Madras High Court
Sri Padmavathi Modern Rice Mill vs The Government Of Puducherry on 17 July, 2012
Author: Vinod K.Sharma
Bench: Vinod K.Sharma
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 17.07.2012
CORAM:
THE HONOURABLE MR.JUSTICE VINOD K.SHARMA
W.P.No.21095 of 2011
1. SRI PADMAVATHI MODERN RICE MILL
REP BY ITS PROPRIETOR B. GANGATHARAN
S/O. S. BALAKRISHANAN REDIYAR, NO.6-C, WARKAL
ODAI ST., KATTUKUPPAM, PUDUCHERRY 607 402
2. SRI SAKTHI MODERN RICE MILL
REP BY ITS PROPRIETOR T. SAMBANDAM
S/O. THAMODARAN MANAJAKALLI ST., T.N. PALAYAM
PUDUCHERRY 600 507
3. THILLAI MODERN RICE MILL
REP BY ITS PROPRIETOR T. VISAHAMOORTHI
S/O. K. THARSHANAMOORTHY,
14, VILLIANOOR MAIN ROAD,
PUDUKUYPPAAM, PUDUCHERRY 605 105
4. PARAMESWARI MODERN RICE MILL
REP BY ITS PROPRIETOR PAZHANI
S/O. VENUKOUNDAR,
53, MAIN ROAD, ARIYUR POST
PUDUCHERRY 605 102
5. SHRI LAKSHMINARAYANA MODERN RICE MILL
REP BY ITS PROPRIETOR P.PALRAJ
S/O.PALANISAMY R.S. NO.18/4,7,8
ERUSAMPALAYAM ROAD, ARIYANKUPPAM,
PUDUCHERRY 605 007
6. SRI PANDURANGA MODERN RICE MILL
REP BY ITS PROPRIETOR S. MANJULA
W/O. P.SRINIVASAN
NO. 95/6 EMBALAM MAIN ROAD,
SENBIYAPALAYAM, PUDUCHERRY 10
7. SRI ANGALAPARAMESWARI MODERN RICE MILL
REP BY ITS PROPRIETOR M.SUNDHARI
W/O.V. MANI, R.S. NO.1008/8, ERICARAI ST.,
KORKADU VILLAGE, NETTAPAKKAM COMMUNE
PUDUCHERRY 605 110
8. DAVAMANGALA DEVI MODERN RICE MILL
REP BY ITS PROPRIETOR V.RAJESWARI
W/O.S. VENKATACHALAM
KANBALIKARANKUPPAM CHELLANCHERI POST
PUDUCHERRY 605 106
9. BHASKAR MILLTEC RICE MILL
REP BY ITS PROPRIETOR K.BHASKAR
S/O.A.KANNAN, MANGALAM, PUDUCHERRY 605 110
10. THIRUMURUGAN MODERN RICE MILL
REP BY ITS PROPRIETOR P.SELVAM
S/O. PANDURANGAN, R.S.NO. 96/90 AND 96/92
IYANARAPPAN KOIL ROAD, SULTHANKUPPAM ,
MANAPATTU POST, PUDUCHERRY
11. SRI SAKTHIMURUGAN MODERN RICE MILL
REP BY ITS PROPRIETOR B. NATRAJ
S/O.N. ANANDHAKRISHNAN THAMARAIKUPPAM ST
NALLAVADU ROAD, THAVALAKUPPAM,
PUDUCHERRY 605 007
12. SRI PALANIANDAVAR MODERN RICE MILL
REP BY ITS PROPRIETOR R.ANANDHAN
S/O.N. RAMAKRISHNAN, T.V. MALAI ROAD
VADHANOOR, PUDUCHERRY 605 501
13. T.S.M. NAIDU MODERN RICE MILL
REP BY ITS PROPRIETOR S. GOPALAKRISHNAN
S/O.T. SARANGAPANI, NO.14/2 PARIKALPATU ROAD
MOOLODAI BAHOUR COMMUNE, PUDUCHERRY
14. SRI BALAJI MODERN RICE MILL
REP BY ITS PROPRIETOR M. AMUTHA
W/O.S.MOHAN, 1/1 UCHIMEDU BAHOUR COMMUNE,
PUDUCHERRY
15. SRI VIJAYA MODERN RICE MILL
REP BY ITS PROPRIETOR J. VIJAYANANTHAN
W/O.JEEVANANTHAM, 149/3 KATTUKARAI ROAD
THIRUKANOOR, PUDUCHERRY 605 501
16. SRI RAJ VIGNESH MODERN RICE MILL
REP BY ITS PROPRIETOR N.SEKAR
S/O.NANDHAGOPAL, NETTAPAKKAM,
NETTAPAKKAM POST, PUDUCHERRY 605 106
17. MURUGAN MODERN RICE MILL
REP BY ITS PROPRIETOR C. AZHAGAR
S/O.KANNAYURAM, ANANDAPURAM,
KANDANANGALAM POST, PUDUCHERRY 605 102
18. JAYALAKSHMI MODERN RICE MILL
REP BY ITS PROPRIETOR D. PURUSHOTHAMAN
S/O.THAVARASU, 21 MAIN ROAD, NETTAPAKKAM
PUDUCHERRY, PUDUCHERRY 605 106
19. VENKATACHALAPATHI MODERN RICE MILL
REP BY ITS PROPRIETOR R.ALAVANTHAR
S/O. RAMANUJAM, R.S. NO.34/2
SORAPET POST, PUDUCHERRY 605 501
20. VIJAYA MODERN RICE MILL
REP BY ITS PROPRIETOR R.SEKAR
S/O.R.RAJARAM, NO. 3 MADUGARAI MAIN ROAD
KARIKALAMPAKKAM, PUDUCHERRY
21. SRI BAVANIAMMAN MODERN RICE MILL
REP BY ITS PROPRIETOR S. SAKTHIVEL
S/O. SAMMANTHAM, METTU ST.,
KATTERIKUPPAM, PUDUCHERRY 605 502
22. GAJALAKSHMI MODERN RICE MILL
REP BY ITS PROPRIETOR R. THANGAMANI
S/O.RASU, NO.1 VILLIANOOR MAIN ROAD,
EMABALAM, PUDUCHERRY 605 106
23. SAKTHI RICE MILL
REP BY ITS PROPRIETOR D.SENTHILKUMAR
S/O. M.DHANARAJ, CUDDALORE ROAD,
THAVALAKPPAM, PUDUCHERRY
24. PONDY VENKATESWARA MODERN RICE MILL
REP BY P.PREMAVATHI, W/O.PAKKIRISAMY
NO.28, CUDDALORE ROAD, TOLLGATE,
ARIYANKUPPAM, PUDUCHERRY 605 007
25. RAJARAJAN MODERN RICE MILL
REP BY RAVI, S/O. KANNAN A.
A-22 INDUSTRIAL ESTATE
THATTANCHAVADY, PUDUCHERRY 605 009
26. SHIVASHAKTHI RICE INDUSTRIES
N.T. SIVAKUMAR, S/O.N.THANRAJU
CUDDALORE ROAD, THAVALAKUPPAM
PUDUCHERRY 605 007
27. SRI RAM MODERN RICE MILL
K.TAMILARASI, W/O. N. GOTHANDAPANI
R.S. NO.12/1B, URUVAIYAR VILLAGE,
VILLIANOOR, PUDUCHERRY
28. SRI MOOGAMBIGAI MODERN RICE MILL
A. SRINIVASAN, S/O.P.ARUMUGAM
46, IRUSAMPALAYAM ROAD, ARIYANKUPPAM
PUDUCHERRY 605 007
29. SRI KRISHNA MODERN RICE MILL
R.YUVARAJ, S/O.K. RADHAKRISHNAN
ANDIYARPALAYAM, GENGARAMPALAYAM POST,
PUDUCHERRY 605 108
30. LAKSHMI KUMARAN MODERN RICE MILL
LAKSHMI KANTAN, CUDDALORE ROAD
THAVALAKUPPAM, PUDUCHERRY 605 007 ... PETITIONERS
-vs-
1. THE GOVERNMENT OF PUDUCHERRY
REP BY ITS JOINT SECRETARY,
DEPT. OF CIVIL SUPPLIES AND CONSUMER AFFAIRS,
PUDUCHERRY
2. THE DIRECTOR
DEPT. OF CIVIL SUPPLIES AND CONSUMER AFFAIRS
PUDUCHERRY ... Respondents
Prayer: Writ petition is filed under Article 226 of Constitution of India for issuance of a Writ in the nature of Certiorari, to call for the records on the file of the 1st respondent in G.O.38 dated 27.03.2012 and to quash the same as illegal, incompetent, without jurisdiction and unconstitutional.
For Petitioners : Mr.V.Raghavachari
For Respondents : Mr.T.Murugesan, SC
For Miss N.Mala
*****
O R D E R
The petitioners, who are rice mill owners, have invoked the writ jurisdiction with a prayer for issuance of a writ in the nature of Certiorari to quash the notification issued vide G.O.38 dated 27.03.2012, being illegal, incompetent, unconstitutional and without jurisdiction.
2. The Director, Department of Civil Supplies and Consumer Affairs, Puducherry, entered into a statutory contract with the Millers for procurement of single boiled rice under Clause-3 of Puducherry Paddy and Rice Procurement (levy) Order 1996.
3. The petitioners, under the contract, undertook to sell singled boiled rice to the Government at the rate acceptable to both the parties. The petitioners agreed to supply single boiled rice under fifty percent levy system. The procurement policy of rice and paddy (levy Order) 2010, stipulated formation of a committee for implementing the provisions of levy order.
4. The Government Order 18 dated 03.09.2010 was issued for forming of committees. In order to effectively implement the scheme, the Government of Puducherry issued different Government orders from time to time, including the Government Orders with regard to fixing of the rate.
5. The Government of Puducherry issued G.O.17 dated 18.08.2010 to enforce fifty percent levy on licensed Millers, wherein it was stipulated THAT;
i)Food Corporation of India (FCI) will be the agent of Union of Puducherry for procurement of rice from the rice Millers.
ii)the rice will be procured at the rate fixed by the Government of India from time to time for each season and the FCI was to pay procurement price to Millers.
iii)the licensed rice Millers were obliged to deliver fifty percent of the total production as mill levy to FCI. The FCI was to make arrangement for procurement of 61,000 metric tonnes of single boiled rice as per the specification approved by the Government of India. The Millers were also directed to deliver 17,000 metric tonnes of single boiled rice for KMS 2009-2010.
iv)the committee was also constituted to fix the mill wise target
6. The Government of India in exercise of statutory function, notified the cost fixed for single boiled rice for 2009-2010. The notification dealt with the price for not only Puducherry, but many States.
7. It is the submission of petitioner, that Union Territory of Pondicherry is the predominant user of single boiled rice in the entire country and no other State has ventured into it. It was in view of the cost factor involved for single boiled rice, that the Central Government undertook to pay the price through FCI and the excess price for single boiled rice was to be borne by the Government of Puducherry.
8. It is submitted that the Union Territory of Puducherry was aware, that the purchase of single boiled rice will be costlier than parboiled rice or double boiled rice.
9. The rate fixed by the Central Government in exercise of statutory powers for Grade-A during the KMS year 2009-2010, was Rs.1620.50 (Rupees One Thousand Six Hundred Twenty and Paise Fifty only) and for KMS 2010-2011, it was Rs.1619.20 (Rupeees One Thousand Six Hundred Nineteen and Paise Twenty only).
10. The Millers expressed their difficulties in supplying single boiled rice at the rate fixed, as in the preparation of single boiled rice, there is substantial wastage. It was therefore thought fit to constitute a committee, for submission of the report. It was in pursuance to the report submitted, by the duly constituted committee, that the Government of Puducherry issued G.O.30 dated 05.01.2011, stipulating payment of incentive to sustain Millers.
11. The stand of the petitioners is that the term incentive was misnomer, as in fact, it was compensation to recuperate the loss. The basis for incentive was the recommendation of the committee, constituted by the Government. It is the submission of petitioners, that the report of the Indian Institution of CROP Processing Technology (Ministry of Food Processing Industries, Government of India), Thanjavur, is clear on this subject. The committee had conducted a detailed study and it was thereafter that the rates for common and Grade-A paddy rice, were fixed.
12. The recommendation made by the committee was as under:
"As is basis yield: The overall single boiled rice milling yield for common paddy is 62.7% and for grade A paddy is 60.7% As per Uniform specifications: The milled rice yield as per norms for common paddy is 68.7% and for Grade-A paddy is 66.5%."
13. The committee found, that the loss in single boiled rice was on an average 7..5%. The Director, Department of Civil Supplies and Consumer Affairs, Puducherry, was one of the member of committee, who made recommendation, and it is for this reason, that the incentive was paid by the Government.
14. The positive stand of petitioners is that it was on the recommendation of the committee, that the Government had issued G.O.30 dated 05.01.2011 in granting incentive at 3.16 per kg. It is also submitted, that the petitioners had expressed their apprehension to supply of single boiled rice at the statutory rate fixed by the Government. It was at the time of entering into the contract, that the petitioners were assured of compensation, and constitution of the committee to deal with the subject.
15. It was on the assurance of the Government, that the petitioners entered into the contract, and that the Government, keeping its word, had issued G.O.30 to mitigate the loss. Furthermore, it was on this assurance, that the Millers had undertaken to supply levy paddy to the Government.
16. The respondent no.2 paid the amount in terms of G.O.30 dated 05.01.2011. The TDS was also deducted from petitioners. The stand of petitioners is that if the payments are not made in terms of G.O.30, the entire business of the petitioners will collapse.
17. The respondent no.1 thereafter issued G.O.3 dated 19.08.2011 to withdraw the incentive given under Clause 4 of G.O.30 dated 05.01.2011. It is the stand of petitioners that Clause-4 in the Government Order was introduced surreptitiously. The purpose of G.O.3 dated 19.08.2011 was to identify the people, who were entitled to free distribution of rice and it has nothing to do with the rates payable to the Millers.
18. It is submitted, that there was no change in the events between 05.01.2011 and 19.08.2011, as there was no fall in the grain price, nor production of foodgrain increased. Rather the prices have been continuously increasing every year. It is also the stand of petitioners, that the Government of India has fixed a minimum sale price every year and no Government agency could offer anything lesser than it.
19. It is also submitted, that once the purchaser and Millers had agreed to supply at the rate fixed, it was not open to the respondents to reduce it unilaterally. The Order is said to be unconstitutional and arbitrary, thus, violative of Article 14 and 19 of the Constitution of India.
20. During the pendency of writ petition, the notification earlier issued was withdrawn and was substituted by G.O.38 dated 27.03.2012, which resulted in amending of the writ petition.
21. It is submitted, that by amending the Government order with retrospective effect, the position of petitioners has been made deplorable. It is also submitted that Puducherry Central Co-opeative Sales and Distribution Society is purchasing the rice at Rs.22 per kg. Whereas the price determined and payable to petitioners is only Rs.16.10 paisa, that too for single boiled rice, and not for parboiled rice. The petitioners placed reliance on the proceedings of the Central Government dated 13.10.2010, which reads as under:
"I am directed to refer to Government of Puducherry letter No.I 8/DCS & CA/Levy/2007/Costing dated 20.09.2010 on the above subject and convey the approval of government of India to the request of Govt. of Puducherry for extension of delivery of single boiled levy rice for KMS 2009-10 for two months beyond 30th September, 2010 on the rates as per the enclosed provisional cost sheet and as per the other terms and conditions stipulated in this departments letter dated 02.12.2009, subject to the condition that the single boiled rice should strictly meet the specification of parboiled rice 2009-10.
2. The cost sheet is subject to revision on the basis of appropriate studies for single boiled rice for out turn ratio (OTR) and milling charges"
22. It is the case of petitioners that the Central Government HAD determined for KMS 2009-10 for common variety at the rate of Rs.15.69 per kilo and for Grade-A at Rs.16.13. Based on the study by the Government of Puducherry in accordance with the directions of the Central Government, had fixed the compensation amount at Rs.3.16 per kilo. Though this amount was not sufficient for securing a kilo of single boiled rice in the market, as the price at the Co-operative Society is Rs.22/- for the same quality of rice.
23. The notification is challenged on the ground, that the same is outcome of non-application of mind, as it does not take note of earlier proceedings, including the proceedings of the Central Government dated 13.10.2010.
24. According to petitioners, the modification of Government order during the pendency of writ petition besides being illegal, is also comtemptuous. The impugned notification is challenged on the grounds;
i)that the Government of Puducherry has no authority to pass the impugned order retrospectively;
ii)that the Government has not applied its mind while passing the impugned notification as it has failed to take note of the Central Government's order dated 13.10.2010, where the rate fixed was only with regard to parboiled rice and the price fixed for single boiled rice was provisional and subject to study of OTR for manufacture of single boiled rice;
iii)that the rates of paddy had increased, therefore, reducing the rates unilaterally is hit by the principles of legitimate expectation as also equity and justice;
iv)that the impugned order amounts to breach of undertaking given to the Court on 29.12.2011, undertaking to pay compensation amount till the date of the Government order dated 18.08.2011, therefore, retrospective withdrawal is contemptuous, for which the respondents are liable to be punished under Article 215 of the Constitution of India.
25. The writ petition is opposed by the respondents on the ground, that the petitioners have no locus standi to challenge the Government policy decision, which has been taken in the larger interest of public. It is also submitted that in the matter of granting and withdrawal of incentive, no right is vested in any individual, nor the incentive can be claimed as a matter of right, therefore, the writ petition deserves to be dismissed on this short ground.
26. It is submitted that the production, procurement and distribution of rice were always subject to Government's regulation, even from pre-independence days. The stand of the respondents is that the dealing with rice is subject to Governmental supervision and regulations in exercise of statutory powers under Section 3(1) of the Essential Commodities Act.
27. That India, being Socialistic Welfare State, is committed to provide free rice to the families below poverty line and at subsidized price to families above the poverty line. Under the scheme of Central Government, the rice is distributed to the poorest among poor and the various State Governments have announced different schemes for free distribution of rice from time to time. It was in order to implement policies and schemes of the Central Government floated for welfare of the citizens, that the Government of Puducherry fixed the estimate of procurement of 17000 Mts of rice during KMS 2009-10 and 61000 Mts for the KMS 2010-11.
28. The Government of India through State Governments procures rice for this purpose through its agency, Food Corporation of India, by imposing compulsory levy on the Millers. Various price orders are issued by the respective State Governments fixing the percentage of levy.
29. The Government of Puducherry vide G.O.Ms.No.32/96, passed the Pondicherry Paddy and Rice Procurement (Levy) Order, 1996 and under which, licensed millers / dealers were obliged to sell 20% of the stock held by them as levy rice to Government at the procurement price. It was under the levy order, target for each mill is fixed. If the Miller defaults in delivering the levy, the State Government has power to seize and remove stocks.
30. The Government of India thereafter vide letter dated 8th November, 2007, insisted to impose 50% compulsory levy on millers under Essential Commodities Act, 1955. The order in this regard was issued vide G.O.Ms.Nos.5 & 6 dated 09.06.2010.
31. It is the case of respondents that the Kharif Market Season starts from 1st October and ends on 30th September every year. The Government of Puducherry decided to procure single boiled rice under 50% levy on the local millers of Puducherry and Karaikal regions. The uniform specification for the single boiled rice was also issued by the Government of India vide letter No.8-7/2010-S&I dated 16.06.2010. The procurement of single boiled rice was started by FCI in the month of September 2010 and was continued till November 2010 for KMS 2009-10, by getting extension from the Government of India.
32. As per the Government order No.17 dated 18.08.2010, it was stated that levy of procurement price shall be at the rate fixed by the Government of India from time to time for each season and that the FCI shall pay the procurement price to the millers.
33. Clause 2 (iv) (b) and Clause 2 (v)(c) of the order read as under:
"Clause 2 (iv) (b): If a miller in lieu of the quantity saleable under sub-clause (a) above, is agreeable to sell a fixed quantity of such variety or varieties of rice during such period or periods and in such installments as ma be agreed upon between the miller and the Government, the Director of Civil Supplies and Consumer Affairs may enter into an undertaking in writing in this behalf in the Form at schedule I with such miller setting out the quantity, variety or varieties, period or periods, installments and other relevant details. Notwithstanding anything contained in sub-clause(s), the liability of the miller under that sub-clause shall remain suspended during the subsistence of such undertaking and as long as the miller continues to discharge their obligations under such undertaking from time to time and shall stand discharge fully for the year on completion of sale in terms of such undertaking.
"Clause 2 (v) (c): If the miller takes the option to sell 50% of the rice produced on millers account everyday to the Government, the miller is entitled to receive the release certificates in 1:1 ratio for the quantity sold to Government. If the miller opt for fixed quantity under clause (iv)(b) based on agreement, the same will be divided month wise and on fulfilling the commitments as per the undertaking every month. During the month the miller is entitled for one release certificate valid till the end of the subsequent month without any limits or quantity."
34. The stand of the respondents is that uniform specification of parboiled rice is also applicable for single boiled rice. The Government of India had issued costing for parboiled rice vide letter No.2(2)/2009-PY-1 dated 02.12.2009 for KMS 2009-10. Later, a provisional costing sheet for KMS 2009-10 was issued by the Government of India vide Lr.No.167(51)/2008-PY-1 dated 13.10.2010 of the US to the Union of India. This was subject to revision on the basis of proper studies for single boiled rice for the out turn ratio and the milling charges.
35. The petitioners had accepted 50% compulsory levy fixed by the Government of Puducherry and also procurement price of Grade-A rice (applicable to the Single Boiled Rice) at Rs.1613.20 per Qtl. The Government of Puducherry, taking into consideration the low out turn ration of the single boiled rice, when compared to double boiled rice, announced a financial incentive of Rs.3.16 per kg to the millers, who have deposited single boiled rice to FCI as per the target fixed for them.
36. In the order, it was clearly stated, that the payment of financial incentive will be subject to the availability of funds under the relevant head of account and fulfillment of certain other conditions laid down under G.O.Ms.No.30 dated 05.01.2011. The submission of the respondents is that after assuming of new Government and keeping its election promises, it was decided to distribute rice free of cost in the following scale:
i)AAY beneficiary - 35kg
ii)BPL beneficiary 25kg
iii)APL beneficiary - 15kg As per the stand of respondents, the financial implication under the new policy is as under:
Card Category Present Card Strength Scale of Supply /card/month Selling Price/Kg at FPS Total Requirement of rice G.O.I.'s under TPDS Qty in Mt C.I.P. (in Mt including Transportation & handing charges Financial implication/Month @ C.I.P Rate Addl. Requirement of Rice in MT GoI's allotment at economic cost including transportation & handing charges /MT Financial Implication Economic cost month AAY 3220 35Kg Free of cost 1129 1129 Rs.4800 Rs.5419200 Nil Nil BPL 122447 25Kg Free of cost 3061 2441 Rs.7450 Rs.18185450 620 13650 Rs.8463000 APL 184557 15Kg Free of cost 2769 700 Rs.10100 Rs.7070000 2069 13650 Rs.28241850 TOTAL Rs.30674650 Rs.36704850 Whereas additional funds required for distribution of PDS rice at free of cost for 2011-12 is as under: Details Non Plan Plan SCSCP Amount provided in BE 2011-12 Rs.32,00,00,000 Rs.1,56,86,000 Rs.6,23,14,000 Amount Booked upto September 2011 Rs.18,34,67,750 Rs.57,34,983 Rs.1,62,77,310 Balance amount available Rs.13,65,32,250 Rs.99,51,017 Rs.4,60,36,690 Fund required from October 2011 to March 2012 Rs.40,42,77,000 Less-Balance amount available Rs.19,25,19,957 Additional fund required Rs.21,17,57,043
37. The fund requirement for payment of incentive, even if continued, would come to Rs.24,64,80,000/- (Rupees Twenty Four Crores Sixty Four Lakhs and Eighty Thousand only) p.a., therefore, keeping in view of the fact, that the Government of Puducherry has already stopped the fund, which was not possible to continue with the incentive granted to the millers, therefore, it was decided to withdraw it.
38. It is submitted, that for withdrawing the scheme, no notice was required to be issued to the beneficiaries or give any explanation thereof. It is the stand of respondents that the Government is at liberty to implement any new scheme and also withdraw such scheme, if not viable. The rate is being paid to petitioners for single boiled rice as fixed by the Government of India from time to time, which takes into consideration all the factors.
39. Though initially it was stated that incentive was not withdrawn retrospectively and it was undertaken that applicable incentive to all the millers will be paid as on date of withdrawal of incentive, but subsequently this order stands modified and the benefit has been withdrawn retrospectively.
40. The basic point raised and the reply is that the decision of withdrawing of incentive was based on larger public objective and keeping in view the availability of fund position. It is denied in the counter, that the principle of promissory estoppel or legitimate expectation are applicable to the facts of this case, as the obligation to deliver the levy rice is statutory obligation under the Essential Commodities Act, 1955, which is not dependent of the incentive of the State Government.
41. Thus, on the averments made herein above, it is pleaded that the prayer in the writ petition, being without any merit, be dismissed.
42. In the additional counter filed to the amended writ petition, the stand taken is that the Government of Puducherry has ample authority to pass the impugned order retrospectively. The stand taken is that the price fixation is within the domain of the Central Government and the study for variance of price is also conducted by the Central Government, in which the Union Territory of Pondicherry has no role to play.
43. Learned counsel for the petitioners in support of this writ petition vehemently contended, that the Government of India, vide Letter No. 167(51)/2008-PY-1 dated 13.10.2010, while accepting the request of Government of Puducherry for extension of delivery of single boiled rice for KMS 2009-10 for two months beyond 30th of September, 2010, had categorically observed that the provisional price was subject to revision, on the basis of proper studies for single boiled rice for the out turn ratio and the milling charges.
44. It was contended, that the approval by Central Government itself shows, that the rate for common rice at the rate of Rs.1569/- (Rupees One Thousand Five Hundred Sixty Nine only) and Grade-A rice at the rate of Rs.1613.20 (Rupees One Thousand Six Hundred Thirteen and Paise Twenty only), was provisional, and was subject to revision on the basis of appropriate studies.
45. Learned counsel for the petitioners referred to the report of Indian Institution of CROP Processing Technology, regarding Milling Trials for Single Boiled White belly Rice, wherein it was pointed out that the overall single boiled rice milling yield for common paddy is 62.7% and for grade A paddy is 60.7% as against the yield of 68.7% for common paddy and 66.5% for Grade-A.
46. The contention of learned counsel for the petitioners, therefore, was that it was taking note of studies by the Institution of CROP Processing Technology, that G.O.30 dated 05.01.2011 was issued for grant of incentive of 3.16 per kg for deposit of single boiled rice to the FCI as per the contract, though it was made subject to the availability of fund under the relevant head of account and subject to fulfilling conditions laid thereunder.
47. The stand of petitioners was, that the fixation of price by the Central Government being provisional and keeping in view the studies conducted, the Government Order, though termed as incentive, was in fact an additional price for single boiled rice, and not incentive for supplies, as stated by the respondents. In case, the stand of the respondents is accepted, then it was to be applicable to both categories of rice, i.e., double boiled rice/ parboiled rice as well as single boiled rice.
48. The very fact, that it was limited to single boiled rice shows, that it was in the form of additional price, which was to be fixed by the State Government on the basis of studies. The incentive therefore formed part of statutory price, which could not have been withdrawn, by the respondents.
49. Learned counsel for the petitioners referred to G.O.Ms.No.3 dated 18.08.2011, to contend that the reading of this order shows, that the object of this letter was for distribution of rice at free of cost and to revise the scale of supply of rice under the Universal PDS orders and was not to deal with fixation of prices for levy rice.
50. Learned counsel for the petitioners referred to Clause-4 of the order, under challenge prior to withdrawal, to contend that the object of incentive was to compensate the low percentage of Out Turn Ratio (OTR) for single boiled rice. Even though this letter stood modified, but the intention was clear, that though termed as incentive, it was in fact additional price to compensate the low percentage of Out Turn Ratio (OTR) for single boiled rice, which could not be withdrawn.
51. Learned counsel for the petitioners also contended, that subsequent G.O.38 dated 27.03.2012 vide which G.O.Ms.No.3 dated 18.08.2011 was modified, cannot be sustained in law, firstly for the reason, that the reading of G.O.Ms.No.3 shows, that it was an incentive to compensate low percentage of Out Turn Ratio for single boiled rice, which could not be withdrawn and in any case, it could not be withdrawn retrospectively.
52. The impugned notification, therefore on the face of it, is arbitrary, thus, violative of Article 14 of the Constitution.
53. It was also contended by learned counsel for the petitioners, that the respondents, after supply, cannot now withdraw the incentive announced on the principle of promissory estoppel, as it was in pursuance to the grant of incentive, that the decision to fix final price for single boiled rice was not taken, in view of the fact, that the price fixed by the Central Government was provisional, and subject to revision on receipt of study report.
54. The impugned order is also challenged on the ground, that it is violative of legitimate expectation of the millers to get the incentive for timely supply of single boiled rice, keeping in view the cost factor involved.
55. In support of the contention, that the impugned order of the Government of Puducherry is arbitrary, thus, violative of Article 14 of the Constitution of India, learned counsel for the petitioners placed reliance on the judgment of the Hon'ble Supreme Court in Mahabir Auto Stores and Others vs. Indian Oil Corporation and Others, (1990) 3 SCC 752, wherein the Hon'ble Supreme Court was pleased to lay down as under:
"12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in M/s Radha Krishna Agarwal v. State of Bihar.1t appears to us, at the outset, that in the facts and circumstances of the case, the respondent-company IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual par- ties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. See Radha Krishna Agarwal v. State of Bihar, at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the con- tract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether heating is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu & Anr., Maneka Gandhi v. Union of India & Anr., Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors., R.D.Shetry v. International Airport Authority of India & Ors., and also Dwarkadas Marlaria and sons v. Board of Trustees of the Port of Bombay. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case.
13. The existence of the power of judicial review however depends upon the nature and right involved in the facts and circumstances of the particular case. It is well settled that there can be "malice in law". Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law. Indeed "malice in law" is part the dimension of the rule of relevance and reason as well as the rule of fair play in action."
56. Learned counsel for the petitioners thereafter placed reliance on the judgment of the Hon'ble Supreme Court in Mahalakshmi Sugar Mills Company Limited and another vs. Union of India and others, (2009) 16 SCC 569, to contend that determination of price in exercise of powers under Section 3(2)(f) of Sugar (Control) Order, under Essential Commodities Act, 1955, though is a legislative function and the Superior Courts normally do not interfere with those functions, but when the functions are carried out in contravention of statutory requirements, the Courts are not powerless.
57. The Hon'ble Supreme Court held that in case the price is determined without applying the principles underlying factors enunciated under Section 3(3-C) of the Act, it is open to the Courts to issue the desired directions to enforce statutory obligations.
58. Learned counsel for the petitioners also referred to the judgment of the Hon'ble Supreme Court in The Panipat Co-operative Sugar Mills vs. The Union of India, (1973) 1 SCC 129. This judgment does not deal with determination of price of sugar, therefore, cannot be said to be relevant to the question involved in this writ petition.
59. In support of the contention, that it was not open to the respondents to withdraw the incentive retrospectively, learned counsel for the petitioners placed reliance on the judgment of the Hon'ble Supreme Court in the case of Kusumam Hotels (P) Ltd., vs. Kerala State Electricity Board & Ors. (Civil Appeal No.101 of 2007) decided on 16.05.2008, wherein the Hon'ble Supreme Court was pleased to lay down as under:
16. There cannot be any doubt whatsoever that a policy decision canbe reviewed from time to time. It is also beyond any doubt that the concessions granted can be withdrawn in public interest. Indisputably, the State is also entitled to change or alter the economic policies. Appellants do not have any vested right to enjoy the concessions granted to them forever, particularly when the Board is constituted and incorporated under the provisions of Electricity (Supply) Act, 1948. Any policy decision adopted by the State would not bebinding on the Board, save and except provided for in the Act. The Board being an independent entity, the duties and functions of the Boardvis-a-vis the State are enumerated in the Act. The Board, however,would be bound by any direction issued by the State Government on questions of policy. A dispute which may arise as to whether a question is or not a question of policy involving public interest, Central Government is the final arbiter. The policy decision adopted by the State on the basis whereof the Board felt obligated to grant electrical connection in favour of the appellants on the basis of industrial tariff must, therefore, be understood in the context of Section 78A of the 1948 Act. What is binding on the Board is the policy of the State. The direction of the State was to apply a particular category of tariff to the appellants. Such directions could have been withdrawn while making another tariff. The State indisputably has the power to grant subsidy from its own coffer instead of directing the Board to grant concession.
17. It is now a well settled principle of law that the doctrine of promissory estoppel applies to the State. It is also not in dispute that all administrative orders ordinarily are to be considered prospective in nature. When a policy decision is required to be given a retrospective operation, it must be stated so expressly or by necessary implication. The authority issuing such direction must have power to do so. The Board, having acted pursuant to the decision of the State, could not have taken a decision which would be violative of such statutory directions. 15.5.1999 was fixed as the cut off date by the Board. It, by itself, could not have done so. But the State for issuing the GO dated 26.9.2000 could have fixed the said cut off date on its own. We although do not agree that by granting retrospectivity to the said order, the entirety of the Government Order should be set aside the same or per se would be held to be unreasonable, but what we mean to say is that it could be given effect to only from the date of the order, i.e., prospectively and not from an anterior date, i.e., retrospectively.
18. It was held in Lohia Machines Ltd. and Anr. v. Union of India (UOI) and Ors. [(1985) 2 SCR 686]:
"On the other hand it is quite clear that if the relief granted is to be withdrawn with retrospective operation from 1972 the assessees who have enjoyed the relief for all those years will have to face a very grave situation. The effect of the withdrawal of the relief with retrospective operation will be to impose on the assessee a huge accumulated financial burden for no fault of the assessee and this is bound to create a serious financial problem for the assessee. Apart from the heavy financial burden which is likely to upset the economy of the undertaking, the assessee will have to face other serious problems. On the basis that the relief was legitimately and legally available to the assessee, the assessee had proceeded to act and to arrange its affairs. If the relief granted is now permitted to be withdrawn with retrospective operation, the assessee may be found guilty of violation of provisions of other statutes and may be visited with penal consequences..."
Yet again in M/s. Indian Metals and Ferro Alloys Ltd. & Anr. v. State of Orissa & Ors. [(1987) 3 SCC 189], it was opined :
"25...we hold that the High Court was not right in observing that the orders under Section 22-B of the Act imposing restrictions on consumption of power could not legally and validly be passed by the Government "with retrospective effect" in the middle of a water year. But the position regarding disallowance of clubbing stands on an entirely different footing. If a consumer had been allowed the benefit of clubbing previously, that benefit cannot be taken away with retrospective effect thereby saddling him with heavy financial burden in respect of the past period where he had drawn and consumed power on the faith of the orders extending to him the benefit of clubbing..."
19. It is not necessary for us to notice a large number of decisions on promissory estoppel as the principle thereof has recently been noticed by this Court in Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & Etio & Ors. [(2007) 5 SCC 447] wherein it was stated:
"We are also unable to agree with Mr. Andhyarujina that exemption from tax is a mere concession defeasible by the Government and does not confer any accrued right to the receipient. Right of exemption with a valid notification issued gives rise to an accrued right. It is a vested right. Such right had been granted to them permanently. "Permanence" would mean unless altered by statute. Thus, when a right is accrued or vested, the same can be taken away only by reason of a statute and not otherwise. Thus, a notification which was duly issued would continue to govern unless the same is repealed."
It was further held:
"126. This Court distinguished its earlier decision in Kasinka Trading v. Union of India55 whereupon Mr Andhyarujina placed strong reliance, in the following terms:
"40. The case of Kasinka Trading v. Union of India cited by the appellant is an authority for the proposition that the mere issuance of an exemption notification under a provision in a fiscal statute such as Section 25 of the Customs Act, 1962, could not create any promissory estoppel because such an exemption by its very nature is susceptible to being revoked or modified or subjected to other conditions. In other words, there is no unequivocal representation. The seeds of equivocation are inherent in the power to grant exemption. Therefore, an exemption notification can be revoked without falling foul of the principle of promissory estoppel. It would not, in the circumstances, be necessary for the Government to establish an overriding equity in its favour to defeat the petitioner's plea of promissory estoppel. The Court also held that the Government of India had justified the withdrawal of exemption notification on relevant reasons in the public interest. Incidentally, the Court also noticed the lack of established prejudice to the promises when it said : `The burden of customs duty, etc. is passed on to the consumer and therefore the question of the appellants being put to a huge loss is not understandable.' (See also Shrijee Sales Corpn. v. Union of India56 and STO v. Shree Durga Oil Mills) We do not see the relevance of this decision to the facts of this case. Here the representations are clear and unequivocal"."
In LML Ltd. v. State of U.P. & Ors. [2007 (14) SCALE 469], this Court opined :
"38. Those suppliers, who keeping in view of their capacity to supply uninterrupted electrical energy had made a representation and pursuant thereto the consumers had altered their position, cannot be permitted to take a different stand as the doctrine of promissory estoppel would apply against them. The said doctrine is premised on the conduct of party making a representation to the other so as to enable him to arrange its affairs in such a manner as if the said representation would be acted upon. It provides for a cause of action. It need not necessarily be a defence."
Yet again in U.P. Power Corporation Ltd & Anr. v. Sant Steel & Alloys (P) Ltd. & Ors. [2007 (14) SCALE 36], it was held :
"In this background, in view of various decisions noticed above, it will appear that the Court's approach in the matter of invoking the principle of promissory estoppel depends on the facts of each case. But the general principle that emerges is that once a representation has been made by one party and the other party acts on that representation and makes investment and thereafter the other party resiles, such act cannot stated to be fair and reasonable. When the State Government makes a representation and invites the entrepreneurs by showing various benefits for encouraging to make investment by way of industrial development of the backward areas or the hill areas, and thereafter the entrepreneurs on the representations so made bona fidely make investment and thereafter if the State Government resile from such benefits, then it certainly is an act of unfairness and arbitrariness. Consideration of public interest and the fact that there cannot any estoppel against a Statute are exceptions."
In State of Orissa & Ors. V. Mangalam Timber Products Ltd. [(2004) 1 SCC 139], a Three Judge Bench of this Court, held :
"... The State Government having persuaded the respondent to establish an industry and the respondent having acted on the solemn promise of the State Government, purchased the raw material at a fixed price and also sold its products by pricing the same taking into consideration the price of the raw material fixed by the State Government and supplied; the State Government cannot be permitted to revise the terms for supply of raw material adversely to the interest of the respondent and effective from a back date and place the respondent in a situation which it will not be able to resolve. The respondent could not have revised its price from a back date and recovered it from innumerable consumers to whom its finished products were supplied at a fixed price."
20. Our attention, however, has been drawn to a decision of this Court in Kasinka Trading & Anr. v. Union of India & Anr. [(1995) 1 SCC 274]. Therein the power of the State to change its policy decision in public interest was emphasized. It was held that the power which can be used for grant of concession, namely, Section 25(1) of the Customs Act itself is the source to rescind the earlier notification, stating :
"Since, the notification had been issued under Section 25(1) of the Act, the very same power was available to the authority for rescinding or modifying that notification and appellant ought to have known that the said notification was capable of or liable to be revoked, modified or rescinded at any time even before the expiry of 31.3.1981 if the `public interest' so demanded. To hold that after the Government had issued the Notification No.66 of 1979 indicating that it was to remain operative till 31.3.1981, it could not be rescinded or modified before the expiry of that date would amount to prohibiting the Government from discharging its statutory obligation under Section 25(1) of the Act, if it was satisfied that it was in the `public interest' to withdraw, modify or rescind the earlier notification. The plain language of Section 25 of the Act is indicative of the position that it is the public interest and public interest alone which is the dominant factor. It is not the case of the appellants that the withdrawal of Notification No.66 of 1979 by the impugned notification was not in `public interest'. Their case, however, is that relying upon the earlier notifications they had acted and the Government should not be permitted to go back on its assurance as otherwise they would be put to huge loss. The courts have to balance the equities between the parties and indeed the courts would bind the Government by its promise `to prevent manifest injustice or fraud'."
It was further held :
"23. The appellants appear to be under the impression that even if, in the altered market conditions the continuance of the exemption may not have been justified, yet, Government was bound to continue it to give extra profit to them. That certainly was not the object with which the notification had been issued. The withdrawal of exemption "in public interest" is a matter of policy and the courts would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was necessary in the "public interest". The courts, do not interfere with the fiscal policy where the Government acts in "public interest" and neither any fraud or lack of bona fides is alleged much less established. The Government has to be left free to determine the priorities in the matter of utilisation of finances and to act in the public interest while issuing or modifying or withdrawing an exemption notification under Section 25(1) of the Act."
21. We are not concerned with the exercise of a statutory power in this case. We are concerned with issuance of a direction by the State which is binding on the Board as also how and to what extent it can be rescinded.
22. We may, however, notice that in Motilal Padampat Sugar Mills v.State of U.P. [(1979) 2 SCR 641, this Court held :
"Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice * * * If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice."
23. Another Bench in Jit Ram v. State of Haryana [(1980) 3 SCR 689] took a different view. Jit Ram was overruled in Union of India v. Godfrey Philips India Ltd. Ltd. [(1985) 4 SCC 369].
24. If the doctrine of promissory estoppel applies for the purpose of enforcing the concession granted in favour of entrepreneurs, it can be withdrawn, inter alia, in public interest. Despite absence of an overriding public interest, however, although a different policy decision can be taken but therefor adequate notice should be given. It was so held in Shrijee Sales Corporation & Anr. v. Union of India [(1997) 3 SCC 398] in the following terms :
"Once public interest is accepted as the superior equity which can override individual equity, the principle should be applicable even in cases where a period has been indicated. The Government is competent to resile from a promise even if there is no manifest public interest involved, provided, of course, no one is put in any adverse situation which cannot be rectified. To adopt the line of reasoning in Emmanuel Ayodeji Ajay v. Briscoe quoted in M.P. Sugar Mills even where there is no such overriding public interest, it may still be within the competence of the Government to resile from the promise on giving reasonable notice which need not be a formal notice, giving the promise a reasonable opportunity of resuming his position, provided of course, it is possible for the promise to restore the status quo ante. If, however, the promise cannot resume his position, the promise would become final and irrevocable."
The same principle was reiterated in Sales Tax Officer & Anr. v.
Shree Durga Oil Mills & Anr. [(1998) 1 SCC 572].
25. In Pawan Alloys & Casting Pvt. Ltd. v. U.P. State Electricity Board & Ors. [(1997) 7 SCC 251], it was held :
"60. So far as Point No. 3 is concerned the appellants are on a weaker footing. It is true that by earlier notifications dated 29-10-1982, 13-7-1984 and 28-1-1986 the scheme of incentives by way of development rebate of 10% was continued to be offered to new industries to be established in the plains of State of U.P. Identically worded Item 9 in the earlier notifications and Item 8 in the last notification dated 28-1-1986 had continued the said incentive scheme. By virtue of the last notification of 28-1-1986 it was clearly laid down by the Board that all new industries which might be established on and after 28-1- 1986 will earn this development rebate for the three years' period from the date of commencement of supply of electricity. It was also provided that all the existing new industries which might have earlier been established before 28-1-1986 and which had still some part of unexpired period of three years of development rebate available with them also were given the continued benefit of the development rebate for the unexpired period from 1-2-1986. What the impugned notification of 31-7-1986 sought to do was to delete this first para of Item 8 of the notification of 28-1-1986. The result was that from 1-8-1986 whatever unexpired period for getting development rebate of 10% was available with the new industries covered by the sweep of the said notification, got withdrawn. It could not be said and it is also not the case of the respondent-Board that in the light of the notification of 31-7-1986 whatever development rebate was granted to these new industries earlier as per the then existing scheme would stand withdrawn or any recovery would be effected against them for the said amount. The case of the Board is that despite any unexpired period for earning the incentive rebate of 10% was available to the existing new industries on 31-7-1986, they would lose that benefit of development rebate for the rest of the unexpired period with effect from 1-8-1986 onwards. Hence it is not possible to agree with the contention of learned counsel for the appellants that the said notification had any retrospective effect. It was purely prospective and had resulted into two consequences -- (i) any new industry which entered into an agreement with the Board for supply of electricity for the first time on and after 1-8- 1986 could not get the benefit of incentive of 10% development rebate; and (ii) all existing new industries which were armed with the guarantee of 10% development rebate under the earlier notifications and had unexpired period out of the three years from the date of earlier commencement of supply of electricity to their concerns lost the benefit for that unexpired period which otherwise would have been available to them from 1-8-1986 onwards till the entire three years' period which had already commenced would have been over. Both these effects of the notification of 31-7-1986 were purely prospective in character and had no retrospective effect. Consequently it cannot be said that the said notification was liable to be struck down on the score of being retrospective in nature. The third point for consideration, therefore, is answered in the negative."
Similar view has been taken in Bannari Amman Sugars Ltd. v. Commercial Tax Officer & Ors. [(2005) 1 SCC 625]; Kuldeep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702]; and M.P. Mathur & Ors. v.DTC & Ors. [(2006) 13 SCC 706].
26. The law which emerges from the above discussion is that the doctrine of promissory estoppel would not be applicable as no foundational fact therefor has been laid down in a case of this nature. The State, however, would be entitled to alter, amend or rescind itspolicy decision. Such a policy decision, if taken in public interest, should be given effect to. In certain situations, it may have an impact from a retrospective effect but the same by itself would not be sufficient to be struck down on the ground of unreasonableness if the source of power is referable to a statute or statutory provisions. In our constitutional scheme, however, the statute and/or any direction issued thereunder must be presumed to be prospective unless the retrospectivity is indicated either expressly or by necessary implication. It is a principle 24 of rule of law. A presumption can be raised that a statute or statutory rules has prospective operation only."
60. Learned Senior Counsel appearing on behalf of the respondents opposed this writ petition by contending that the impugned Government Order, G.O.Ms.No.3, which was under challenge, stands modified and the incentive has been withdrawn with effect from 01.07.2011. The contention of the learned Senior Counsel was that it is always open to the State Governments in exercise of legitimate legislative functions, to issue notifications with retrospective effect. The petitioners do not have any locus standi to challenge the order, by contending that the incentive could not be withdrawn with retrospective effect.
61. It was also the contention of learned Senior Counsel for the respondents, that once it is not disputed that the price for levy rice is fixed by the Central Government and not the Government of Puducherry, the petitioners can only claim the price fixed by the Central Government. The incentive by the Government of Puducherry, therefore, could be withdrawn, as the petitioners did not have any vested right to claim incentive for the timely supply. The petitioners otherwise also were under statutory obligation in view of the Pondicherry Paddy and Rice Procurement (Levy) Order, 1996, as amended to supply the levy rice. In order to butter this argument, learned Senior Counsel for the respondents referred to the procedure of purchase, and pointed out that the price was to be paid by the FCI and not by the Union Territory of Pondicherry.
62. Learned Senior Counsel for the respondents in support of the contention, that it was open to the Government of Puducherry to withdraw the incentive with retrospective effect, placed reliance on the judgment of the Hon'ble Supreme Court in the case of Duncan Industries Ltd., and another vs. Union of India, (2006) 3 SCC 129, wherein the Hon'ble Supreme Court was pleased to hold as under:
"Retrospectivity in the Scheme
27. At the outset, we must note that the Retention Price Scheme, both conceptually and in its actual operation, has always had an retrospectivity built in. Indeed, the correspondence between the parties indicates that the retention price was always fixed and made applicable ex post facto from the beginning of the pricing period with adjustments to be made towards payments and recoveries. However, Dr. Dhavan seeks to differentiate the process for determining the policy norms from the actual process of computing the retention price. According to learned counsel, what was ad hoc and could be retrospectively changed were the subsidies payable or recoverable in line with actuals. On the other hand, according to him, the pricing norms (the formula for calculating retention prices) could not be retrospectively changed. We cannot, however, accept this distinction.
28. At the outset, the first appellant had voluntarily entered into the undertaking dated 10-12-1977, where it promised inter alia:
to abide by the decision of the Committee, which is final and binding on all matters relating to the determination of retention price, net realisation, equated freight, etc. (emphasis supplied) Firstly, neither the abovementioned undertaking, nor the evidence on record, appears to indicate that there exists any distinction on the lines suggested by Dr. Dhavan. Secondly, in our view, all matters relating to the determination of retention price unambiguously includes the power to determine the norms and policy that would be used for computing the retention price. Also, as we have already mentioned, from its inception, the Retention Price Scheme has always had an element of retrospectivity built in. Therefore, the undertaking entered into by the manufacturers clearly allows the Government to retrospectively revise the pricing norms/policy for the Retention Price Scheme. Further, as we shall see, the first appellant was at all stages fully aware of and party to the deliberations that went into determining the norms for calculating the retention prices. Hence, in our view, the distinction sought to be made between the norms for determining retention price and the actual computation of the retention price is not tenable.
63. Learned Senior Counsel for the respondents contended, that this Court can only interfere with the policy decision of the Government of Pondicherry, only when the decision is in violation of Statute, constitutional provision or is arbitrary, and not otherwise. The decision of the Government of Puducherry in this case is neither in violation of any statute or constitutional provision and cannot be said to be arbitrary, to enable this Court to enter into judicial review in exercise of powers under Article 226 of the Constitution. In support of this contention, reliance was placed on the judgment of the Hon'ble Supreme Court in Bajaj Hindustan Limited vs. Sir Shadi Lal Enterprises Limited and another, (2011) 1 SCC 640.
64. Reference to the judgment was also made in support of this contention, that in case of policy / policy matter, the doctrine of legitimate expectation plays no role, therefore, the impugned decision of the Government of Puducherry cannot be challenged on the ground of legitimate expectation.
65. On consideration, I find that this writ petition deserves to succeed. The Central Government in exercise of power conferred under Section 3 of the Essential Commodities Act, had fixed the provisional levy cost for single boil rice. It was also made clear by the Central Government, that the price for levy rice was subject to revision, on the basis of appropriate studies for single boiled rice for Out Turn Ratio (OTR) and milling charges.
66. It is not in dispute that report was submitted by the Indian Institution of CROP Processing Technology, pointing out that the overall single boiled rice milling yield for common paddy is 62.7% as against 68.7% for common paddy and 60.7% for Grade-A paddy as against 66.5% for common paddy. It was on the basis of study, that G.O.Ms.No.30 dated 05.01.2011 was issued for grant of incentive at Rs.3.16 per kg to the millers, as is clear from the reading of impugned G.O.Ms.No.3 dated 18.08.2011, where it was clearly mentioned, that the incentive was paid to Millers to compensate the low percentage of Out Turn Ratio (OTR) for single boiled rice.
67. The contention of learned Senior Counsel for the respondents, that it is the Central Government, which fixed the price for levy rice, and that the petitioners, therefore, have no right to claim incentive, is misconceived. The levy price fixed by the Central Government is the minimum price payable, which did not bar the Union Territory of Pondicherry to give higher price. It is well settled that in a given case, it is open to State Government to give higher price than the one fixed by Central Government, which is normally called the state advised price.
68. Furthermore, in this case, the price fixed by the Central Government was provisional, which was subject to revision on the basis of appropriate studies for single boiled rice. Learned counsel for the petitioners therefore is right in contending, that though it was termed as incentive, but in fact is levy price payable by the Union Territory of Pondicherry, keeping in view the study conducted, as advised by Central Government, while fixing the levy price.
69. The contention of the learned Senior Counsel for the respondents, that the policy decision by the State Governments can be withdrawn, in public interest at any stage, also deserves to be noticed to be rejected, as grant of incentive was not the policy decision, but statutory obligation under Section 3 of the Essential Commodities Act, which stipulates that fixation of levy price by taking note of relevant cost factors involved in the process. It was not open to the Government of Puducherry to arbitrarily withdraw the incentive.
70. Even if for the sake of argument, the grant of incentive is taken to be concession, as contended by the learned Senior Counsel for the respondents, in that event also, the public interest or public policy cannot be invoked to unilaterally rescind a contract of purchase, on the terms specified by the Government, in view of the law laid down by the Hon'ble Supreme Court in Sunil Pannalal Banthia vs. City & Industrial Development Corporation of Maharashtra, (2007) 10 SCC 674, wherein it was held as under:
"On the legal question, it is quite obvious that having acted and held out assurances to the appellants which caused the appellants to alter their position to their prejudice, it was not open to CIDCO to take a unilateral decision to cancel the allotment on the ground that it had acted without jurisdiction and/or in excess of jurisdiction and in violation of its rules and regulations."
71. The impugned notification also cannot be sustained, as it was not open to the Government of Puducherry to withdraw the incentive retrospectively, after the petitioner had acted on it. In case, notification is taken to have been issued, in exercise of powers under the Pondicherry Paddy and Rice Procurement (Levy) Order, 1996, it could not be withdrawn, being statutory obligation under Section 3 of the Essential Commodities Act to take relevant factor into consideration for fixing the price, and even if it is taken to be non statutory notification or a concession, then also the notification issued by way of Executive decision, cannot be withdrawn retrospectively, in view of the law laid down by the Hon'ble Supreme Court in Vice Chancellor, M.D.University vs. Jahan Singh, (2007) 5 SCC 77, on the principle of promissory estoppel.
72. There is also force in the contention of the learned counsel for the petitioners, that on the principle of promissory estoppel, it was not open to the respondents to withdraw the incentive, as it was under the assurance given at the time of execution of contract, keeping in view of the provisional fixation of price, that the levy rice was supplied, and after the supply was made, it was not open to the Government of Pondicherry to withdraw, in view of the principle of promissory estoppel. The Hon'ble Supreme Court in M.R.F.Ltd.,Kottayam vs. Asst. Commissioner (Assessment) Sales Tax and Others, (2006) 8 SCC 702, has laid down that doctrine of promissory estoppel applies even to statutory notifications.
73. The learned Senior Counsel for the respondents however was right in contending that the plea of legitimate expectation was not available to the petitioners, in case of policy decisions.
74. The contention of the learned Senior Counsel for the respondents, that this Court, in exercise of jurisdiction under Article 226, cannot question the policy / policy decision and policy matter, is also not sustainable, as the Hon'ble Supreme Court in Bajaj Hindustan Limited vs. Sir Shadi Lal Enterprises Limited and another, (supra), has clearly laid down, that judicial review in case of policy decision is permissible, if there is violation of statute, the constitutional provisions or if the act of State is totally arbitrary.
75. In this case, it was statutory obligation of the respondents to fix price by taking into statutory consideration under Section 3 of the Essential Commodities Act, and having done so in fixing the additional price by way of incentive, it could not be arbitrarily withdrawn, that too, with retrospective effect.
76. The judgment in Duncan Industries Ltd., and another vs. Union of India, (supra) has no application to the facts of the present case, as that was not the case of withdrawal of benefit retrospectively, but it was the matter relating to principle to be followed for determining the price, and other norms and policy use for computing the retention price. It was therefore, that the Hon'ble Supreme Court held that Retention Price Scheme had an element of retrospectively built in, and therefore change of criteria could not be challenged on the ground, that it had an element of retrospectivity. The Hon'ble Supreme Court did not lay down, that the benefit / incentive granted could be withdrawn retrospectively, as contended by learned Senior Counsel.
77. For the reasons stated herein-above, this writ petition is allowed. The impugned G.O.Ms.No.3 dated 18.08.2011, as modified vide G.O.38 dated 27.03.2012, is ordered to be quashed, but with no order as to the costs.
78. Connected miscellaneous petition is closed.
ar TO
1. THE GOVERNMENT OF PUDUCHERRY REP BY ITS JOINT SECRETARY, DEPT. OF CIVIL SUPPLIES AND CONSUMER AFFAIRS, PUDUCHERRY
2. THE DIRECTOR DEPT. OF CIVIL SUPPLIES AND CONSUMER AFFAIRS PUDUCHERRY