D.C.M.
Limited & Anr Vs. Union of India & Anr [1996] INSC 943
(13 August 1996)
Venkataswami
K. (J) Venkataswami K. (J) Punchhi, M.M. K. Venkataswami, J.
CITATION:
JT 1996 (7) 623 1996 SCALE (5)826
ACT:
HEAD NOTE:
The
short point that arises for our consideration is whether the Principle of
Promissory Estoppel applies to the facts of this case. The facts are as under :
The
appellants owned two sugar factories at Daurala and Mawana (Meerut) and at both these factories the
business of manufacturing and selling of sugar by vacuum pan process was
carried on. The Central Government promulgated the Sugar (Control) Order on
10.6.66 under which the sale of sugar by producers was controlled. In order to
mitigate the hardship caused to the sugar industry in the establishment of new
sugar factories and for effecting substantial expansions in the existing sugar
factories, the Government sanctioned a scheme in November, 1975 providing
incentives to the new sugar factories and also to those sugar factories who had
applied for and completed their expansion projects during the period 1.11.75 to
20.10.80. The incentives consisted partly of higher percentage of levy-free
sugar quota and partly of concessions in the excise duty. It was also announced
that the eligible sugar factories will be entitled for the above-said
incentives for a period of five years from the date of their completion of
licensed expansions. In the year 1978, there was a major change in the sugar
policy i.e. the control and the price distribution, release and movement of
sugar was lifted w.e.f. August
16, 1978. As a result
of this decontrol, the classification - levy and levy-free sugar - no longer
existed and consequently the benefits under the incentive scheme were no longer
required/available. While so, the Central Government w.e.f. December 17, 1979
again modified the sugar policy to provide for partial control with dual
pricing as was the situation prior to August 16, 1978. The Government after
examining the various altered parameters for revising the scheme announced a
revised scheme to provide incentives to the new sugar factories and expansion
projects. This revised scheme came into effect from the sugar year 1980-81. At
this juncture, it must be noted that the percentage of levy-free sugar
announced in the 1975 scheme is higher than the percentage announced in the
1980 scheme. The new scheme of the year 1980 was made applicable even to those
industries who were otherwise entitled to the benefit of the scheme announced
in the year 1975. The appellants after completing the expansion projects at the
two places on 6.8.80 and 13.8.80 applied for necessary eligibility certificate
for additional free-sale sugar entitlements as per the 'incentives announced.
The respondents allowed the incentives as per the revised 1980 scheme. However,
the appellants asserted that the incentives as per the scheme announced in the
year 1975 must be given to them. The respondents did not accede to this claim
of the appellants.
Aggrieved
by that they moved the High Court for the issue of a writ of mandamus directing
the first respondent to issue a supplementary eligibility certificate for 1.63 lakh
quintals of additional freesale sugar entitlement over and above the
entitlement declared by the Central Government on the basis of revised 1980
scheme for the year 1980-81 to 1982-83. In addition to that, the appellants
also prayed for a writ of mandamus directing the first respondent to issue a
further eligibility certificate determining the amount of additional free-sale
entitlement to the appellants' sugar factory for the year 1983-84 and 1984-85
under the incentive scheme of the year 1975.
The
High Court rejecting the claim of the appellants dismissed the writ petition.
Mr. Shanti
Bhushan, learned Senior counsel appearing for the appellants contended that the
Principle of Promissory Estoppel squarely applies to the facts of this case.
According to him, the new scheme announced in the year 1980 cannot be applied
to the appellants merely because there was no control for the sale of sugar by
the producers for a short period. It is further contended that the appellants
had spent huge amounts towards the expansion of sugar factories at two places
on the incentives announced in the year 1975 and therefore, they cannot be
denied on account of the decontrol of the sugar for a short period. In support
of that argument, he placed heavy reliance on a judgment of this Court in Union
of India & Ors. vs. Godfrey Philips India Ltd. (1985 4 SCC 369). On the
other hand, learned counsel appearing for the respondents placing reliance on
the decontrol order submitted that during the period when there was no control
of sale of sugar by the producers, the producers were enabled to sell their
hundred percent of that production in the open market and the benefit flowing
from such decontrol changed the whole complex and, therefore, the appellants
cannot be allowed to contend that the Government cannot change the scheme.
We
have considered the rival submissions. It is well- settled that the doctrine of
promissory estoppel represents a principle evolved by equity to avoid injustice
and, though commonly named promissory estoppel, it is neither in the realm of
contract nor in the realm of estoppel. The basis of this doctrine is the inter--position
of equity which has always, proved to its form, stepped in to mitigate the rigour
of strict law. It is equally true that the doctrine of promissory estoppel is
not limited in its application only to defence but it can also found a cause of
action.
This
doctrine is applicable against the Government in the exercise of its
governmental public or executive functions and the doctrine of executive
necessity or freedom of future executive action, cannot be invoked to defeat
the applicability of this doctrine. It is further well- established that the
doctrine of promissory estoppel must yield when the equity so require. If it
can be shown by the Government or public authority that having regard to the
facts as they have transpired, it would be unequitable to hold the Government
or public authority to the promise or representation made by it, the court
would not raise an equity in favour of the person to whom the promise or
representation is made and enforce the promise or representation against the
Government or public authority.
The
doctrine of promissory estoppel would be displaced in such a case because on
the facts, equity would not require that the Government or public authority
should be held bound by the promise or representation made by it (vide 1985 4
SCC 369 (supra)).
In
this case we have found that the Government before refusing the incentive
scheme of the year 1975 have taken into account various factors including the
decontrol of sale of sugar for the period from 16.8.78 to 17.12.79. Further if
the prayer of the appellants were to be allowed, several lakhs of quintals of
sugar will have to be released as incentive levy-free sugar which otherwise
meant for public distribution system. We agree with the learned Judges of the
High Court when they observed that the 'petitioners who availed of the
resulting benefit due to decontrol cannot in all fairness lay claim to be
restored the benefit of the incentives in full now over again though the basic
premise became non-existent. The benefit under the subsequent scheme in force
from November 15, 1980 has already been accorded to them
in full measure'.
The
High Court also noticed another important factor to decline the relief prayed
for by the appellants, namely, that the appellant company had applied for a
grant of the licence in the year 1975, had mentioned in the licence application
that the entire expansion would be done by the said company at its own expense.
The company was granted licence in February, 1975 and that time nobody could
imagine about the incentive scheme which was announced on December 6, 1975. The appellants, therefore, cannot
argue that the scheme announced induced them to undertake the expansion of
which the licence had been received by it in February, 1975.
The
expansion carried out by the appellants in pursuance of the licence issued in
February, 1975 was independent and had nothing to do with the incentive
announced in December, 1975 as observed by the High Court.
Taking
all these factors into consideration, we have no doubt that on the facts of
this case, the Principle of Promissory Estoppel has no application at all. The
judgment relied on by the learned Senior counsel for the appellants, namely,
Godfrey Philips case supports the case of the respondents on facts. In the
result the appeal fails and is accordingly dismissed. No costs.
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