Report No. 108

2.14. Malhotra & Sons v. Union of India.-

In 1973, the Union of India formulated a scheme for providing incentives to registered exporters of walnuts with a view to offset the losses which exporters would otherwise incur and to augment the foreign exchange earnings of the country. Under the scheme cash assistance was to be given to such exporters upto September 30, 1975. The cash assistance scheme was withdrawn in September 1973, after notice to all concerned and after taking into consideration their representations. Alleging that they had invested considerable sums of money for expanding their business, the petitioners contended that the Government was estopped from going back on their representation. Rejecting the contention, the High Court held:1

"It is well known that the sovereign authority like the State has to look after the interest of millions of people and in the present socio-economic set up of the country, it cannot be bound down by an assurance for all times to come where the interest of the public comes into conflict with the assurance once given. In such cases (when the State performs governmental, public or sovereign functions) the doctrine would not apply when it clashes with the interest of the public at large, except when it is necessary to prevent fraud or manifest injustice. If the Government after a review of its policy decision finds that modification or alteration is required in the earlier policy in the interest of the public at large, the Government cannot be debarred from reviewing that policy. Ours is not a country with unlimited financial resources and the courts of law cannot ignore the fact. The utilisation of the meagre financial resources by the Government therefore, has to be left to the judgment of the Government which is the best judge of the needs of its people.

The courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its Governmental, public or sovereign capacity. In its commercial activity the position would, of course, be different. In the present set up of the country, when finances are required for starting and completing various projects in the interest of the public at large, the Government cannot be held bound by a representation made by it, when the need for continuance of the representation is no longer there. The Government must be given a free hand to determine the priorities when on the one hand there are the hungry millions for the larger benefit of whom the money is required by the State, and on the other hand are the affluent few who wish to bind the Government by its promise to make additional profits. The petitioners do not run the risk of incurring any losses except of course the loss of additional profits."

1. AIR 1976 J&K 41 (45-48).