REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6478 OF 2009
DEVI MULTIPLEX & ANR. …. Appellants
Versus
STATE OF GUJARAT & ORS …. Respondents
WITH
CIVIL APPEAL NOs.6479/2009, 6480/2009, 6481/2009,
6482/2009, 6483/2009, 6484/2009, 6485/2009, 6487/2009, 6488/2009,
6489/2009, 6490/2009 AND 6491/2009
J U D G M E N T
Uday Umesh Lalit, J.
1. Civil Appeal 6478 of 1979 is directed against the judgment and order
dated 26.06.2009 passed by the High Court of Gujarat at Ahmedabad in
Special Civil Application No.18692 of 2005 to the extent it dismissed the
challenge to the order passed by respondent no. 3 dated 20.07.2005
rejecting the application of the appellants for extension of time under
Clause 10 of New Package Scheme of Incentives for Tourism Projects, 1995-
2000. Similar challenge stands raised in other civil appeals against Orders
rejecting their applications for extension of time. Since Civil Appeal
No.6478 of 2009was taken as the lead matter, facts relating thereto are
dealt with in detail hereafter.
2. On 20.12.1995 Government of Gujarat announced policy named “New
Package Scheme of Incentives for Tourism Projects, 1995-2000” (hereafter
referred to as the Scheme) with a view to make available all fiscal and non
fiscal incentives, reliefs and concessions enjoyed by industries to
‘Tourism’ which was accorded the status of an industry, in order to give a
boost to tourism sector by attracting higher investment in the areas with
tourism potential and to generate employment opportunities. Under Clause 2,
the Scheme came into operation on 1.8.1995 and was to remain in force for a
period of five years upto 31.07.2000. Under Clause 3, to be eligible, a new
tourism unit ought to be registered after 1.8.1995. Clause 4.7 dealt with
effective steps which such unit was expected to undertake. Under Clause 5,
after taking initial effective steps a tourism unit could apply to the
Director of Tourism for registration. All projects had to conform to the
specifications and requirements spelt out in Appendix B which Appendix
dealt with various categories of tourism units and Item 22 thereof
pertained to Entertainment Complexes including multi cinema theater
complexes or multiplexes. Clause 7 categorised tourism units in four
categories, namely, Prestigious Tourism Units, Large Scale Tourism Units,
Small Scale Tourism Units and Tiny Tourism Units with minimum fixed capital
investment of Rs. 10 Crore, 90 lakhs, 10 lakhs and less than 10 lakhs
respectively. Clause 8 dealt with incentives and stated that a tax holiday
of 5-10 years would be available in respect of exemptions from (i) Sales
Tax (ii) Turnover Tax (iii) Electricity Duty (iv) Luxury Tax and (v)
Entertainment Tax, upto 100% of capital investment. In clause 8.1 it was
stated that the quantum of incentives would not exceed 100% of eligible
capital investment and it further stated the period of eligibility in
respect of Prestigious Tourism Unites, Large Scale Tourism Units, Small
Scale Tourism Units and Tiny Tourism Units to be 10 years, 8 years, 6 years
and 5 years respectively. Clause 9 dealt with composition of sanctioning
authority whereunder State Level Committee was competent to issue
eligibility certificate in respect of Prestigious and Large Units while
District Level Committee was to issue eligibility certificate for all Small
Scale and Tiny Tourism Units. The procedure for registration tourism units
for incentives was detailed in Clause 10.
Clauses 4.7 and 10 of the Scheme are quoted hereunder:-
“4.7 EFFECTIVE STEPS
The effective steps shall comprise
(a) initial effective steps which shall include:
i) Effective possession of land by an eligible unit free from all
encumbrances.
ii) Registration in respect of company/Cooperative Society/Trust in respect
of a partnership firm, evidence of execution of partnership deed and
filling of requisite application with payment of necessary registration
fees with the Registrar of Firms.
iii) Submission of project report specifically mentioning the category of
tourism activity (coverage) and the incentive that are proposed to be
availed of by the eligible unit with all relevant details.
iv) Copy of application duly acknowledged by all statutory and executive
authorities from which permission is required.
(b) final effective steps shall mean and include:
i) Clearance, if any, from Central/State Government and other
authorities concerned for implementing the project.
ii) Tying up of the means of finance for the project to the satisfaction
of the incentive sanctioning authority.
iii) Acquisition of fixed assets at site to the extent of 10% of the total
fixed assets as envisaged for the project, and
iv) Evidence regarding expenditure on the project, including advances and
pre-operative expenses paid, aggregating to at least 25 percent of the
capital cost envisaged for the project.
10. PROCEDURE FOR REGISTRATION OF TOURISM UNITS FOR INCENTIVES:
All tourism units eligible for the Scheme will apply to the Director of
Tourism in a prescribed Form. The Directors of Tourism will scrutinizes
the application and will issue temporary and permanent registration
adopting the following procedure:
a) Director of Tourism shall give provisional registration in the first
instance upto 2 years to the eligible unit after scrutinizing the
application received by him under the Scheme.
b) If such a unit is not in a position to start commercial operation
during the initial validity period the unit will have to apply with the
progress report to the State Level Committee which is authorized to grant
extension upto six months at a time or a total period of 2 years after
examining the difficulties experienced by the individual unit in
implementing the project and also record the reasons thereof in writing.
c) The units which are unable to go into operation after it has been
given extension under para (b) above will have to apply to Government the
reasons for the delay. Such application will have to be forwarded by the
director of tourism, who will carry out physical inspection of projects and
report to government for decision. If the director of tourism is satisfied
that the steps to implement the project are adequate he shall inform the
Government about the same.
d) The State Government on examination of details made available by the
director of tourism may decide to extend or reject the registration
depending upon the merit of each case. The decision of Government in this
regard will be final and binding on the party.
e) The unit will become eligible to apply for provisional or temporary
registration only after taking initial effective steps as stipulated in
para 4(7)(a).
f) The eligible unit will be registered permanently only after the
commencement of commercial operation and completion of the project.”
4. The State Government, in exercise of powers conferred upon it under
Section 29 of the Gujarat Entertainment Tax Act, 1977 (Act 16 of 1977),
issued Notification dated 14.02.1997 which was published in the Government
Gazette of even date. The relevant part of the Notification was as under:
“Whereas the Government of Gujarat has introduced a New Package Scheme of
incentives for Tourism Projects 1995-2000, under the “New Package Scheme
for incentives for Tourism Projects 1995-2000, under the “New Tourism
Policy, 1995” vide Government Resolution, Information, Broadcasting and
Tourism Department No.NTP-1095-1983-C, dated the 20th December, 1995
(hereinafter referred to as “the aid resolution”):
And whereas the Government of Gujarat considers it necessary so to do
in the public interest:
Now, therefore, the exercise of powers conferred by sub-sec. (1) of
Section 29 of the Gujarat Entertainment Tax Act, 1977 (Guj. 16 of 1977),
(hereinafter refrred to as “the said Act”) and in supersession of
Government Notification, Information, Broadcasting and Tourism Department
No. (GHT.91.45) MNR-1391-285-E, dated the 24th December, 1991 the
Government of Gujarat hereby exempt wholly the tax on the entertainment
which fulfils the criteria laid down in Appendix-B of the said resolution
(hereinafter referred to as the eligible entertainment) during the eligible
period or upto the period of expiry of the limits of incentives, whichever
is earlier, to the extent referred to in para 8.1 of the said
resolution……………………………………..
…………………………………………………………………………………………………………………..”
Paragraph 17 of the Notification stated that the exemption under said
Notification would be subject to all terms and conditions referred to in
Government Resolution dated 20.12.1995 in the Scheme and further conditions
stipulated in the Notification.
5. The appellants being desirous of setting up a multiplex and avail the
incentives under the Scheme took effective steps as stated in the Scheme
and the Notification dated 14.02.1997 and applied for Temporary
Registration Certification (TRC for short). Said application was examined
by the concerned authorities and TRC was granted on 17.09.1999 and the same
was sent to the appellants under covering letter dated 04.11.1999. In
pursuance thereof the appellants started constructing the multiplex in
accordance with the Scheme.
6. On 28.06.2000 Government Resolution No.NTP/1098-3219/C was issued by
the State Government seeking to clarify incidental/ancillary aspects as
regards treatment of certain cases covered under the Scheme. Clause A of
the Resolution stated that an application for TRCs under the existing
policy would be accepted till 31.07.2000 and TRCs would be issued provided
initial effective steps were taken on or before 31.07.2000. Clause B of
the said Resolution was as under:
“B. ADHOC/FINAL ELIGIBILITY ERTIFICATE:
All the units to whom TRC has already been issued under the guidelines of
Tourism Policy 1995-2000, shall apply for the Eligibility certificate
within 180 days from the date of commencement of commercial activities.
All the units to whom TRC has been issued & have not commenced commercial
activities on or before 31.07.2000 shall be considered as pipelines case.
The units falling under the pipeline cases shall complete the respective
project within the time-limit given below.
a) Tiny Project 1 year w.e.f. 31/7/2000
b) Small Project 1 year w.e.f. 31/7/2000
c) Prestigious Project 2 year w.e.f. 31.7.2000
d) Large project 2 year w.e.f. 31.7.2000
No further extension or relaxation shall be available to pipeline cases.
The unit falling under the pipeline cases who fails to complete the project
as stipulated above shall not be eligible for any incentive Adhoc or Final
as per tourism Policy 1995-2000.
No investment made after operative period or Scheme, i.e. 31.7.2000 shall
be considered as eligible investment. However, in case of projects not
completed and commissioned up to 31.7.2000 the investment made during
extended period mentioned above shall be considered while computing
eligible investment.
The validity period of the TRC issued under the existing policy 1995-2000
shall be two years from date of issue or expiry of operative period or
policy, i.e. 31.7.2000 whichever is earlier.
The pipeline cases, once rejected shall not be eligible to apply again for
incentives under the Tourism Policy 1995-2000.”
The Scheme was extended upto 30.09.2000 and later upto 30.11.2000 vide
Resolutions dated 31.07.2000 and 30.09.2000 respectively issued by the
State Government.
7. On 26.01.2001 a massive earthquake took place in the State resulting
in collapse of number of buildings and structures. This caused suspension
of the process of issuing development permissions, for the purposes of
maintaining structural safety standards in Development Control Regulations
under the provisions of the Gujarat Town Planning and Urban Development
Act, 1976. On 27.03.2001 it was directed by the State Government that all
development permissions must adhere to structural safety norms as stated in
annexure to said order dated 27.03.2001 and that even with respect to the
existing development permissions, necessary certification regarding
structural stability and strengthening ought to be issued by Structural
Engineers having requisite qualifications. The appellants submitted
building plans along with the requisite structural stability certificate.
The approval was accorded by the Municipal Corporation in October 2001 and
the appellants resumed construction work. Since more than a year was lost
because of subsequent changes in building norms, the appellants applied on
11.12.2001 for grant of extension for completing the project pointing out
the aforesaid difficulties. It was stated that as on the date, the
appellants had incurred expenditure to the tune of Rs.91.25 lakhs for which
a certificate of the Chartered Accountant was enclosed. Photographs of the
completed civil works were also enclosed.
8. Around 26.02.2002 large scale communal riots took place in the State
and Naroda (where the project of the appellant is located) was one of the
worst affected areas. Normal civil life was disrupted for a considerable
time, the labour force had left the site and accordingly, as per the
appellants, no construction could take place for more than four months. On
04.04.2002 in its 12th meeting, State Level Committee considered the
application dated 11.12.2001 preferred by the appellants. It clarified that
the date of TRC in case of the appellants shall be 4.11.1999. Keeping in
view the delay in continuation of operation due to earthquake and so also
the progress made by the appellants, the Committee granted extension in
validity period of TRC by six months which decision was communicated on
15.04.2002. The appellant wrote on 24.02.2002 stating that though the
extension was granted by the State Level Committee, the appellants could
effectively get only 17 days out of the extension of six months. The
appellants informed that the civil work was complete and the
electrification and air-conditioning work was in progress. It was further
stated that as on that date Rs.1.11 crores were spent on various items of
capital work, as supported by certificate from the Chartered Accountant and
prayed for further extension of four months. By subsequent letter dated
19.08.2002 it was stated that the civil work and the electrification was
complete and the ducting and air-conditioning work was on the verge of
completion. The status of investment as on that date was said to be more
than Rs.3.21 crores, as supported by the certificate from the Chartered
Accountant. The appellants then requested for extension of six months
instead of four months as was prayed earlier vide request dated 29.04.2002.
9. The State Level Committee in its 13th meeting held on 21.09.2002
discussed the provisions of extension in validity period of TRCs as per the
policy. It felt that the implementation of various projects was affected
on account of the earthquake and subsequent finalisation of Development
Control Rules and Regulations for the earthquake resistant building
structures. As regards the application of the appellants, the Committee
found that the delay in commencing the operation due to earthquake and in
completing the operation due to riots was justifiable and that the physical
progress of the project was satisfactory. However, it took the view that
extending the validity period would result in extension beyond 31.07.2002
and as such the matter was required to be deferred till the Government took
a decision on modification of GR dated 28.06.2000.
10. The appellants vide letter dated 30.10.2002 reiterated their request
for extension which was repeated by letters dated 13.12.2002 and
22.04.2003. On 20.06.2003 the Commissioner of Tourism informed that a
proposal for amendment of GR dated 28.06.2000 was sent and the matter was
being considered at the governmental level. It was stated that the
eligibility as per TRC issued to the appellants was in force and that their
project was still eligible. The appellants commenced commercial operations
on 11.07.2003 and applied for grant of appropriate eligibility certificate
on 04.11.2003.
11. In June 2004 Multiplex Association of Gujarat filed Special Civil
Application No.5574 of 2004 on behalf of its members in the High Court
seeking appropriate directions for grant of eligibility certificate to its
members. The High Court by its order dated 22.06.2004 directed the State
Government to decide the applications/representations for extension of
time. Thereafter, on 22.07.2004 the Commissioner of Tourism issued a show
cause notice calling upon the appellants why their application dated
04.11.2003 for grant of eligibility certificate should not be rejected.
Relying on the GR dated 28.06.2000, it was stated that the project was not
completed by 31.07.2002 and as such the appellants did not qualify for the
benefit of the Scheme dated 20.12.1995. The show cause notice was replied
by the appellants. On 20.07.2005 the application for grant of eligibility
certificate was rejected stating the following reasons:
“1. Sufficient time extension has already been given for starting
commercial activities of the project.
2. Further extension of time limit would lead to undue burden on the
State’s Exchequer.
Multiplicity of multiplexes beyond the requirement in the State.”
The aforesaid order dated 20.07.2005 was challenged by the appellants by
filing Special Civil Application No.18692 of 2005 in the High Court seeking
declaration that period for starting commercial operation as envisaged in
the Scheme stood extended upto 11.07.2003 and that the appellants were
entitled to be issued eligibility certificate and to all incentives under
the Scheme. The High Court while rejecting the submissions observed that
the operative period of the Scheme came to an end on 30.11.2000 by which
time the appellants had not commenced commercial operation and that the
appellants were not entitled to any benefits or incentives under the
Scheme. It found that the time for completing the project and commencing
the commercial operation would stand extended as a result of Government
Resolution dated 28.06.2000 only upto 31.07.2002 and upto 30.11.2002 in
view of Government Resolutions dated 31.07.2000 and 30.09.2000, that there
could be no further extension of time limit and that since the commercial
operations had not commenced even within such extended time period, the
claim of the appellants was rightly rejected. It observed that in the facts
and circumstances of the case there could be no application of the
principles of Promisory Estoppel. The present appeal by Special Leave
seeks to challenge the view so taken by the High Court. During the pendency
of the matter this Court had directed the appellants and similarly situated
multiplex theatre owners to keep paying the current taxes and to deposit
the outstanding dues as on 31.07.2009 in six equal quarterly installments
with interest @ 9 per cent on reducing balance.
Appearing for the appellants, Mr. Rakesh Dwivedi, learned Senior
Advocate submitted that the incentives provided in Clauses 8 and 8.1, and
the procedure prescribed for registration in Clause 10 formed the core of
promise and representation on part of the State Government based on which
eligible units including that of the appellants had altered their position
and made huge investments in Large Scale Tourism Units. He submitted that
such units could not now be told that the non fiscal benefits of extension
of validity period would not be granted to them despite they have been
fulfilled the conditions of satisfactory progress. It was further submitted
that Clause 10(b) and more particularly the expressions “in the first
instance” and “initial validity period” in said Clause 10 (b) promised an
over all validity period of four years; the initial validity period being
two years granted straight away under TRC while the subsequent period of
two years could be granted depending upon the progress report and
difficulties experienced. He submitted that the notification dated
14.2.1997 was issued under Section 29 of Act 16 of 1977 incorporating the
terms and conditions of the Scheme dated 20.12.1995 and as such Clause 10
of the Scheme had acquired a statutory status. In his submission, G.R.
dated 28.06.2000 was a mere resolution not being translated into similar
notification under Section 29, and therefore said GR dated 28.06.2000 could
not detract or derogate from statutory notification dated 14.2.1997. On
merits, it was submitted that the reasons in the letter of rejection dated
20.07.2005 were incorrect and irrelevant. He stated that out of 108 TRCs
issued under the Scheme, only in 22 or 23 cases the projects were completed
and commercial operations had started. Evidently, the State Government must
have considered that the burden with respect to 108 TRCs could comfortably
be borne, keeping in mind the advantages flowing from establishment of the
projects. Further, three projects had shut down after they became
operational. In the circumstances, the reasons regarding undue burden on
the Exchequer and requirement of Multiplexes in the State as stated, were
absurd and baseless.
14. Mr. Pritesh Kapur learned Advocate appearing for the State
submitted that the Scheme was to remain in force up to 31.07.2000 which
period was further extended up to 30.11.2000 and that the Scheme including
Clause 10 in its entirety ceased to be operative thereafter. In the
submission of the learned counsel, the right to seek an extension of the
validity period beyond the cut off date would survive only if such right
was an accrued right, which was not so in the present case. He further
submitted that GR dated 28.06.2000, rather than detracting from the Scheme
granted further extension to such units and as such cases for extension
after the period of operation of the Scheme had come to an end must and
ought to be governed by G.R. dated 28.06.2000 alone and that since said
G.R. did not contemplate any extension, the State Level Committee was right
in not exercising any powers for grant of extension. The Government was
also right in his submission, in taking a policy decision in not granting
any further extensions.
15. Mr. Rakesh Dwivedi learned Senior Advocate in rejoinder submitted
that incentives under Clause 8 which span beyond 5 years and up to 10
years, were designed to survive even after expiry of the Scheme. He further
submitted that in a case where TRC was granted towards the end of the
operative period of the Scheme, the final effective steps would necessarily
have to be taken after the expiry of the Scheme and thus the Scheme itself
contemplated that the actions under various clauses would continue to be
undertaken even after the expiry of the Scheme. In his submission the
concept of “accrued right” is to be seen in the context of Section 6 of the
General Clauses Act which may not strictly apply in the present case. It
was submitted that in any case positive acts in the form of huge
investments for setting up the projects having been undertaken during the
initial validity period of the Scheme, the entitlement to claim benefit of
consideration of case for extension under the Scheme was an “accrued
right”.
16. Reading of the Scheme shows that to be eligible for the incentives
under the Scheme, a new project ought to have obtained registration after
1.8.1995 and taken initial effective steps under Clause 4.7(a) which inter
alia included effective possession of land free from all encumbrances and
submission of Project Report. It is only thereafter that an intending unit
could apply and be given provisional registration under Clause 10(a). Said
clause indicates that such provisional registration “in the first instance”
would be up to two years. If the unit was not in a position to start
commercial operation during this initial validity period of two years, it
would be entitled to apply with progress report to the State Level
Committee for extension, which could be granted up to six months at a time
or a total period of two years after examining the difficulties experienced
in implementing the project. This first level of extensions for a total
period of two years could be granted by the State Level Committee and even
if a unit was unable to go into operation after availing such extensions,
it could still apply to the Government for further extension. Clauses 8 and
8.1 dealt with incentives and period of eligibility which would go up to
ten years after a unit was found to be fully eligible. These clauses
clearly show that such stages or eventualities would survive even after the
expiry of period of the operation of the Scheme. The reading of the Scheme
further shows that no fresh application and TRCs could be granted after the
period of operation but those who had crossed the threshold and were given
TRC, could have the full benefit of the stages contemplated in Section 10.
In our considered view, it would be incorrect to say that all the clauses
including Clause 10 would cease to operate after the period of operation
had come to an end. It being the clear intent that such stages and
eventualities ought to survive even after the expiry of the Scheme, we
reject the submission advanced on behalf of the State.
17. Clause 7 of the Scheme classifies projects in different categories
and for a Large Scale Tourism Unit, with which we are presently concerned,
fixed capital investment was required to be more than Rs.90 lakhs. The
Scheme definitely promised an initial period for completion of the project
under Clause 10 (a) as two years after the initial effective steps were
under taken by the concerned unit. Clause 10 (b) further promised an
extension for two years subject to State Level Committee being satisfied
that an individual unit had experienced difficulties in implementing the
project. A unit was therefore promised the availability of an opportunity,
depending upon the individual fact situation, to pray for extension up to
two years. Clause 10(C) further entitled such unit to approach the State
Govt. even after the aforesaid aggregate period of four years for further
extension. In our view, Clause 10 was one of the core features of the
Scheme based on which eligible units were invited to make capital
investment of more than Rs. 90 Lakhs with a promise of incentives under
Clause 8. Having given such promise, based on which the appellants incurred
capital expenditure, the question now arises as regards applicability of
doctrine of Promissory Estoppel.
18. The law on the subject of Promissory Estoppel was recapitulated and
succinctly dealt with by this Court in State of Punjab Vs. Nestle India
Ltd.[1] It found the foundation of the doctrine laid in the decision in
Collector of Bombay Vs. Municipal Corporation of the City of Bombay[2], the
principle built upon in Union of India Vs. Anglo Afghan Agencies[3] and the
superstructure of the doctrine, with its pre-conditions, strengths and
limitations outlined in the decision in Motilal Padampat Sugar Mills Co.
Ltd. Vs. State of UP[4]. This Court then dealt with the discordant note in
Jit Ram Vs. State of Haryana[5] and how that was firmly disapproved in
Union of India Vs. Godfrey Philips India Ltd.[6] by a bench of three
judges. We deem it appropriate to quote paras 27, 28, 29, 34, 35 and 36
from the decision in State of Punjab Vs. Nestle India Ltd. (Supra):-
“27. However, the superstructure of the doctrine with its preconditions,
strengths and limitations has been outlined in the decision of Motilal
Padampat Sugar Mills Co. Ltd. v. State of U.P.3 Briefly stated: the case
related to a representation made by the State Government that the
petitioners’ [pic]factory would be exempted from payment of sales tax for a
period of three years from the date of commencement of production. It was
proved that the petitioners had, as a consequence of the representation,
set up the factory in the State. But the State Government refused to honour
its representation. It claimed sales tax for the period it had said that it
would not. When the petitioners went to court, the State Government took
the pleas:
(1) in the absence of notification under Section 4-A, the State Government
could not be prevented from enforcing the liability to sales tax imposed on
the petitioners under the provisions of the Sales Tax Act;
(2) that the petitioners had waived their right to claim exemption; and
(3) that there could be no promissory estoppel against the State Government
so as to inhibit it from formulating and implementing its policies in
public interest.
28. This Court rejected all the three pleas of the Government. It
reiterated the well-known preconditions for the operation of the doctrine:
(1) a clear and unequivocal promise knowing and intending that it would be
acted upon by the promisee;
(2) such acting upon the promise by the promisee so that it would be
inequitable to allow the promisor to go back on the promise.
29. As for its strengths it was said: that the doctrine was not limited
only to cases where there was some contractual relationship or other pre-
existing legal relationship between the parties. The principle would be
applied even when the promise is intended to create legal relations or
affect a legal relationship which would arise in future. The Government was
held to be equally susceptible to the operation of the doctrine in whatever
area or field the promise is made — contractual, administrative or
statutory. To put it in the words of the Court:
“The law may, therefore, now be taken to be settled as a result of this
decision, that where the Government makes a promise knowing or intending
that it would be acted on by the promisee and, in fact, the promisee,
acting in reliance on it, alters his position, the Government would be held
bound by the promise and the promise would be enforceable against the
Government at the instance of the promisee, notwithstanding that there is
no consideration for the promise and the promise is not recorded in the
form of a formal contract as required by Article 299 of the Constitution.
(SCC p. 442, para 24)
* * *
[E]quity will, in a given case where justice and fairness demand, prevent a
person from insisting on strict legal rights, even where they arise, not
under any contract, but on his own title deeds or under statute. (SCC p.
425, para 8)
* * *
Whatever be the nature of the function which the Government is discharging,
the Government is subject to the rule of promissory estoppel [pic]and if
the essential ingredients of this rule are satisfied, the Government can be
compelled to carry out the promise made by it.” (SCC p. 453, para 33)
34. The discordant note struck by Jit Ram case5 was firmly disapproved by a
Bench of three Judges in Union of India v. Godfrey Philips India Ltd.6 It
was affirmed that: (SCC p. 387, para 12)
“12. There can therefore be no doubt that the doctrine of promissory
estoppel 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 the doctrine of promissory estoppel.”
35. It was held that irrespective of the nature of power wielded the
Government is bound to wield that power provided it possessed such power
and has promised to do so knowing and intending that the promisee would act
on such promise and the promisee has done so: (SCC p. 389, para 14)
“We think that the Central Government had power under Rule 8 sub-rule (1)
of the Rules to issue a notification excluding the cost of corrugated
fibreboard containers from the value of the cigarettes and thereby
exempting the cigarettes from that part of the excise duty which would be
attributable to the cost of corrugated fibreboard containers. So also the
Central Board of Excise and Customs had power under Rule 8 sub-rule (2) to
make a special order in the case of each of the respondents granting the
same exemption, because it could legitimately be said that, having regard
to the representation made by the Cigarette Manufacturers’ Association,
there were circumstances of an exceptional nature which required the
exercise of the power under sub-rule (2) of Rule 8. The Central Government
and the Central Board of Excise and Customs were therefore clearly bound by
promissory estoppel to exclude the cost of corrugated fibreboard containers
from the value of the goods for the purpose of assessment of excise duty
for the period 24-5-1976 to 2-11-1982.”
36. The limitations to the doctrine delineated in Motilal Padampat Sugar
Mills3 however, were also reaffirmed when it was said: (SCC pp. 387-88,
para 13)
“[T]hat there can be no promissory estoppel against the legislature in the
exercise of its legislative functions nor can the Government or public
authority be debarred by promissory estoppel from enforcing a statutory
prohibition. It is equally true that promissory estoppel cannot be used to
compel the Government or a public authority to carry out a representation
or promise which is contrary to law or which was outside the authority or
power of the officer of the Government or of the public authority to make.
We may also point out that the doctrine of promissory estoppel being an
equitable doctrine, it must yield when the equity so requires; if it can be
shown by the Government or public authority that having regard to the facts
as they have transpired, it would be inequitable to hold the Government or
public authority to the promise or representation made by it, the Court
would not raise an equity in favour [pic]of the person to whom the promise
or representation is made and enforce the promise or representation against
the Government or public authority.”
Coming to the facts of the present case, we find that the Scheme
definitely promised incentives in the form of Tax holiday of 5-10 years in
respect of exemptions from Sales Tax, Turnover Tax, Electricity Duty,
Luxury Tax and Entertainment Tax upto 100 per cent of capital investment if
a new unit was registered after 1.8.1995 and appropriate investment in
fixed capital assets was made. It also promised an initial period of two
years for going operational in the first instance, extendable by further
period of two years subject to satisfactory progress to be found by the
State Level Committee. Even thereafter, the Unit could still approach the
State Government for further extension. This was part of the core of the
Scheme, which invited investment in tourism units promising tax holiday as
stated above. Based on such representation, various units including that
of the appellants having come forward and altered their position, the State
Government would certainly be bound by the principles of Promissory
Estoppel. The State Government was thus estopped from going back on the
promise so made in the Scheme and could not have curtailed the period and
the opportunity specifically made available within which the project could
be completed so as to avail the benefits under the Scheme.
We find nothing in the present case on the basis of which there could
possibly be room to say that it would be inequitable to hold the State
Government to its promise. Out of 108 TRCs issued under the Scheme, the
burden that the Government was well aware and thought that it could
comfortably bear, only 19 or 20 units have been established and are
functional. In any case, the impact of incentives so offered under the
Scheme and the consequential burden must have been weighed carefully when
such promise was made and the Scheme was formed. We may respectfully refer
to the following observations of this Court in S.V.A. Steel Re- Rolling
Mills Ltd. and others v. State of Kerala and others[7] to which one of us
(Anil R. Dave, J.) was a party:
“30. Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and its
capacity to give the benefits. Without proper appreciation of all the
relevant factors, the State should not give any assurance, not only because
that would be in violation of the principles of promissory estoppel but it
would be unfair and immoral on the part of the State not to act as per its
promise.”
Furthermore, the Scheme as framed on 20.12.1995 formed the basis of a
statutory notification under Section 29 of Act 16 of 1977 and as such the
core components of the Scheme had acquired a statutory status. By virtue of
said Section 29, the notification dated 14.2.1997 was required to be laid
for not less than 30 days before the State Legislature. If the State
Government was desirous of amending, varying or rescinding said
notification dated 14.2.1997, the subsequent G.R. dated 28.06.2000 ought
to have been translated in a statutory notification under Section 29 of the
Act 16 of 1977. In the absence of such steps having been undertaken, G.R.
dated 28.06.2000 could not in any way detract from or dilute the effect of
the Scheme which had acquired statutory status.
21. We therefore hold that the appellants were entitled to have full
benefit and advantage of Clause 10 of the Scheme and the curtailment of the
period and opportunity available under said Clause 10 of the Scheme by
subsequent G.R. dated 28.06.2000 was bad and ineffective.
The record indicates that the progress of the project of the
appellants was greatly hampered as a result of major earth quake in the
State on 26.01.2001 and large scale communal riots in the State in February
2002. The State Level Committee was satisfied that the commencement and
continuation of the project was so affected as a result of these major
difficulties and had granted initial extension of six months but the
appellants had benefit of only few days out of such extension. The
subsequent request for further extension which was backed with relevant
certificate from the Chartered Accountant certainly persuaded the State
Level Committee to find that the facts justified grant of further extension
but it felt it had lost the power to grant such extension because of G. R.
dated 28.06.2000. In the light of the view that we have taken, the State
Level Committee was still competent to consider the request for grant of
extension.
23. In the circumstances, we allow the appeal and set aside the decision
of the High Court in so far as it held that the operative period of the
Scheme came to an end on 30.11.2000 and that there could be no further
extension of time limit. Since the appellants have already commenced
commercial operations, it now needs to be assessed by the State Level
Committee whether in the facts of the case the appellants could justifiably
have claimed extension under Clause 10 of the Scheme. We direct the State
Level Committee to make such assessment in accordance with Clause 10, in
three months of the receipt of this decision. Needless to say, if such
assessment is found in favour of the appellants, they shall be entitled to
the incentives and benefits under the Scheme.
24. All the connected matters raise identical issues and challenge
rejection of their applications for extension of time. In each case the
Order passed by the concerned authority is similarly worded and passed on
20.07.2005, i.e. the same date. These connected appeals are also allowed
with similar direction.
25. The appeals stand allowed in terms as stated above. No order as
to costs.
………………………..J.
(Anil R. Dave)
………………………..J.
(Uday Umesh Lalit)
New Delhi,
May 13, 2015
-----------------------
[1] 2004(6) SCC 465
[2] 1952 SCR 43
[3] 1968(2) SCR 366
[4] 1979(2)SCC 409
[5] 1981(1)SCC 11
[6] 1985(4) SCC 369
[7] (2014) 4 SCC 186
-----------------------
30
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6478 OF 2009
DEVI MULTIPLEX & ANR. …. Appellants
Versus
STATE OF GUJARAT & ORS …. Respondents
WITH
CIVIL APPEAL NOs.6479/2009, 6480/2009, 6481/2009,
6482/2009, 6483/2009, 6484/2009, 6485/2009, 6487/2009, 6488/2009,
6489/2009, 6490/2009 AND 6491/2009
J U D G M E N T
Uday Umesh Lalit, J.
1. Civil Appeal 6478 of 1979 is directed against the judgment and order
dated 26.06.2009 passed by the High Court of Gujarat at Ahmedabad in
Special Civil Application No.18692 of 2005 to the extent it dismissed the
challenge to the order passed by respondent no. 3 dated 20.07.2005
rejecting the application of the appellants for extension of time under
Clause 10 of New Package Scheme of Incentives for Tourism Projects, 1995-
2000. Similar challenge stands raised in other civil appeals against Orders
rejecting their applications for extension of time. Since Civil Appeal
No.6478 of 2009was taken as the lead matter, facts relating thereto are
dealt with in detail hereafter.
2. On 20.12.1995 Government of Gujarat announced policy named “New
Package Scheme of Incentives for Tourism Projects, 1995-2000” (hereafter
referred to as the Scheme) with a view to make available all fiscal and non
fiscal incentives, reliefs and concessions enjoyed by industries to
‘Tourism’ which was accorded the status of an industry, in order to give a
boost to tourism sector by attracting higher investment in the areas with
tourism potential and to generate employment opportunities. Under Clause 2,
the Scheme came into operation on 1.8.1995 and was to remain in force for a
period of five years upto 31.07.2000. Under Clause 3, to be eligible, a new
tourism unit ought to be registered after 1.8.1995. Clause 4.7 dealt with
effective steps which such unit was expected to undertake. Under Clause 5,
after taking initial effective steps a tourism unit could apply to the
Director of Tourism for registration. All projects had to conform to the
specifications and requirements spelt out in Appendix B which Appendix
dealt with various categories of tourism units and Item 22 thereof
pertained to Entertainment Complexes including multi cinema theater
complexes or multiplexes. Clause 7 categorised tourism units in four
categories, namely, Prestigious Tourism Units, Large Scale Tourism Units,
Small Scale Tourism Units and Tiny Tourism Units with minimum fixed capital
investment of Rs. 10 Crore, 90 lakhs, 10 lakhs and less than 10 lakhs
respectively. Clause 8 dealt with incentives and stated that a tax holiday
of 5-10 years would be available in respect of exemptions from (i) Sales
Tax (ii) Turnover Tax (iii) Electricity Duty (iv) Luxury Tax and (v)
Entertainment Tax, upto 100% of capital investment. In clause 8.1 it was
stated that the quantum of incentives would not exceed 100% of eligible
capital investment and it further stated the period of eligibility in
respect of Prestigious Tourism Unites, Large Scale Tourism Units, Small
Scale Tourism Units and Tiny Tourism Units to be 10 years, 8 years, 6 years
and 5 years respectively. Clause 9 dealt with composition of sanctioning
authority whereunder State Level Committee was competent to issue
eligibility certificate in respect of Prestigious and Large Units while
District Level Committee was to issue eligibility certificate for all Small
Scale and Tiny Tourism Units. The procedure for registration tourism units
for incentives was detailed in Clause 10.
Clauses 4.7 and 10 of the Scheme are quoted hereunder:-
“4.7 EFFECTIVE STEPS
The effective steps shall comprise
(a) initial effective steps which shall include:
i) Effective possession of land by an eligible unit free from all
encumbrances.
ii) Registration in respect of company/Cooperative Society/Trust in respect
of a partnership firm, evidence of execution of partnership deed and
filling of requisite application with payment of necessary registration
fees with the Registrar of Firms.
iii) Submission of project report specifically mentioning the category of
tourism activity (coverage) and the incentive that are proposed to be
availed of by the eligible unit with all relevant details.
iv) Copy of application duly acknowledged by all statutory and executive
authorities from which permission is required.
(b) final effective steps shall mean and include:
i) Clearance, if any, from Central/State Government and other
authorities concerned for implementing the project.
ii) Tying up of the means of finance for the project to the satisfaction
of the incentive sanctioning authority.
iii) Acquisition of fixed assets at site to the extent of 10% of the total
fixed assets as envisaged for the project, and
iv) Evidence regarding expenditure on the project, including advances and
pre-operative expenses paid, aggregating to at least 25 percent of the
capital cost envisaged for the project.
10. PROCEDURE FOR REGISTRATION OF TOURISM UNITS FOR INCENTIVES:
All tourism units eligible for the Scheme will apply to the Director of
Tourism in a prescribed Form. The Directors of Tourism will scrutinizes
the application and will issue temporary and permanent registration
adopting the following procedure:
a) Director of Tourism shall give provisional registration in the first
instance upto 2 years to the eligible unit after scrutinizing the
application received by him under the Scheme.
b) If such a unit is not in a position to start commercial operation
during the initial validity period the unit will have to apply with the
progress report to the State Level Committee which is authorized to grant
extension upto six months at a time or a total period of 2 years after
examining the difficulties experienced by the individual unit in
implementing the project and also record the reasons thereof in writing.
c) The units which are unable to go into operation after it has been
given extension under para (b) above will have to apply to Government the
reasons for the delay. Such application will have to be forwarded by the
director of tourism, who will carry out physical inspection of projects and
report to government for decision. If the director of tourism is satisfied
that the steps to implement the project are adequate he shall inform the
Government about the same.
d) The State Government on examination of details made available by the
director of tourism may decide to extend or reject the registration
depending upon the merit of each case. The decision of Government in this
regard will be final and binding on the party.
e) The unit will become eligible to apply for provisional or temporary
registration only after taking initial effective steps as stipulated in
para 4(7)(a).
f) The eligible unit will be registered permanently only after the
commencement of commercial operation and completion of the project.”
4. The State Government, in exercise of powers conferred upon it under
Section 29 of the Gujarat Entertainment Tax Act, 1977 (Act 16 of 1977),
issued Notification dated 14.02.1997 which was published in the Government
Gazette of even date. The relevant part of the Notification was as under:
“Whereas the Government of Gujarat has introduced a New Package Scheme of
incentives for Tourism Projects 1995-2000, under the “New Package Scheme
for incentives for Tourism Projects 1995-2000, under the “New Tourism
Policy, 1995” vide Government Resolution, Information, Broadcasting and
Tourism Department No.NTP-1095-1983-C, dated the 20th December, 1995
(hereinafter referred to as “the aid resolution”):
And whereas the Government of Gujarat considers it necessary so to do
in the public interest:
Now, therefore, the exercise of powers conferred by sub-sec. (1) of
Section 29 of the Gujarat Entertainment Tax Act, 1977 (Guj. 16 of 1977),
(hereinafter refrred to as “the said Act”) and in supersession of
Government Notification, Information, Broadcasting and Tourism Department
No. (GHT.91.45) MNR-1391-285-E, dated the 24th December, 1991 the
Government of Gujarat hereby exempt wholly the tax on the entertainment
which fulfils the criteria laid down in Appendix-B of the said resolution
(hereinafter referred to as the eligible entertainment) during the eligible
period or upto the period of expiry of the limits of incentives, whichever
is earlier, to the extent referred to in para 8.1 of the said
resolution……………………………………..
…………………………………………………………………………………………………………………..”
Paragraph 17 of the Notification stated that the exemption under said
Notification would be subject to all terms and conditions referred to in
Government Resolution dated 20.12.1995 in the Scheme and further conditions
stipulated in the Notification.
5. The appellants being desirous of setting up a multiplex and avail the
incentives under the Scheme took effective steps as stated in the Scheme
and the Notification dated 14.02.1997 and applied for Temporary
Registration Certification (TRC for short). Said application was examined
by the concerned authorities and TRC was granted on 17.09.1999 and the same
was sent to the appellants under covering letter dated 04.11.1999. In
pursuance thereof the appellants started constructing the multiplex in
accordance with the Scheme.
6. On 28.06.2000 Government Resolution No.NTP/1098-3219/C was issued by
the State Government seeking to clarify incidental/ancillary aspects as
regards treatment of certain cases covered under the Scheme. Clause A of
the Resolution stated that an application for TRCs under the existing
policy would be accepted till 31.07.2000 and TRCs would be issued provided
initial effective steps were taken on or before 31.07.2000. Clause B of
the said Resolution was as under:
“B. ADHOC/FINAL ELIGIBILITY ERTIFICATE:
All the units to whom TRC has already been issued under the guidelines of
Tourism Policy 1995-2000, shall apply for the Eligibility certificate
within 180 days from the date of commencement of commercial activities.
All the units to whom TRC has been issued & have not commenced commercial
activities on or before 31.07.2000 shall be considered as pipelines case.
The units falling under the pipeline cases shall complete the respective
project within the time-limit given below.
a) Tiny Project 1 year w.e.f. 31/7/2000
b) Small Project 1 year w.e.f. 31/7/2000
c) Prestigious Project 2 year w.e.f. 31.7.2000
d) Large project 2 year w.e.f. 31.7.2000
No further extension or relaxation shall be available to pipeline cases.
The unit falling under the pipeline cases who fails to complete the project
as stipulated above shall not be eligible for any incentive Adhoc or Final
as per tourism Policy 1995-2000.
No investment made after operative period or Scheme, i.e. 31.7.2000 shall
be considered as eligible investment. However, in case of projects not
completed and commissioned up to 31.7.2000 the investment made during
extended period mentioned above shall be considered while computing
eligible investment.
The validity period of the TRC issued under the existing policy 1995-2000
shall be two years from date of issue or expiry of operative period or
policy, i.e. 31.7.2000 whichever is earlier.
The pipeline cases, once rejected shall not be eligible to apply again for
incentives under the Tourism Policy 1995-2000.”
The Scheme was extended upto 30.09.2000 and later upto 30.11.2000 vide
Resolutions dated 31.07.2000 and 30.09.2000 respectively issued by the
State Government.
7. On 26.01.2001 a massive earthquake took place in the State resulting
in collapse of number of buildings and structures. This caused suspension
of the process of issuing development permissions, for the purposes of
maintaining structural safety standards in Development Control Regulations
under the provisions of the Gujarat Town Planning and Urban Development
Act, 1976. On 27.03.2001 it was directed by the State Government that all
development permissions must adhere to structural safety norms as stated in
annexure to said order dated 27.03.2001 and that even with respect to the
existing development permissions, necessary certification regarding
structural stability and strengthening ought to be issued by Structural
Engineers having requisite qualifications. The appellants submitted
building plans along with the requisite structural stability certificate.
The approval was accorded by the Municipal Corporation in October 2001 and
the appellants resumed construction work. Since more than a year was lost
because of subsequent changes in building norms, the appellants applied on
11.12.2001 for grant of extension for completing the project pointing out
the aforesaid difficulties. It was stated that as on the date, the
appellants had incurred expenditure to the tune of Rs.91.25 lakhs for which
a certificate of the Chartered Accountant was enclosed. Photographs of the
completed civil works were also enclosed.
8. Around 26.02.2002 large scale communal riots took place in the State
and Naroda (where the project of the appellant is located) was one of the
worst affected areas. Normal civil life was disrupted for a considerable
time, the labour force had left the site and accordingly, as per the
appellants, no construction could take place for more than four months. On
04.04.2002 in its 12th meeting, State Level Committee considered the
application dated 11.12.2001 preferred by the appellants. It clarified that
the date of TRC in case of the appellants shall be 4.11.1999. Keeping in
view the delay in continuation of operation due to earthquake and so also
the progress made by the appellants, the Committee granted extension in
validity period of TRC by six months which decision was communicated on
15.04.2002. The appellant wrote on 24.02.2002 stating that though the
extension was granted by the State Level Committee, the appellants could
effectively get only 17 days out of the extension of six months. The
appellants informed that the civil work was complete and the
electrification and air-conditioning work was in progress. It was further
stated that as on that date Rs.1.11 crores were spent on various items of
capital work, as supported by certificate from the Chartered Accountant and
prayed for further extension of four months. By subsequent letter dated
19.08.2002 it was stated that the civil work and the electrification was
complete and the ducting and air-conditioning work was on the verge of
completion. The status of investment as on that date was said to be more
than Rs.3.21 crores, as supported by the certificate from the Chartered
Accountant. The appellants then requested for extension of six months
instead of four months as was prayed earlier vide request dated 29.04.2002.
9. The State Level Committee in its 13th meeting held on 21.09.2002
discussed the provisions of extension in validity period of TRCs as per the
policy. It felt that the implementation of various projects was affected
on account of the earthquake and subsequent finalisation of Development
Control Rules and Regulations for the earthquake resistant building
structures. As regards the application of the appellants, the Committee
found that the delay in commencing the operation due to earthquake and in
completing the operation due to riots was justifiable and that the physical
progress of the project was satisfactory. However, it took the view that
extending the validity period would result in extension beyond 31.07.2002
and as such the matter was required to be deferred till the Government took
a decision on modification of GR dated 28.06.2000.
10. The appellants vide letter dated 30.10.2002 reiterated their request
for extension which was repeated by letters dated 13.12.2002 and
22.04.2003. On 20.06.2003 the Commissioner of Tourism informed that a
proposal for amendment of GR dated 28.06.2000 was sent and the matter was
being considered at the governmental level. It was stated that the
eligibility as per TRC issued to the appellants was in force and that their
project was still eligible. The appellants commenced commercial operations
on 11.07.2003 and applied for grant of appropriate eligibility certificate
on 04.11.2003.
11. In June 2004 Multiplex Association of Gujarat filed Special Civil
Application No.5574 of 2004 on behalf of its members in the High Court
seeking appropriate directions for grant of eligibility certificate to its
members. The High Court by its order dated 22.06.2004 directed the State
Government to decide the applications/representations for extension of
time. Thereafter, on 22.07.2004 the Commissioner of Tourism issued a show
cause notice calling upon the appellants why their application dated
04.11.2003 for grant of eligibility certificate should not be rejected.
Relying on the GR dated 28.06.2000, it was stated that the project was not
completed by 31.07.2002 and as such the appellants did not qualify for the
benefit of the Scheme dated 20.12.1995. The show cause notice was replied
by the appellants. On 20.07.2005 the application for grant of eligibility
certificate was rejected stating the following reasons:
“1. Sufficient time extension has already been given for starting
commercial activities of the project.
2. Further extension of time limit would lead to undue burden on the
State’s Exchequer.
Multiplicity of multiplexes beyond the requirement in the State.”
The aforesaid order dated 20.07.2005 was challenged by the appellants by
filing Special Civil Application No.18692 of 2005 in the High Court seeking
declaration that period for starting commercial operation as envisaged in
the Scheme stood extended upto 11.07.2003 and that the appellants were
entitled to be issued eligibility certificate and to all incentives under
the Scheme. The High Court while rejecting the submissions observed that
the operative period of the Scheme came to an end on 30.11.2000 by which
time the appellants had not commenced commercial operation and that the
appellants were not entitled to any benefits or incentives under the
Scheme. It found that the time for completing the project and commencing
the commercial operation would stand extended as a result of Government
Resolution dated 28.06.2000 only upto 31.07.2002 and upto 30.11.2002 in
view of Government Resolutions dated 31.07.2000 and 30.09.2000, that there
could be no further extension of time limit and that since the commercial
operations had not commenced even within such extended time period, the
claim of the appellants was rightly rejected. It observed that in the facts
and circumstances of the case there could be no application of the
principles of Promisory Estoppel. The present appeal by Special Leave
seeks to challenge the view so taken by the High Court. During the pendency
of the matter this Court had directed the appellants and similarly situated
multiplex theatre owners to keep paying the current taxes and to deposit
the outstanding dues as on 31.07.2009 in six equal quarterly installments
with interest @ 9 per cent on reducing balance.
Appearing for the appellants, Mr. Rakesh Dwivedi, learned Senior
Advocate submitted that the incentives provided in Clauses 8 and 8.1, and
the procedure prescribed for registration in Clause 10 formed the core of
promise and representation on part of the State Government based on which
eligible units including that of the appellants had altered their position
and made huge investments in Large Scale Tourism Units. He submitted that
such units could not now be told that the non fiscal benefits of extension
of validity period would not be granted to them despite they have been
fulfilled the conditions of satisfactory progress. It was further submitted
that Clause 10(b) and more particularly the expressions “in the first
instance” and “initial validity period” in said Clause 10 (b) promised an
over all validity period of four years; the initial validity period being
two years granted straight away under TRC while the subsequent period of
two years could be granted depending upon the progress report and
difficulties experienced. He submitted that the notification dated
14.2.1997 was issued under Section 29 of Act 16 of 1977 incorporating the
terms and conditions of the Scheme dated 20.12.1995 and as such Clause 10
of the Scheme had acquired a statutory status. In his submission, G.R.
dated 28.06.2000 was a mere resolution not being translated into similar
notification under Section 29, and therefore said GR dated 28.06.2000 could
not detract or derogate from statutory notification dated 14.2.1997. On
merits, it was submitted that the reasons in the letter of rejection dated
20.07.2005 were incorrect and irrelevant. He stated that out of 108 TRCs
issued under the Scheme, only in 22 or 23 cases the projects were completed
and commercial operations had started. Evidently, the State Government must
have considered that the burden with respect to 108 TRCs could comfortably
be borne, keeping in mind the advantages flowing from establishment of the
projects. Further, three projects had shut down after they became
operational. In the circumstances, the reasons regarding undue burden on
the Exchequer and requirement of Multiplexes in the State as stated, were
absurd and baseless.
14. Mr. Pritesh Kapur learned Advocate appearing for the State
submitted that the Scheme was to remain in force up to 31.07.2000 which
period was further extended up to 30.11.2000 and that the Scheme including
Clause 10 in its entirety ceased to be operative thereafter. In the
submission of the learned counsel, the right to seek an extension of the
validity period beyond the cut off date would survive only if such right
was an accrued right, which was not so in the present case. He further
submitted that GR dated 28.06.2000, rather than detracting from the Scheme
granted further extension to such units and as such cases for extension
after the period of operation of the Scheme had come to an end must and
ought to be governed by G.R. dated 28.06.2000 alone and that since said
G.R. did not contemplate any extension, the State Level Committee was right
in not exercising any powers for grant of extension. The Government was
also right in his submission, in taking a policy decision in not granting
any further extensions.
15. Mr. Rakesh Dwivedi learned Senior Advocate in rejoinder submitted
that incentives under Clause 8 which span beyond 5 years and up to 10
years, were designed to survive even after expiry of the Scheme. He further
submitted that in a case where TRC was granted towards the end of the
operative period of the Scheme, the final effective steps would necessarily
have to be taken after the expiry of the Scheme and thus the Scheme itself
contemplated that the actions under various clauses would continue to be
undertaken even after the expiry of the Scheme. In his submission the
concept of “accrued right” is to be seen in the context of Section 6 of the
General Clauses Act which may not strictly apply in the present case. It
was submitted that in any case positive acts in the form of huge
investments for setting up the projects having been undertaken during the
initial validity period of the Scheme, the entitlement to claim benefit of
consideration of case for extension under the Scheme was an “accrued
right”.
16. Reading of the Scheme shows that to be eligible for the incentives
under the Scheme, a new project ought to have obtained registration after
1.8.1995 and taken initial effective steps under Clause 4.7(a) which inter
alia included effective possession of land free from all encumbrances and
submission of Project Report. It is only thereafter that an intending unit
could apply and be given provisional registration under Clause 10(a). Said
clause indicates that such provisional registration “in the first instance”
would be up to two years. If the unit was not in a position to start
commercial operation during this initial validity period of two years, it
would be entitled to apply with progress report to the State Level
Committee for extension, which could be granted up to six months at a time
or a total period of two years after examining the difficulties experienced
in implementing the project. This first level of extensions for a total
period of two years could be granted by the State Level Committee and even
if a unit was unable to go into operation after availing such extensions,
it could still apply to the Government for further extension. Clauses 8 and
8.1 dealt with incentives and period of eligibility which would go up to
ten years after a unit was found to be fully eligible. These clauses
clearly show that such stages or eventualities would survive even after the
expiry of period of the operation of the Scheme. The reading of the Scheme
further shows that no fresh application and TRCs could be granted after the
period of operation but those who had crossed the threshold and were given
TRC, could have the full benefit of the stages contemplated in Section 10.
In our considered view, it would be incorrect to say that all the clauses
including Clause 10 would cease to operate after the period of operation
had come to an end. It being the clear intent that such stages and
eventualities ought to survive even after the expiry of the Scheme, we
reject the submission advanced on behalf of the State.
17. Clause 7 of the Scheme classifies projects in different categories
and for a Large Scale Tourism Unit, with which we are presently concerned,
fixed capital investment was required to be more than Rs.90 lakhs. The
Scheme definitely promised an initial period for completion of the project
under Clause 10 (a) as two years after the initial effective steps were
under taken by the concerned unit. Clause 10 (b) further promised an
extension for two years subject to State Level Committee being satisfied
that an individual unit had experienced difficulties in implementing the
project. A unit was therefore promised the availability of an opportunity,
depending upon the individual fact situation, to pray for extension up to
two years. Clause 10(C) further entitled such unit to approach the State
Govt. even after the aforesaid aggregate period of four years for further
extension. In our view, Clause 10 was one of the core features of the
Scheme based on which eligible units were invited to make capital
investment of more than Rs. 90 Lakhs with a promise of incentives under
Clause 8. Having given such promise, based on which the appellants incurred
capital expenditure, the question now arises as regards applicability of
doctrine of Promissory Estoppel.
18. The law on the subject of Promissory Estoppel was recapitulated and
succinctly dealt with by this Court in State of Punjab Vs. Nestle India
Ltd.[1] It found the foundation of the doctrine laid in the decision in
Collector of Bombay Vs. Municipal Corporation of the City of Bombay[2], the
principle built upon in Union of India Vs. Anglo Afghan Agencies[3] and the
superstructure of the doctrine, with its pre-conditions, strengths and
limitations outlined in the decision in Motilal Padampat Sugar Mills Co.
Ltd. Vs. State of UP[4]. This Court then dealt with the discordant note in
Jit Ram Vs. State of Haryana[5] and how that was firmly disapproved in
Union of India Vs. Godfrey Philips India Ltd.[6] by a bench of three
judges. We deem it appropriate to quote paras 27, 28, 29, 34, 35 and 36
from the decision in State of Punjab Vs. Nestle India Ltd. (Supra):-
“27. However, the superstructure of the doctrine with its preconditions,
strengths and limitations has been outlined in the decision of Motilal
Padampat Sugar Mills Co. Ltd. v. State of U.P.3 Briefly stated: the case
related to a representation made by the State Government that the
petitioners’ [pic]factory would be exempted from payment of sales tax for a
period of three years from the date of commencement of production. It was
proved that the petitioners had, as a consequence of the representation,
set up the factory in the State. But the State Government refused to honour
its representation. It claimed sales tax for the period it had said that it
would not. When the petitioners went to court, the State Government took
the pleas:
(1) in the absence of notification under Section 4-A, the State Government
could not be prevented from enforcing the liability to sales tax imposed on
the petitioners under the provisions of the Sales Tax Act;
(2) that the petitioners had waived their right to claim exemption; and
(3) that there could be no promissory estoppel against the State Government
so as to inhibit it from formulating and implementing its policies in
public interest.
28. This Court rejected all the three pleas of the Government. It
reiterated the well-known preconditions for the operation of the doctrine:
(1) a clear and unequivocal promise knowing and intending that it would be
acted upon by the promisee;
(2) such acting upon the promise by the promisee so that it would be
inequitable to allow the promisor to go back on the promise.
29. As for its strengths it was said: that the doctrine was not limited
only to cases where there was some contractual relationship or other pre-
existing legal relationship between the parties. The principle would be
applied even when the promise is intended to create legal relations or
affect a legal relationship which would arise in future. The Government was
held to be equally susceptible to the operation of the doctrine in whatever
area or field the promise is made — contractual, administrative or
statutory. To put it in the words of the Court:
“The law may, therefore, now be taken to be settled as a result of this
decision, that where the Government makes a promise knowing or intending
that it would be acted on by the promisee and, in fact, the promisee,
acting in reliance on it, alters his position, the Government would be held
bound by the promise and the promise would be enforceable against the
Government at the instance of the promisee, notwithstanding that there is
no consideration for the promise and the promise is not recorded in the
form of a formal contract as required by Article 299 of the Constitution.
(SCC p. 442, para 24)
* * *
[E]quity will, in a given case where justice and fairness demand, prevent a
person from insisting on strict legal rights, even where they arise, not
under any contract, but on his own title deeds or under statute. (SCC p.
425, para 8)
* * *
Whatever be the nature of the function which the Government is discharging,
the Government is subject to the rule of promissory estoppel [pic]and if
the essential ingredients of this rule are satisfied, the Government can be
compelled to carry out the promise made by it.” (SCC p. 453, para 33)
34. The discordant note struck by Jit Ram case5 was firmly disapproved by a
Bench of three Judges in Union of India v. Godfrey Philips India Ltd.6 It
was affirmed that: (SCC p. 387, para 12)
“12. There can therefore be no doubt that the doctrine of promissory
estoppel 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 the doctrine of promissory estoppel.”
35. It was held that irrespective of the nature of power wielded the
Government is bound to wield that power provided it possessed such power
and has promised to do so knowing and intending that the promisee would act
on such promise and the promisee has done so: (SCC p. 389, para 14)
“We think that the Central Government had power under Rule 8 sub-rule (1)
of the Rules to issue a notification excluding the cost of corrugated
fibreboard containers from the value of the cigarettes and thereby
exempting the cigarettes from that part of the excise duty which would be
attributable to the cost of corrugated fibreboard containers. So also the
Central Board of Excise and Customs had power under Rule 8 sub-rule (2) to
make a special order in the case of each of the respondents granting the
same exemption, because it could legitimately be said that, having regard
to the representation made by the Cigarette Manufacturers’ Association,
there were circumstances of an exceptional nature which required the
exercise of the power under sub-rule (2) of Rule 8. The Central Government
and the Central Board of Excise and Customs were therefore clearly bound by
promissory estoppel to exclude the cost of corrugated fibreboard containers
from the value of the goods for the purpose of assessment of excise duty
for the period 24-5-1976 to 2-11-1982.”
36. The limitations to the doctrine delineated in Motilal Padampat Sugar
Mills3 however, were also reaffirmed when it was said: (SCC pp. 387-88,
para 13)
“[T]hat there can be no promissory estoppel against the legislature in the
exercise of its legislative functions nor can the Government or public
authority be debarred by promissory estoppel from enforcing a statutory
prohibition. It is equally true that promissory estoppel cannot be used to
compel the Government or a public authority to carry out a representation
or promise which is contrary to law or which was outside the authority or
power of the officer of the Government or of the public authority to make.
We may also point out that the doctrine of promissory estoppel being an
equitable doctrine, it must yield when the equity so requires; if it can be
shown by the Government or public authority that having regard to the facts
as they have transpired, it would be inequitable to hold the Government or
public authority to the promise or representation made by it, the Court
would not raise an equity in favour [pic]of the person to whom the promise
or representation is made and enforce the promise or representation against
the Government or public authority.”
Coming to the facts of the present case, we find that the Scheme
definitely promised incentives in the form of Tax holiday of 5-10 years in
respect of exemptions from Sales Tax, Turnover Tax, Electricity Duty,
Luxury Tax and Entertainment Tax upto 100 per cent of capital investment if
a new unit was registered after 1.8.1995 and appropriate investment in
fixed capital assets was made. It also promised an initial period of two
years for going operational in the first instance, extendable by further
period of two years subject to satisfactory progress to be found by the
State Level Committee. Even thereafter, the Unit could still approach the
State Government for further extension. This was part of the core of the
Scheme, which invited investment in tourism units promising tax holiday as
stated above. Based on such representation, various units including that
of the appellants having come forward and altered their position, the State
Government would certainly be bound by the principles of Promissory
Estoppel. The State Government was thus estopped from going back on the
promise so made in the Scheme and could not have curtailed the period and
the opportunity specifically made available within which the project could
be completed so as to avail the benefits under the Scheme.
We find nothing in the present case on the basis of which there could
possibly be room to say that it would be inequitable to hold the State
Government to its promise. Out of 108 TRCs issued under the Scheme, the
burden that the Government was well aware and thought that it could
comfortably bear, only 19 or 20 units have been established and are
functional. In any case, the impact of incentives so offered under the
Scheme and the consequential burden must have been weighed carefully when
such promise was made and the Scheme was formed. We may respectfully refer
to the following observations of this Court in S.V.A. Steel Re- Rolling
Mills Ltd. and others v. State of Kerala and others[7] to which one of us
(Anil R. Dave, J.) was a party:
“30. Before laying down any policy which would give benefits to its
subjects, the State must think about pros and cons of the policy and its
capacity to give the benefits. Without proper appreciation of all the
relevant factors, the State should not give any assurance, not only because
that would be in violation of the principles of promissory estoppel but it
would be unfair and immoral on the part of the State not to act as per its
promise.”
Furthermore, the Scheme as framed on 20.12.1995 formed the basis of a
statutory notification under Section 29 of Act 16 of 1977 and as such the
core components of the Scheme had acquired a statutory status. By virtue of
said Section 29, the notification dated 14.2.1997 was required to be laid
for not less than 30 days before the State Legislature. If the State
Government was desirous of amending, varying or rescinding said
notification dated 14.2.1997, the subsequent G.R. dated 28.06.2000 ought
to have been translated in a statutory notification under Section 29 of the
Act 16 of 1977. In the absence of such steps having been undertaken, G.R.
dated 28.06.2000 could not in any way detract from or dilute the effect of
the Scheme which had acquired statutory status.
21. We therefore hold that the appellants were entitled to have full
benefit and advantage of Clause 10 of the Scheme and the curtailment of the
period and opportunity available under said Clause 10 of the Scheme by
subsequent G.R. dated 28.06.2000 was bad and ineffective.
The record indicates that the progress of the project of the
appellants was greatly hampered as a result of major earth quake in the
State on 26.01.2001 and large scale communal riots in the State in February
2002. The State Level Committee was satisfied that the commencement and
continuation of the project was so affected as a result of these major
difficulties and had granted initial extension of six months but the
appellants had benefit of only few days out of such extension. The
subsequent request for further extension which was backed with relevant
certificate from the Chartered Accountant certainly persuaded the State
Level Committee to find that the facts justified grant of further extension
but it felt it had lost the power to grant such extension because of G. R.
dated 28.06.2000. In the light of the view that we have taken, the State
Level Committee was still competent to consider the request for grant of
extension.
23. In the circumstances, we allow the appeal and set aside the decision
of the High Court in so far as it held that the operative period of the
Scheme came to an end on 30.11.2000 and that there could be no further
extension of time limit. Since the appellants have already commenced
commercial operations, it now needs to be assessed by the State Level
Committee whether in the facts of the case the appellants could justifiably
have claimed extension under Clause 10 of the Scheme. We direct the State
Level Committee to make such assessment in accordance with Clause 10, in
three months of the receipt of this decision. Needless to say, if such
assessment is found in favour of the appellants, they shall be entitled to
the incentives and benefits under the Scheme.
24. All the connected matters raise identical issues and challenge
rejection of their applications for extension of time. In each case the
Order passed by the concerned authority is similarly worded and passed on
20.07.2005, i.e. the same date. These connected appeals are also allowed
with similar direction.
25. The appeals stand allowed in terms as stated above. No order as
to costs.
………………………..J.
(Anil R. Dave)
………………………..J.
(Uday Umesh Lalit)
New Delhi,
May 13, 2015
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[1] 2004(6) SCC 465
[2] 1952 SCR 43
[3] 1968(2) SCR 366
[4] 1979(2)SCC 409
[5] 1981(1)SCC 11
[6] 1985(4) SCC 369
[7] (2014) 4 SCC 186
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