner companys unit. Thus, instead of allowing the capital cost as actually incurred by the petitioner company (which is the practice Page 223 stated to have been followed for other units), it was only allowing those elements of capital cost, which was lower as estimated by PDIL regardless of the actual cost. This was despite the fact that the actual cost incurred by the petitioner company was lower than the estimates of PDIL when taken as a whole. The item-wise difference was sought to be explained by the petitioner company on account of grouping of cost. Since the PRP is stated not to have been revised, the petitioner company claims to have suffered huge losses on account of the element of subsidy being much less than it ought to have been.

14. The petitioner company made a representation on 24.08.2002 in this behalf, but received a response dated 17.04.2002 in respect of the removal of ceiling on the retention price by only drawing the attention of the petitioner company to the Departments letter dated 07.01.1993. There were further representations made by the petitioner company, but to no avail. Not only this, a circular was issued on 04.06.2002 announcing new policy parameters for the 7th/8th pricing period and the petitioner company had imminent threat of recoveries being made from future subsidies due to the petitioner company.

15. The petitioners has, thus, filed the present writ petition making a three- fold grievance and challenging the action of the respondents in (i) fixation of ceiling on the retention price payable to the petitioner company linked with the other two units, namely, TCL and CFCL; (ii) refusing to calculate the capital cost in terms of the letters dated 07.01.1993 and 21.01.1994; and (iii) rejection of the petitioner companys request for calculation of the retention price and payment of difference paid from 1995 till date.

16. Learned senior counsel for the petitioners drew attention of this Court to the Government Resolution dated 01.11.1977 where it is stated as under:

2. The system provides for a fair ex-factory retention price per tonne of Urea (hereinafter referred to as retention price) for each plant based on a capacity utilization 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 31st March, 1979 for each of the 21 Urea manufacturing plants.

17. On the basis of the aforesaid, learned senior counsel for the petitioners emphasized that there were three important aspects to the policy for determination of the retention price (i) the retention price has to be determined for each plant; (ii) the determination of the retention price is to be based on capacity utilization of 80%; and (iii) there should be a 12% post- tax return on net worth.

18. It was, thus, submitted that the letter of willingness to grant license under The Industries (Development and Regulation) Act, 1951 dated 12.07.1989 has to be understood in that context. It was, however, not disputed that the said letter did impose three conditions of the promoters share capital Page 224 contribution being not less than 10%, debt equity ratio (for short, DER) of 2.5:1 and the subsidy being payable to the unit subject to capital cost of Rs. 695 crores.

19. The representation of the petitioner company dated 18.05.1992 had emphasized that the delay in execution of the project had increased the cost and the financial institutions were not willing to take a view on financing of the project since in terms of the Letter of Intent issued by respondent No. 1/UOI, the subsidy payable was to be calculated at a fixed capital cost of Rs. 695 crores, even though the actual cost would not be less than Rs. 1,250 crores as on that date and this was making the project unviable. The petitioner company had expressed its willingness for fixing the capital cost at Rs. 1,225 crores of the project. On information being sought from the Government about the period and the nature of delay and the cost overruns, a reply was sent. On a perusal of the material submitted by the petitioners, respondent No. 1/UOI had taken a stand vide letter dated 07.01.1993 that for purposes of calculation of cost escalation, only those cost escalation which were due to the delays attributable solely to the Government would be recognized for purposes of subsidy and the actual retention price and the consequential subsidy would be taken by the FICC on completion of the project on the principles applicable at that time to other fertilizer manufacturing units without applying the ceiling of capital cost of Rs. 695 crores. The petitioner company had, thus, expressed hope vide letter dated 28.01.1993 that in due course of time the Government would consider removal of the ceiling since implementing the project with a ceiling on the price would put the petitioner company in a considerable disadvantage as compared to other similar plants.

20. In view of the aforesaid factual matrix, learned senior counsel for the petitioners submitted that the mode and manner of calculation of the actual cost is erroneous. The financial reports of both PDIL and ICICI were available and it was not open to the respondents to pick up components from different reports to arrive at a lower figure. It was submitted that the respondents were not willing to even accept the lower valuation of the two reports in to, but were taking up component of one report and matching with the other component of the other report to take the lower figure. This had a fallacy since the mode and manner of calculation of a particular component and as to what it included would differ from report to report. Another factor emphasized was that such a practice was not followed either in the case of CFCL or TCL.

21. The second aspect raised is about the DER. In this behalf, it was submitted that no prejudice is caused to the respondents even if the equity component is higher. This was so as the debt component will have an interest element and the DER should only be treated as a ceiling and not that it cannot be lower than the ratio fixed for purposes of calculation. Learned senior counsel for the petitioners further submitted that different DERs will result in different subsidies which itself would be discriminatory.

22. Learned senior counsel for the petitioners emphasized that the subsidy regime must conform to the policy dated 01.11.1977 assuring 12% post-tax return. Thus, any methodology, which defeats this fundamental principle, would be contrary to the policy itself and not legally sustainable. Page 225 The FICC, respondent No. 2 herein, in its 75th Meeting had the complete data, reports and records of the capital cost of the petitioner company and after in-depth exercise the capital cost was fixed at Rs. 1,162 crores. However, while fixing the FRP after filing of the writ petition, the respondents have taken a different direction on the basis of element-wise cost for each component of the project cost in the Techno Economic Feasibility Report as given by PDIL and reducing the FRP to Rs. 1,096 crores. It was, thus, submitted that this has been done by following a zig zag manner, which would not be permissible as different reports may show different heads for each component. In case of CFCL and TCL, the capital cost of the said two companies as per the report of their financial institutions was taken as the basis and, thus, there was no reason to follow a different methodology in the case of the petitioner company. In this behalf, learned senior counsel has also relied upon a letter dated 29.05.2002 of PDIL wherein it was stated as under:

Sub: Shahjahanpur Urea Plant - Project Report - January, 1993 Dear Sir, We refer to your letter dated 16th May, 2002 requiring us to give the elementwise cost for each component of project cost given in our revised Techno Economic Feasibility Report for your Project at Shahjahanpur prepared by us in January, 1993. In this connection, we wish to inform you that the said report was prepared report gave cost estimates under broad categories of Institutions/Banks. Accordingly the project report gave cost estimates under broad categories of various items of project cost. These cost estimates were based on the past experience of our project cell as well as work done already on the project. The equipment wise value was not given in the project report as the same was neither available nor it was required to be given. The equipment wise value has never been given in other similar Techno Economic Feasibility Reports. It is also not possible at this stage to give any further break up of cost estimates given in our report. As such, it is not possible to compare the actual elementwise cost with Project cost estimates as given in our report.

The targets of implementation given in the project report were based on an assumed Zero Date of 01.04.1992. This was of course subject to immediate availability of funds for implementing the project.

23. Learned senior counsel for the petitioners, thus, emphasized that the view even of PDIL was that it was not possible to compare actual element-wise cost with the project cost assessment.

24. Learned senior counsel for the petitioners emphasized that there was no occasion nor was it permissible to re-fix the project cost at the time of assessment of the FRP. It is only in the eventuality that at the time of fixation of PRP, the variables and operating data is not available, would there be occasion to consider such variables and data in addition at the stage of fixation of the FRP. In the case of fixation of the capital cost, there is no change. It was, thus, submitted that there was not even a case made out that the fixation of capital cost at the stage of determination of the PRP suffered from any inaccuracies, especially since all the material was before the FICC when the PRP was fixed and in this behalf the minutes of the 75th Page 226 Meeting have been referred to. The minutes have been referred specifically to emphasize that the stand of the respondents was calculation of PRP on provisional basis is resorted to in the absence of operating data from the units and that the provisional price initially is fixed based on unverified data. It was further recorded in the minutes that the retention prices are provisional in nature as determination of FRP is dependent on unit-wise evaluation of various inputs and expenses which is a time consuming process. The project cost was not dependent on any operating data/variable data. It was, thus, contended that the FRP has been fixed not only contrary to the Government Resolution dated 01.11.1977, but also contrary to the consistent policy adopted by the respondents over a period of time. The FRP has been made lower than even the two other units so as to defeat the petitioners' challenge to the ceiling of its price and co-relation with other two units.

25. Insofar as the issue of DER is concerned, the same is sought to be explained by submitting that all that it implied was that the contribution of promoters cannot be less than 1 in case if the borrowing from financial institutions was 2.5. This does not prevent the promoters from bringing in more money, especially since the project cost had gone up. The financial institutions were reluctant to bring in more money and, thus, the petitioner company had no option but to make good the deficiency through promoters and, thus, the petitioner company should be entitled to claim the benefit of interest paid by it on the said borrowings from private sources. Starting from the year 1998, the PRP was fixed by taking the DER on actuals and this was the practice for similarly placed units. Subsidy was, thus, being released from 1998 onwards till the time when the FRP was determined when the retention price was sought to be calculated by returning to the fixed DER of 2.5:1. It was submitted that this was arbitrary and illegal and there was no reason to vary the principle followed while calculating the PRP. The DER was submitted to have relevance only when the capital cost was to be kept at Rs. 695 crores and once that was allowed to be given a go-bye, the FRP had to be assessed only on the basis of actual DER. It is only by this methodology, it was submitted, that the mandate of the policy of 12% post-tax return could be achieved. The DER of 2.5:1 was a stipulation in the license and was not part of the scheme and, thus, could not be said to have relevance for purposes of determination of the subsidy.

26. Learned senior counsel for the petitioners did not dispute the communication dated 15.01.1997 addressed by the petitioner company to respondent No. 1/UOI, which is as under:

15 January, 1997 Dear Sir, Removal of Ceiling on Retention Price of Urea produced at our Shahjahanpur Plant We are grateful to you for the opportunity to our Chairman Shri Abhey Oswal and the undersigned on 14.01.1997 to discuss the above matter when Shri Anil Kumar, Secretary (Fertilizers) and Shri K.K. Jaswal, Jt. Secretary (Fertilizers) were also present.

Page 227 During the discussions, we took the opportunity of pointing out that the purpose of the ceiling on Retention Price was to keep the capital cost of the plant under control so that it does not soar unduly higher than other plants. We have brought to your kind notice that we have been able to complete the plant at a capital cost of Rs. 1,368 crores which is comparable to other similar plants. In our various representations to the Department of Fertilizers, we have only sought a post-tax return of 12% on the net worth as guaranteed by the Government of India in its resolution dated 01.11.1977.

The Department of Fertilizers is also aware that in spite of our best efforts in which we were duly assisted by the Department of Fertilizers by its intervention in writing to the Ministry of Finance, the company was unable to obtain higher amount of term loans and was finally sanctioned only a sum of Rs. 555 crores as debt. However, the company is willing to concede that its Retention Price may be calculated at a deemed Debt Equity Ration of 2.5: 1. In this manner, the company will be able to obtain a return only at the rate applicable to long term loans in respect of the additional amount raised by promoters/Group Companies to meet the gap in means of finance. This shall reduce the retention price per tonne of Urea. On this basis, we are enclosing a calculation of Ad-hoc price on both the alternatives which clearly shows that even at the ad-hoc stage, our retention price works out to be higher than Rs. 6,547/- being presently given to us.

We request that the above points may kindly be taken into consideration while taking a view on our representation for removal of ceiling on the Retention Price.

27. It was, however, submitted that not much reliance can be placed on the said letter insofar as the concession made therein about the willingness of the petitioner company to concede that its retention price may be calculated at deemed DER of 2.5:1 is concerned. This is so as the respondents are stated never to have acted upon the said letter and from 1998 onwards, the retention price was being calculated on the basis of actual DER. It was further submitted that there can be no DER which results in preventing the petitioner company of the benefit of 12% post-tax return as the same would be arbitrary and contrary to the policy dated 01.11.1977.

28. Learned senior counsel for the petitioners in this behalf referred to the judgment of the Constitution Bench of the Supreme Court in Olga Tellis and Ors. v. Bombay Municipal Corporation and Ors., to emphasize that if a representation is made to the citizens to act on the same to their prejudice, then the authorities cannot resile from the representation and must make the same good. It was held that there can be no estoppel against the Constitution. It was observed in paras 28 and 29 as under:

28. It is not possible to accept the contention that the petitioners are estopped from setting up their fundamental rights as a defense to the demolition of the huts put up by them on pavements or parts of public Page 228 roads. There can be no estoppel against the Constitution. The Constitution is not only the paramount law of the land but, it is the source and sustenance of all laws. Its provisions are conceived in public interest and are intended to serve a public purpose. The doctrine of estoppel is based on the principle that consistency in word and action imparts certainty and honesty to human affairs. If a person makes a representation to another, on the faith of which the latter acts to his prejudice, the former cannot resile from the representation made by him. He must make it good. This principle can have no application to representations made regarding the assertion or enforcement of fundamental rights. For example, the concession made by a person that he does not possess and would not exercise his right to free speech and expression or the right to move freely throughout the territory of India cannot deprive him of those constitutional rights, and more than a concession that a person has no right of personal liberty can justify his detention contrary to the terms of Article 22 of the Constitution. Fundamental rights are undoubtedly conferred by the Constitution upon individuals which have to be asserted violated. But, the high purpose which the Constitution seeks to achieve by conferment of fundamental rights is not only to benefit the community. The Preamble of the Constitution says that India is not only to benefit the community. The Preamble of the Constitution says that India is a democratic Republic. It is in order to fulfill the promise of the Preamble that fundamental rights are conferred by the Constitution, some on citizens like those guaranteed by Articles 15 , 16 , 19 , 21 and 29 and, some on citizens and non-citizens alike, like those guaranteed by Articles 14 , 21 , 22 and 25 of the Constitution. A concession made by him in a proceeding, whether under a mistake of law or otherwise, that he does not possess or will not enforce any particular fundamental right, cannot create an estoppel against him in that or any subsequent proceeding. Such a concession, if enforced, would defeat the purpose of the Constitution. Were the argument of estoppel valid, an all powerful State could easily tempt an individual to forgo his precious personal freedoms on promise of transitory, immediate benefits. Therefore, notwithstanding the fact that the petitioners had conceded in the Bombay High Court that they have no fundamental right to construct hutments on pavements and that they will not object to their demolition after October 15, 1981, they are entitled to assert that any such action on the part of public authorities will be in violation of their fundamental rights. How far the argument regarding the existence and scope of the right claimed by the petitioners is well founded is another matter. But, the argument has to be examined despite the concession.

29. The plea of estoppel is clearly connected with the plea of waiver, the object of both being to ensure bona fides in day-to-day transactions. In Basheshwar Nath v. Commr. of Income-tax, Delhi, , a Constitution Bench of this Court considered the question whether the fundamental rights conferred by the Constitution can be waived. Two members of the Bench (Das C.J. and Kapoor J.) held that there can be no waiver of the fundamental rights founded on Article Page 229 14 of the Constitution. Two others (N.H. Bhagwati and Subba Rao, JJ.) held that not only could there be no waiver of the right conferred by Article 14, but there could be no waiver of any other fundamental right guaranteed by Part III of the Constitution. The Constitution makes no distinction, according to the learned Judges, between fundamental rights enacted for the benefit of an individual and those enacted in public interest or on grounds of public policy.

29. Learned senior counsel for the petitioners also referred to the judgment of the Apex Court in Ramana Dayaram Shetty v. International Airport Authority of India and Ors., . It was observed in para 10 as under:

10. ... It is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. This rule was enunciated by Mr. Justice Frankfurter in Viteralli v. Saton, 359 U.S. 535: Law Ed. (Second Series) 1012 where the learned Judge said:

An executive agency must be rigorously held to the standards by which it professes its action to be judged .... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirments that bind such agency, that procedure must be scrupulously observed .... This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the sword.

The Court accepted the rule as valid and applicable in India in A.S. Ahluwalia v. Punjab, and in subsequent decision given in Sukhdev v. Bhagatram, , Mathew, J., quoted the above-referred observations of Mr. Justice Frankfurter with approval. It may be noted that this rule, though supportable also as an emanation from Article 14, does not rest merely on that article. It has an independent existence apart from Article 14. It is a rule of administrative law which has been judicially evolved as a check against exercise of arbitrary power by the executive authority. If we turn to the judgment of Mr. Justice Frankfurter and examine it, we find that he has not sought to draw support for the rule from the equality clause of the United States Constitution, but evolved it purely as a rule of administrative law. Even in England, the recent trend in administrative law is in that direction as is evident from what is stated at pages 540-41 in Prof. Wade's Administrative Law, 4th edition. There is no reason why we should hesitate to adopt this rule as a part of our continually expanding administrative law. Today with tremendous expansion of welfare and social service functions, increasing control of material and economic resources and large scale assumption of industrial and commercial activities by the State, the power of the Page 230 executive Government to affect the lives of the people is steadily growing. The attainment of socio-economic justice being a conscious end of State policy, there is a vast and inevitable increase in the frequency with which ordinary citizens come into relationship of direct encounter with State power-holders. This renders it necessary to structure and restrict the power of the executive Government so as to prevent its arbitrary application or exercise. Whatever be the concept of the rule of law, whether it be the meaning given by Dicey in his The Law of the Constitution or the definition given by Hayek in his Road to Serfdom and Constitution of Liberty or the exposition set forth by Harry Jones in his The Rule of Law and the Welfare State, there is as pointed out by Mathew, J., in his article on The Welfare State, Rule of Law and Natural Justice in Democracy, Equality and Freedom 'substantial agreement in juristic thought that the great purpose of the rule of law notion is the protection of the individual against arbitrary exercise of power, wherever it is found'. It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle it makes no difference whether the exercise of the power involves affectation of some right or denial of some privilege.

30. Learned senior counsel for the petitioners emphasized that the very basis of the ceiling on payment of subsidy linked to the other two units has been opined to be not permissible by the Law Ministry of the Government of India. It was, thus, submitted that this opinion was binding on the respondents in view of the circular of the Government of India, which has been taken note of in the judgment of the Division Bench of this Court in Crl.W. No. 260/2000 titled 'Dr. R.C. Anand v. State and Anr.' decided on 27.05.2003. It was observed in para 10 as under:

10. The first question for consideration is whether the decision of the Ministry of Law and Justice is binding on respondent No. 2 Mr. Rakesh Tiku to support his contention placed reliance on the office memorandum dated 18th September, 1972 issued by the Government of India, Ministry of Law and Justice. Department of Legal Affairs. This deals with the procedure for obtaining legal advice from the Ministry of Law and Justice. The relevant paras which deal with the organisations/agencies entitled to seek advice and the procedure to be adopted are reproduced as under:

Para 1.1 The important instructions heretofore issued regarding the procedure to be followed by the Ministries/Departments of the Government of India, while seeking advice on legal matters are consolidated as follows for the guidance of the Ministries/Departments.

Para 2.1 The organisations/agencies which may seek legal advice from this Department, are Ministries/Departments of the Government of India in Page 231 all matters including those relating directly to the functions of control, statutory of otherwise, which the Government may have to exercise, in respect of autonomous corporate bodies, including Government companies/Corporations set up, owned or controlled by the Government of India, small autonomous bodies set up by the Government, and financed substantially or wholly by the Government, at the instance of the appropriate Ministry/Department, as a matter of practical convenience and economy, where these bodies do not have numerous occasions for such advice. In heavy and complicated matters, however, the small autonomous bodies might do well to seek legal advice.

Para 4.1 For seeking legal opinion, reference may be made to this Department either by recording an inter-Departmental notice (presently known as the Note), on the file itself, or by sending a self-contained inter-departmental note. Such a reference should normally be made under the directions of an officer, not below the rank of an Under Secretary or as may be provided by the departmental instructions. Full facts of the case and the points on which this Department's advice is required, should be clearly stated. This would save time and labour all round and help in expeditious disposal of the references to this Department.

Para 4.5 If, in any case, the Ministry/Department feels that the facts of the case have not been fully appreciated by this department or that clarification is needed in any matter, the case may be referred back to this Department for further consideration and advice. If, after further reference, this Department adheres to its previous advice, it should be followed by the Ministry/Department concerned.

Since the giving of advice on legal matters and interpretation of laws is one of the primary functions of this department, assigned to it by the Government of India (Allocation of Business) Rules, it is not appropriate on the part of any Ministry/Department to say that it is not bound by the advice given by this Department, nor can it refuse to follow such advice.

31. The whole substratum of the submission of learned senior counsel for the petitioners is that the most material aspect to be kept in mind is that the postulated 12% post-tax return under the Government Resolution of 01.11.1977 must be adhered to at all costs and any calculation to the contrary cannot be sustained. Thus, the FRP must be re-fixed by taking the actual DER and by taking the capital cost as a whole given by PDIL or actually incurred by the petitioner company and de-linking the payment of subsidy from TCL and CFCL.

32. Learned senior counsel for the petitioners in the end emphasized the fact that such a direction was permissible to be given under Article 226 of the Constitution of India (for short, 'the Constitution'), especially in view the Division Bench judgment of this Court in Deepak Fertilizer and PetroChemicals Corporation Ltd. v. Union of India, (DB) where dealing with a similar issue of fixation of the retention price of fertilizers, directions were issued in writ proceedings.

Page 232

33. The respondents have opposed the grant of any relief to the petitioners. Learned Additional Solicitor General (for short, 'ASG') submitted that the writ proceedings are not the appropriate remedy as the decision of the respondents does not suffer from the vice of arbitrariness, nor is there performance of any statutory function. Thus, if the petitioners have any grievance, the remedy can be only by way of a civil suit. Learned ASG relied upon the judgments of the Supreme Court in Bareilly Development Authority and Anr. v. Ajai Pal Singh and Ors., and State of U.P. and Ors. v. Bridge and Roof Company (India) Ltd., to advance the proposition that where the State enters into ordinary contracts with private parties, the parties are governed by the terms of the contract and are not entitled to seek redressal under Article 226 of the Constitution for breach of the contract. In such a case, the remedy would either be arbitration or institution of a suit.

34. Learned ASG referred to the communication dated 24.10.1977 addressed by the Government of India dealing with the issue of pricing of fertilizers. It was the attempt of the Government to rationalise the system which had resulted in the concept of retention prices for units to be administered by the FICC. This communication set out the parameters of the scheme which was to be brought into force and includes the proforma to be signed by the parties. Such proforma included the following paragraph in the end:-

We further undertake and promise to abide by the decisions of the Fertilizer Industry Coordination Committee which is final and binding on us on all matters relating to the determination of retention prices and transfer prices.

35. The communication sent by the petitioners dated 06.02.1996 also included such an undertaking as mentioned aforesaid to abide by the decision of the FICC in respect of matters relating to determination of the retention price. It was, thus, submitted that the decision of the FICC in this behalf is final and binding on the petitioners, who had undertaken to accept the same. Learned ASG emphasized that the DER has a special connotation insofar as a subsidy scheme is concerned as compared to the phraseology as understood in normal financial parlance. This is so since for the debt portion, the FICC pays only actual rate of interest; while for the equity portion, it pays the income-tax and ensures 12% post-tax return. Thus, in subsidy parlance, if the debt component is higher, then the subsidy becomes lower.

36. The petitioner company and KRIBHCO were competing for the same project and while the project cost of KRIBHCO was less, the DER was 1:1. In case of the petitioner company, the DER was 2.5:1. Thus, the very condition for grant of the license was this DER projected by the petitioner company. The Cabinet Committee dealing with the issue of grant of the license for the project considered the two balancing factors of the lower project cost of KRIBHCO Page 233 as against the projected DER being higher of the petitioner company. Thus, the petitioner company would not have got the license if the DER was not a factor to be taken into consideration since the projected cost of KRIBHCO was less.

37. The aforesaid was the reason, according to the submission of learned ASG, which resulted in condition No. (vi) being imposed as an additional condition, while issuing the Letter of Intent dated 12.07.1989. The phraseology used was of the DER for the project being 2.5:1 and not that the DER will not exceed 2.5:1. This was different from the conditions imposed in the case of TCL and CFCL where the phraseology used was that the DER was not to exceed 4:1.

38. The aspect emphasized was that KRIBHCO is a co-operative society where major shares are held by the Union of India and despite the comfortable financial position and lesser capital cost for the project, KRIBHCO was not awarded the project and the same went to the petitioner company solely on the basis of the higher DER. This was so since the higher ratio would result in lesser subsidy and, thus, the same was cleared by the Cabinet Committee of Economic Affairs. Thus, the fixed DER was an essential condition of the license granted to the petitioner company.

39. Insofar as the issue of cap on capital cost of Rs. 695 crores was concerned, it was submitted that after the correspondence, the Government accepted the representation of the petitioner company and removed the cap on capital cost by the letter dated 07.01.1993, but simultaneously provided a linkage with other similarly placed units in the matter of fixation of the retention price for urea. However, so far as the DER was concerned, there was no representation made and, in fact, by the letter dated 15.01.1997 the petitioner company conceded its willingness for the retention price to be calculated at deemed DER of 2.5:1. Not only this, this was followed up by the letter dated 02.05.1997 once again referring to the offer of the petitioner company for its retention price to be calculated at the deemed DER of 2.5:1.

40. The linkage to the other units was sought to be substantiate on the principle of treating everyone alike and in this behalf the communication of the petitioner company dated 29.11.1995 was referred to wherein it was conceded that the plants are more or less technically identical with only some variations in off-site facilities. The plants were stated to have identical technologies and sufficient data on capital cost as well as fixed variable cost was available with the FICC. It was submitted that companies owned by the Central or State Governments have also not been exempted from the provision of linkage as the retention price is fixed on the basis of certain combination of norms and actual data provided by various units. Thus, there cannot be any perceptible variation in the retention price fixed for similarly placed units as otherwise such difference in the retention price could be either viewed as favoritism in respect of the unit to which the higher retention price is fixed or fixing of such higher retention price would tantamount to placing a premium on mismanagement. It was emphasized that what is actually being given is a subsidy to the agriculturist and not a subsidy to the industry. The petitioner company was, thus, being treated at par with TCL and CFCL projects. Page 234 In fact, there was no need to really open the linkages in the case of the petitioner company for the reason that at the time of fixing the FRP, the retention price of the petitioner company did not exceed the retention price fixed for the other two units covered by the linkage.

41. Insofar as the capital cost issue is concerned, the respondents have relied upon the comparative data of the three units, which is as under:

42. The aforesaid data was explained and it was submitted that wherever the actual cost projected by the unit under any head is lesser than the estimates, the actual cost incurred by the unit has to be considered and wherever the actual expenditure is higher than the estimates, the FICC has embarked upon the exercise and found out between the estimates and the actual expenditure as to how much should be accepted. The principle, which is stated to have been followed by the FICC uniformly for all units, is that if the excess/increase is due to the reasons beyond the control of the management, then that had been granted by the FICC. On the same basis where the capital cost could have been kept down by the unit on a more diligent implementation, then to that extent, there was a disallowance as there cannot be a premium on inefficiency.

43. The illustration of the aforesaid is given by the fact that in case of CFCL, the cost of plant, building and machinery allowed was Rs. 665.63 crores as against the actual expenditure of Rs. 673.61 crores; start-up expenses were allowed at Rs. 12.80 crores as against the actual expenditure of Rs. 22.91 crores; and pre-operative expenses were allowed at Rs. 36.44 crores as against the actual expenditure of Rs. 38.41 crores. A similar practice was followed in the case of TCL as the cost of plant, building and machinery allowed was Rs. 781.01 crores as against the actual expenditure of Rs. 782.62 crores; pre-operative expenses were allowed at Rs. 23.30 crores as against the actual expenditure of Rs. 41.14 crores; and start-up expenses were allowed at Rs. 7.00 crores as against the actual expenditure of Rs. 17.45 crores. Similarly, financing charges were allowed at Rs. 278.32 crores as against the actual expenditure of Rs. 339.77 crores. The result was that in case of CFCL, as against the estimate of Rs. 1,267 crores, the actuals projected at Rs. 1185.50 crores and the FICC granted Rs. 1165.44 crores and in case of TCL, as against the estimate of Rs. 1,278 crores, the actuals projected at Rs. 1,400.18 crores and the FICC allowed Rs. 1,317.65 crores.

44. On a para materia principle, the cost of the petitioner company was taken as against the estimate of Rs. 1,284 crores and actuals of Rs. 1,242.33 crores by granting Rs. 1,183.70 crores. The plea of the petitioner company before the FICC for some items of capital cost to be taken as a whole and not on an individual basis was also accepted. An illustration of this is stated to be the site development expenditure allowed at Rs. 31.94 crores as against the actual expenditure of Rs. 18.74 crores. Insofar as the disallowance of certain capital cost is concerned, it was stated that the same is as per uniform policy. In the case of the petitioner company, six luxury imported automobiles including four Mercedes Benz, one Porsche and one BMW cars, capital cost of recreation centre including a gym in South Delhi for the use of Chairman shown as training centre for the employees have all been disallowed.

Page 235

45. The PDIL estimates have been given preference as against the report of the ICICI in view of the fact that the same was prepared in January, 1993 after the cap on capital cost was removed and the delay attributable to the Government came to be removed. In case of ICICI report, the estimates exceeded the actual cost even when the actuals were available.

46. It was the submission of learned ASG that the FICC is an expert body to go into all these questions, examine the facts and figures and determine the capital cost, which is an important element in fixation of the FRP and the same in turn has a direct bearing on the subsidy. Such a calculation of an expert body should, thus, not be interfered with easily in exercise of writ jurisdiction under Article 226 of the Constitution. In this behalf, it was submitted that the Apex Court has consistently taken the view that writ proceedings would not be the appropriate forum to determine such factual issues when an expert body has gone into the same. Reliance was placed on the judgment of the Apex Court in Shri Sitaram Sugar Company Limited and Anr. v. Union of India and Ors., wherein it was observed as under:

56. The court has neither the means nor the knowledge to re-evaluate the factual basis of the impugned orders. The court, in exercise of judicial review, is not concerned with the correctness of the findings of fact on the basis of which the orders are made so long as those findings are reasonably supported by evidence. In the words of Justice Frankfurter of the U.S. Supreme Court in Railroad Commission of Texas v. Rowan and Nichols Oil Company, 31 UD 570, 575: 85 L ed 358, 362:

Nothing in the Constitution warrants a rejection of these expert conclusions. Nor, on the basis of intrinsic skills and equipment, are the federal courts qualified to set their independent judgment on such matters against that of the chosen State authorities .... When we consider the limiting conditions of litigation - the adaptability of the judicial process only to issues definitely circumscribed and susceptible of being judged by the techniques and criteria within the special competence of lawyers - it is clear that the Due Process Clause does not require the feel of the expert to the supplanted by an independent view of judges on the conflicting testimony and prophecies and impressions of expert witnesses.

This observation is of even greater significance in the absence of a Due Process Clause.

57. 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. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent Page 236 with the laws of the land. As stated by Jagannatha Shetty, J. in Gupta Sugar Works (supra):

... the court does not act like a chartered 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.

58. 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. As stated by Justice Cardozo in Mississippi Valley Barge Line Company v. United States of America, 292 US 282, 286-87: 78 L ed 1260, 1265:

The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the Commission by training and experience is qualified to form.... It is not the province of a court to absorb this function to itself.... The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.

47. Learned ASG also referred to the judgment of the Supreme Court in Gupta Sugar Works v. State of U.P. and Ors., 1987 (Supp.) SCC 476 wherein it was observed as under:

4. This will be the parameters and the limitation of inquiry by courts whenever the price fixation of any essential commodity is called into question. This 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.

48. Learned ASG did not dispute the fact that the object is to give a return of 12% post-tax on net worth and it is in furtherance thereof that the various exercises were carried on by the FICC. The data filed by the petitioners was relied upon to contend that in many of the years, the return was almost double of 12% post-tax profit on the net worth and where the same fell below 12%, the same was due to certain recoveries made in that year. The relevant chart in this behalf was filed as Annexure - E to an application of respondent No. 1/UOI filed on 13.10.2003 to bring on record certain additional facts, which is as under:

Annexure -E Oswal Chemicals and Fertilizers Limited (OCFL) ( Actual Profitability for Fertilizer activity as per OCFL's certified Annual Cost Data furnished to FICC ) Actual Post-Tax Profits from Urea Operations % age of Post Tax Profit to Net Worth (Rs. Crores) (%) Year 21.63 11.00% 1995-96 141.61 17.70% 1996-97Page 237 202.21 27.00% 1997-98 159.1 19.90% 1998-99 85.77 23.50% 1999-00 33.69 10.30% 2000-01 101.5 24.80% 2001-02 53.3 15.60% 2002-03

----- ------

Total/Average 798.81      18.70%
               -----      ------

49. It is not disputed that the subsidy was being paid on the basis of PRP since the subsidy scheme was put into effect in the year 1977. Such PRP is in turn fixed on the facts projected by the units and the object was that there should be no resource crunch and the unit should continue to work. The exercise of computation of FRP is undertaken at the end of the policy period. The FICC Board has representatives from the industry and Chairman of the petitioner company himself was a Member of the FICC from July, 1998 to July, 2001. The delay in calculation of the FRP is sought to be explained on account of the fact that some of the units including that of the petitioner company declared the actual production capacity for claiming the provisional subsidy while showing the installed capacity which is far below production level for purposes of the FRP.

50. In such a situation, it was stated that there can be no question of any promissory estoppel. It was stated that the Division Bench of Andhra Pradesh High Court in WP No. 18242/2002 vide Order dated 25.07.2003 and the Division Bench of Allahabad High Court in WP No. 43934/2001 vide Order dated 07.11.2003 have taken this view and the SLP against the Order of the Division Bench of Andhra Pradesh High Court has been dismissed.

51. The submission of learned senior counsel for the petitioners based on the opinion of the Law Ministry has been rebutted on the ground that the said opinion is not final and would be one of the relevant factors, which may be taken into account by the Cabinet Committee. In any case, it was submitted that no categorical opinion was given by the Law Ministry as in the year 2001, the Ministry had said that no legal issue was involved. Thus, the judgment in Dr. R.C. Anand's case (supra) is sought to be distinguished.

52. The reference to Deepak Fertilizer and PetroChemicals Corporation Ltd.'s case (supra) was submitted to be misplaced on the ground that insofar as the issue of project cost disallowance was concerned, the said decision itself laid down that it is a question of fact which could not be gone into in writ jurisdiction. Only the difference of reimbursement of transport cost was examined which was based on an undertaking of the FICC. The claim of interest was negated.

53. The parties including the petitioners are stated to have been given adequate opportunity of hearing and the decision has been taken by the FICC thereafter. In any case, such schemes are administrative and the subsidy is virtually a compensation.

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54. The last submission advanced by learned ASG was based on the plea of delay and laches since it is the impugned order of 07.01.1993 which is sought to be challenged. It was submitted that filing of a letter and/or representation can neither be a cure nor be a justification for explaining the inordinate delay in filing the writ petition. In this behalf, learned ASG referred to judgments of the Apex Court in State of Maharashtra v. Digambar, ; Ramjas Foundation and Ors. v. Union of India and Ors., 1993 Supp (2) SCC 20; and Gian Singh Mann v. High Court of Punjab and Haryana and Anr., . All these judgments lay down that a party must approach the Court for redressal of the grievances under Article 226 of the Constitution expeditiously and making successive representations during the period in question cannot justify the Court overlooking the inordinate delay.

55. I have given a considerable thought to the elaborate submissions advanced by learned senior counsels for the parties.

56. I deem it appropriate to first consider whether ipso facto a writ petition would not be the appropriate remedy. The petitioners have strongly relied upon the judgment of Deepak Fertilizer and PetroChemicals Corporation Ltd.'s case (supra) to substantiate the plea that such a matter arising from the fixation of price has formed the subject matter of adjudication before the Division Bench of this Court. It is no doubt true that only part of the relief was allowed. What was allowed was on the basis of documents which showed that it had been represented to the petitioner therein that transport cost would be reimbursed. To that extent, the submission of learned ASG is correct. However, the party has not been non-suited on the ground of non-maintainability of the writ petition, but what will have to be considered is whether the facts and circumstances of the case and the matter in issue are such as would be amenable to be considered and decided in writ jurisdiction. I am of the considered view that it cannot be said that a writ petition is ipso facto not maintainable. However, the question whether the petitioners are or are not entitled to the relief claimed in the present proceedings is being dealt with hereinafter.

57. The respondents have raised the issue of delay and laches. There is no dispute about the proposition that mere making of representations would not suffice to extend the cause of action and that is what has been the view expressed by the Apex Court in the judgments referred to aforesaid. I am unable to agree with the submission of learned ASG that the matter in issue is one of really impugning only the decision of 07.01.1993. It is not as if the petitioner company was only making representations, but the respondents were entertaining the representations, taking some decision on the same and even giving hearing to the petitioners. There has also been fixation of the FRP after filing of the present writ petition. The respondents themselves asked the petitioners to come for a hearing vide letter dated 03. Page 239 11.2000 and thereafter took the decision. It would, thus, not be appropriate to non-suit the petitioners merely on the ground of delay and laches since I do not find this case one of such delays and laches.

58. The issue of fixation of the PRP and the FRP is affected by the plea based on the DER. The submission of the petitioners is that the DER of 2.5:1 should be the upper ceiling limit. However, a reading of the Letter of Intent dated 12.07.1989 shows that certain conditions have been imposed as additional conditions. Condition No. (vi) specifically deals with the issue of DER. The phraseology is clear that the DER for the project will be 2.5:1. It is not the upper ceiling limit. This is distinguished from the DER in respect of the other two units where the phraseology is different. In those cases, the DER is required not to exceed 4:1. Thus, a conscious decision has been taken in case of the petitioner company to have the DER of 2.5:1 and the same was accepted by the petitioners.

59. The background in which this DER was fixed cannot be lost sight of. The respondents have pointed out that KRIBHCO, a cooperative society, was a competitor for the unit in question. The projected cost of KRIBHCO was less than that of the petitioner company. Despite this, the project was handed over to the petitioner company and one of the major consideration was the DER. The DER of KRIBHCO was 1:1 while that of the petitioner company was 2.5:1. That being the position, it is not open to the petitioners to now claim that this DER should be read in another manner.

60. It is also relevant to note that the DER has a special meaning in respect of such subsidization of the projects. The ratio of debt equity has a direct bearing on the extent of the subsidy. This is so since for the debt portion, the FICC pays only actual rate of interest, while for the equity portion, the tax paid and thereafter 12% post-tax profit has to be taken care of. Thus, if the debt component is higher, the subsidy becomes lower. It is, thus, not possible to accept the contention of learned senior counsel for the petitioners that because the petitioner company was unable to get further loans, no difference would be made by the petitioner company increasing the equity component by bringing in more money through the process of promoters. It may be open for the petitioner company to do so, but for purposes of calculation of subsidy, the DER would be taken as 2.5:1 as the same was an important factor in issuance of the Letter of Intent to the petitioner company and has a major ramification insofar as calculation of the subsidy is concerned. It is also in terms of what is stipulated in the Letter of Intent.

61. It is also relevant to note that the petitioner company itself conceded its willingness not to doubt this aspect of DER being 2.5:1 in its communication dated 16.01.1997. Not only this, the same aspect was repeated vide letter dated 02.05.1997 while requesting for removal of the ceiling for capital cost. This would only show that the petitioners also understood that the DER was liable to be maintained at 2.5:1.

62. I am, thus, of the considered view that the submission based on any variation sought in respect of this DER is misplaced and for the calculation of subsidy and/or the PRP or the FRP, it is only the ratio of 2.5:1 which is to be taken into account.

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63. The next aspect to be considered arises from the mode and manner of calculation of the capital cost. The capital cost was originally fixed at Rs. 695 crores in terms of additional condition No. (xv) of the Letter of Intent dated 12.07.1989. It is only subsequently that the request was made by the petitioners seeking increase of this cost and removal of the ceiling. The respondents were willing to accommodate the petitioner company to the extent that there were ramification on the capital cost by delays attributable to the Government. This was so communicated vide letter dated 07.01.1993. However, while according to such removal of ceiling, it was simultaneously communicated that the subsidy would be determined by the FICC on completion of the project on the basis of principles applicable at that time to other fertilizer manufacturing units. Thus, what was sought to be done was that on the one hand relaxation on the ceiling limit was provided for the petitioner company; while on the other hand, it was clearly stipulated that the petitioner company would be dealt with on the same footing as the other units. This has been the consistent stand of the respondents from 1993 onwards.

64. In my considered view, this stand can hardly be said to be arbitrary or irrational as all the units are sought to be treated at par while providing relaxation to the petitioner company. The rationale for this is also explained by the respondents that the retention price is fixed on the basis of certain combination of norms and data provided by the units and there ought not to be perceptible variations while fixing such retention price as the technology is more or less similar. The retention prices may not be identical, but ought to be similar. The working of the capital cost has also been done, in my considered view, on a rational basis. There cannot be a premium on inefficiency and, thus, both the figures of actual cost and estimated cost have been considered. If the actual cost is lower than the estimated cost, that difference would be a proof of the efficiency. However, if the actual cost exceeds the estimated cost, then unless it can be shown that the increase is due to the reasons beyond the control of the management, to accept the actual cost would be a premium on inefficiency.

65. The respondents have given illustrations of how such a principal has been uniformly followed. It is not a case of mere criss-cross as sought to be contended by learned senior counsel for the petitioners. Cogent reasons have been given why reliance has been placed on the report of PDIL, which was prepared after the cap on the capital cost was removed and taking into consideration the delay which could be said to be attributable to the Government. The ICICI report gave estimates which exceeded even the actual cost when the actual cost was available.

66. The most material aspect is that any differentiation in methodology would have invited criticism and would have been construed to be violative of the norms set out in the Constitution whereby the parties should be treated similarly. It was in order to avoid any such allegation of violation of Article 14 of the Constitution, the same parameter in this behalf was followed. Thus, illustrations have been given in respect of the other two units also where the mode and methodology of calculation is the same as in case of the petitioner company. It is this which has resulted in the FICC taking the figure for the Page 241 other two units below the actuals. It is not necessary to go into details of the figures which have been set out herein-before and more than illustrate the same. It cannot be lost sight of the fact that the FICC is an expert body set up to carry out this task. The body has representatives of the trade and Chairman of the petitioner company had himself been a Member to serve on the body for almost three years. The observations made by the Apex Court in Shri Sitaram Sugar Company Limited's case (supra) would, thus, squarely apply. It was held that the Court has neither means nor the knowledge to re-evaluate the factual basis of the impugned orders. In exercise of judicial review, the Court is not concerned with the correctness of the findings of fact on the basis of which the orders are made so long as those findings are reasonably supported by evidence. In M/s. Gupta Sugar Works's case (supra), while dealing with the issue of price fixation of essential commodity, the Apex Court had observed that the Court does not act like a Chartered Accountant nor act like an Income Tax Officer and it is not the function of the Court nor is it concerned with an individual case or a particular problem.

67. If the aforesaid principles are applied to the decision-making process, in the present case, it cannot be said that the FICC, an expert body, took into consideration extraneous material and/or ignored the cogent material to come to a final figure while determining the FRP.

68. There can be no doubt that the ultimate object of the policy of 01.11.1977 has to be kept in mind to provide for 12% post-tax return on equity. That has, in fact, been kept in mind. The respondents have given the figures of profits of the petitioner company (referred to above in tabular form) to substantiate that if the figures are taken into account, the parameter of 12% post-tax return of equity is more than met. It is certainly not within the domain of the present proceedings to go into the correctness of these calculations. If the respondents adopt a parameter whereby a luxury imported vehicles or recreation centre as gyms are excluded from the capital cost, it can hardly be said that such an approach is erroneous.

69. The reliance on the judgment in Dr. R.C. Anand's case (supra) is also of not much assistance to the petitioners. The said judgment analysed the procedure for obtaining legal advice from the Ministry of Law and Justice. The observations, which are important, were that in view of the role of Ministry of Law and Justice of giving advice on legal matters and interpretation of law under The Government of India (Allocation of Business) Rules, it was not appropriate on the part of the other Ministry to say that it is not bound by the advice given by the Law Ministry. This is not the position in the present case. The question is one of fixation of the retention price and some advice may have been sought on a particular aspect. The matter was examined by the Cabinet Committee by taking into consideration the terms of the license, the parameters to be followed for others and such other incidental matters. The advice was taken into consideration. It cannot be said to be an advice of the nature purely based on a legal issue which would bind the other Departments. Thus, the Cabinet Committee was well within its rights to Page 242 determine the parameters. The importance of the role of the FICC cannot but be emphasized being an expert body. Even at the initial stage while considering the issuance of the Letter of Intent, due care was taken to point out to the intending party that in matters of determination of the retention price, the decision of such committee should be final. The undertakings in this behalf have been signed including by the petitioners. This would, of course, not imply that if a wholly irrational decision contrary to the mandate of the Constitution or the policy was taken, this Court would be without jurisdiction to interfere with the same. It can, however, not be doubted that this Court would be extremely slow to interfere with the decision of the expert body like the FICC in view of the aforesaid facts.

70. In view of the aforesaid, I am of the considered view that the process followed by the respondents cannot be faulted with in respect of the DER, linkage with other units for determination of the retention price and the calculation of capital cost. If the petitioners still have grievances in respect of certain calculations or matters for which trial would be required, the appropriate remedy would be a civil suit and not the present proceedings under Article 226 of the Constitution.

71. The writ petition is dismissed with the aforesaid observations.

72. The respondents shall be entitled to costs quantified at Rs. 15,000/-.

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