Hind Lever Chemicals Ltd. And Anr. vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 650 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. In this petition the petitioner has, inter-alia, prayed for the issuance of a writ of mandamus commanding and/or directing the respondents to release the entire subsidy/concessional amount to the petitioner company on the basis of sales of fertilizers made to registered dealers in the state of Bihar. The petitioner has also prayed for a writ, order or direction directing the respondents 5 & 6 (State of Bihar and Director of Agriculture, State of Bihar) to complete the sales certification process in respect of fertilizer sales made by the petitioner company in the state of Bihar and to submit Proforma-B to the respondent No. 1 (Union of India) strictly within a period of 45 days from the date of receipt of the subsidy claims from the petitioner company in Proforma-A with regard to subsidy claims lodged for the period 1.11.2001 onwards. The petitioner has also prayed for a direction directing the respondent No. 1 to pay to the petitioner company a sum of Rs. 75.28 crores (approximately) representing the outstanding subsidy sum of Rs. 60.63 crores Along with interest thereon and further interest till actual payment to the petitioner company.

2. The petitioner has been manufacturing and marketing phosphatic and potassic fertilizers under the brand name "PARAS" for over 15 years. The petitioner company has its own complex of fertilizer manufacturing plants located at Haldia in the state of West Bengal and has been supplying fertilizers in several states, including Bihar. The entire grievance in the present petition is with regard to the supply and sale of fertilizers in the state of Bihar. It is stated in the petition that the operations in Bihar started with the single product "Di-Ammonium Phosphate (DAP)" and subsequently the petitioner expanded operations in Bihar to sell various other types of fertilizers and the petitioner now sells DAP, MOP (Muriate of Potassium), SSP (Single Super Phosphate) and MPK (complex fertilizers), etc. About 1/3rd of the total production of the fertilizers of the petitioner is sold in the state of Bihar and in the year 2000 the petitioner's sales were over 3 lakh metric tonnes of fertilizers in the state of Bihar.

3. In 1977 a scheme for price control of fertilizers was introduced. This scheme was discontinued by the Central Government in 1992 in respect of phosphatic fertilizers. However, as the de-control of phosphatic fertilizers was found to be counter to the interest of the farmers, the Central Government reintroduced a type of price control on such fertilizers through a scheme of subsidy/price concession by issuing guidelines on 16.06.1993. These guidelines were entitled "GOI Guidelines for Scheme of Concession on Sale of Decontrolled Fertilisers to Farmers during 1993-94" . Under these guidelines the product-wise concessions were specified as under:-

Grade Rate of Concession per Tonne (in Rs. )

A) Indigenous DAP 1000

B) MOP 1000

C) SSP (16 % P) 340

It was indicated in paragraph 2 of the said guidelines that while prices were no longer under statutory control, the intention of the Government for extension of concession for decontrolled fertiliser under the scheme was to bring down prices of these fertilisers to a level comparable and competitive with the prices at which the imported products were being sold. It was, therefore, provided therein that the State Governments must continuously monitor the market prices of imported products while implementing the scheme. The expected sale prices to farmers after concession were indicated as under:-

DAP Rs. 6400-6600 per tonne (excluding local taxes)

MOP Rs. 3600-3800 per tonne (excluding local taxes)

SSP Rs. 1900-2000 per tonne (excluding local taxes)

The idea behind the scheme was that if manufacturers sold fertilisers at the suggested prices, then they were entitled to the concessions at the rates specified above. These rates of concessions and suggested prices have been altered from time to time but the principle remains the same.

4. The petitioner contended that the suggested prices at which the petitioner and other manufacturers of fertilisers are required to sell the same are not sufficient to cover even their cost of production. It is only because of the subsidy/concession that is allowed on these sales that the production and sale of fertilisers has become profitable and viable. In other words it is the petitioner's submission that without the subsidy/concession, the petitioner would not be even able to cover its cost of production in respect of these fertilisers and would thereby incur heavy losses.

5. With effect from 01.04.1997, certain modifications in the guidelines were introduced. In particular it was directed by the Central Government that the State Government should ensure sales of decontrolled fertilisers with enhanced concession on phosphatic and potassic fertilisers and at the prices indicated by the Government of India w.e.f. 01.04.1997. Para 5 of the modifications which were telexed to all the State Governments reads as under:-

"STATES ARE REQUESTED TO SEND VERIFIED REPORTS OF SALES OF DECONTROLLED FERTILIZERS TO DAC WITHIN 45 DAYS FROM THE DATE OF RECEIPT OF CLAIMS FROM SUPPLIERS (.) PENDING THAT DAC WILL RELEASE ON ACCOUNT PAYMENT OF 80 PERCENT OF THE CLAIM AMOUNT SUBMITTED (.) THIS PROCEDURE OF RELEASE OF PAYMENT WILL BE APPLICABLE TO DAP AND COMPLEX UNITS AND IMPORTERS OF MOP COMMA DAP WHO HAVE BEEN CONTINUOUSLY IMPORTING THESE FERTILIZERS FOR THE LAST TWO YEARS (.) BALANCE 20 PERCENT WILL BE MADE ON THE BASIS OF CERTIFIED REPORTS BASED ON VERIFICATION RECEIVED FROM STATES(.) IN CASE OF SSP SUPPLIERS COMMA ON ACCOUNT-PAYMENT OF 80 PERCENT WILL BE MADE ONLY COMPANIES AND ON THE BASIS OF THE CERTIFICATES OF STATUtorY AUDItorS REGARDING SALE(.) TO OTHERS PAYMENTS OF CONCESSION WILL BE MADE ONLY AFTER RECEIPT OF VERIFICATION REPORTS FROM STATE GOVERNMENTS(.)"

6. The manufacturers were required to submit their claims for concession/subsidy in respect of the sales of fertilisers made by them. 80% of the claim amount was released on the submission of the claim. The balance 20% was to be released by the Central Government upon receipt of certified reports of verification from the concerned States. It is apparent from the aforesaid guideline that the States were required to send their verified reports of sales of decontrolled fertilisers to the Department of Agriculture and Co-operation (i.e., Central Government) within 45 days of the date of receipt of such claims from the manufacturers/suppliers. The procedure for payment which was initially applicable has been indicated in the letter dated 09.10.2000 [Annexure G (Collectively)] issued by the Department of Fertilisers, Government of India to, inter-alia, all the State Governments. The procedure was that the manufacturers eligible for 80% "on account" payment were required to submit claims in Proforma-C supported by Proforma-A. The Profoma-A was to be addressed to the Director (Agriculture) of States concerned. Proforma-A was required to be certified by the statutory auditor of the company. It was made clear, under the procedure of payment, that on the basis of the aforesaid submission of Proforma-C supported by Proforma-A, the Central Government would release the admissible 80% "on account" payment directly to the manufacturers/importeRs. The balance 20% payment would be released on submission of claims in Proforma-D which would be finalised after receipt of verification of claims in Proforma-B from the State Governments. It was further indicated that in the case of SSP manufacturers, "on account" payment of 80% would be made to public limited companies only on the basis of statutory auditor's certification regarding sale of fertilisers. In respect of others, payment of concession would be made only after receipt of verification reports from the State Governments.

7. Thus, it becomes clear that Proforma-C supported by Proforma-A entitled the manufacturers to obtain "on account" payment of 80% of the eligible concessions. For balance 20%, the manufacturers were required to submit their claims in Proforma-D and payments would only be released after receipt of verification of claims in Proforma-B from the State Governments.

8. It is apparent from the above procedure of payment that the balance 20% of the concessions claimed by the manufacturers was dependent on the concerned States sending their verification of claims in Proforma-B. Until and unless the States verified the claims in Proforma-B, the balance 20% of the concessions claimed would not be released by the Respondent No. 1 to the manufactureRs. In the present case the petitioner had little or no difficulty insofar as sales in other States were concerned. The only difficulty it has faced is with regard to the State of Bihar (Respondent No. 5) which has withheld the supply of verification of claims in Proforma-B for the sales of fertilisers by the petitioner company during the relevant period. As a result of the non-issuance of verification of claims in Proforma-B by the State of Bihar, the petitioner company is unable to claim the balance 20% of the concessions as the respondent No. 1, under the scheme, is only liable to pay the same upon receipt of the verification of claims from the States. The petitioner is aggrieved by the conduct of the State of Bihar in delaying the verification of claims in Proforma-B. According to the petitioner, this conduct on the part of the State of Bihar (Respondent No. 5) is grossly arbitrary, unreasonable and without any basis whatsoever.

9. Dr. A. M. Singhvi, the learned Senior Counsel appearing on behalf of the petitioner, drew my attention to several letters written by the respondent No. 1 (Union of India) to the State Governments wherein the Central Government has stressed the importance of submitting the verification reports in Proforma-B within the stipulated time so that the payments to the manufacturers could be made in time. He stressed and laid emphasis on the point that, for the scheme to operate successfully, it was imperative that verification was done quickly and that payments to the manufacturers were released in time. This was in recognition of the fact that the manufacturers would be able to run economically viable operations only if they received the full amount of the concessions they were entitled to. This is so because, as mentioned above, the suggested prices under the guidelines were not sufficient to cover even the manufacturing costs of the fertilisers. The manufacturers looked upon the concessions as their source of profitability and economic viability. If the concessions were denied to the manufacturers, their very economic viability and survival would be at stake. Delay in release of the concessions would also have the same disastrous result.

10. In this context, it would be pertinent to allude to the correspondence referred to by the Dr Singhvi. He referred to the letter dated 19.08.1994 (Annexure-B) wherein it is mentioned that the verification reports be sent within 2-3 months of actual sales to the farmers so that payments to the manufacturers/importers could be made in time. In the modification of guidelines referred to above which took effect from 01.04.1997, it is clearly indicated that the States were requested to send verified reports of sales of decontrolled fertilisers to the Department of Agriculture and Co-operation (Central Government) within 45 days from the date of receipt of claims from the suppliers. In the letter dated 18.06.1997 (at pages 57-58 of the Paper Book), the State Governments were clearly requested to send the verification reports in Proforma-B by the stipulated dates so that payments to the concerned agencies could be released on time. In this letter, it was also indicated that the State Governments should submit an agency-wise report on non-standard quantity of fertilisers detected so that the same could be deducted from the amounts due to them. By another letter dated 19.12.1997 (at pages 62-63 of the Paper Book), the Central Government again requested the State Governments to send "all the pending certified claims immediately and other certified claims by the stipulated date" to enable the Central Government to release the balance 20% payment to the concerned manufacturers/importeRs. Thereafter, there are a string of letters dated 03.02.1998 (pages 64-65 of the Paper Book), 29.12.1998 (at pages 71-72), 13.04.1999(at pages 75-77), 07.03.2000 (at pages 84-85) and 30.06.2000 (at pages 91-93) from the Central Government to the State Governments requesting that the verification reports be sent "immediately", "within 45 days", "within 45 days", "as early as possible" and "urgently" and "within 45 days", respectively.

11. In the letter dated 09.10.2000, which has already been referred to above and whereby the revised procedure for submission of bills for payments/recoveries in respect of decontrolled fertilisers under the concession scheme of Department of Fertilisers was notified, it is also indicated in para 7 thereof that the State Governments were requested to send verification reports in Proforma-B within 45 days from the date of receipt of claims from the suppliers so that the payments to the concerned companies could be released on time. In paragraph 8 thereof, it is also mentioned that company-wise reports on non-standard quantities of fertilisers detected may also be sent with Proforma-B every month so that the same is deducted from the amount due to the companies. This letter of 09.10.2000 was superseded by the letter dated 17.05.2001 which prescribed the revised procedure in respect of submission of claims for concession of sales of decontrolled fertilisers on or after 01.04.2001. As per the revised procedure applicable w.e.f. 01.04.2001, all manufacturers of potassic and phosphatic fertilisers other than SSP) were eligible for 80% "on account" payment on their production as well as for quantities of these fertilisers imported by them for sale to farmers. The balance 20% was payable on certification of sales by State Governments in Proforma-B. A new Proforma-B was introduced. Similar eligibility criteria were applicable to importers also. Insofar as SSP manufacturers were concerned, it was noted in the said letter in paragraph 2(c) that instances regarding sale of non-standard SSP to farmers by some manufacturers had been brought to the notice of the Department of Fertilisers. In order to put a curb on such practices, the Department of Fertilisers was of the view that there was a need to promote use of specified grades of rock phosphate purchased from notified sources for manufacture of SSP. A Technical Audit and Inspection Cell (TAC) was constituted to conduct inspections of SSP manufacturers regarding uses of specified grades of rock phosphates from notified sources from time to time. It was indicated that the facility of 80% 'on account' payment would be given only to those manufacturers of SSP who use specified grades of rock phosphates as raw materials and submit monthly information on raw materials used in Proforma-E. Such units would continue to be eligible for 80% "on account" payment until recommended otherwise by the TAC after inspections. These provisions were to be applicable to claims for concessions for sales of SSP from 01.06.2001. The balance 20% concession was to be released only after certification of sales by the State Governments in Proforma-B. Those manufacturers of SSP who did not use specified grades of rock phosphates from notified sources would receive the entire concession payment only after certification of sales by the State Governments in Proforma-F and monthly submission of information regarding raw materials used in Proforma-E. In this letter of 17.05.2001, in paragraph 5 thereof, it is clearly provided that the State Governments were requested to send the verification reports in Proforma-B within 45 days from the date of receipt of claims from the suppliers so that payments to the concerned companies are released on time. It was further clarified therein that the certification of sale in Proforma-B was only with reference to the first point of sale to registered dealers for agricultural purposes and that in the new Proforma-B, the word "farmer" has been deleted with respect to certification of sales for agricultural purposes. It was also indicated that company-wise reports on non-standard quantity of fertilisers detected, if any, be also sent as nota-bene with Proforma-B every month so that the same could be deducted from the amount due to the company.

12. In the letter dated 16.08.2001 written by the Government of India to the State Governments, it is noted that it had been the experience that for some reasons concerned State/Union Territory Authorities were taking a long time in issuing sale certification in Proforma-B applicable to the period prior to 01.04.2001. It is recorded therein that the Department of Fertilisers had also received representations stating that this was mainly due to the interpretation of Proforma-B of the then prevailing guidelines (i.e., for the period prior to 01.04.2001). It was further stated therein that the Department of Agriculture and Co-operation (DAC), Government of India who was administering the scheme at that time, while referring to Proforma-B applicable to sales prior to 01.04.2001 had communicated to the Department of Fertilisers that:-

"It will be seen that the certificate to be given by the State in Proforma-B states, 'it is certified that the above statement is correct and the quality is found to be satisfactory'. Neither does this certification nor the statement above this certification have any reference to farmers. The word 'farmer' is mentioned only in the subject, which is on account of the fact that the concession scheme was introduced for selling fertiliser with concession to the farmers. "

By the same letter the state governments were once again requested that necessary action be taken to expedite pending cases of sales certification for the relevant period. It was further indicated that if the State Government felt, it may also carry out verification of sales up to farmer level before giving certification of sales in Proforma-B.

13. The aforesaid letter dated 16.08.2001 makes it amply clear that even in respect of sales prior to 01.04.2001, the reference is only with regard to "first point of sale, " that is, to registered dealers for agricultural purposes. It has been clarified by this letter that farmer level verification is not a pre-condition for certification of sales in Proforma-B. The last sentence of the said letter which permits the State Government, wherever it feels necessary, to also carry out verification of sales up to farmer level, is not a condition imposed by the Central Government which alone is entitled to formulate the scheme. In other words, carrying out of verification of sales up to farmer level cannot be used as an excuse by the State Governments to delay sale certification in Proforma-B.

14. By a letter dated 17.09.2001 issued by the Department of Fertilisers, Government of India to the State Governments, the maximum retail prices and rates of concession during the year 2001-2002 were notified. It was reiterated in this letter that it must be ensured that submission of verification certificates in prescribed Proforma-B in respect of fertilisers sold in a particular month was done within 45 days from the last date of the concerned month.

15. From the provisions of the scheme as well as the various letters of the Central Government to the State Governments referred to above, it is more than clear that under the scheme the State Governments were required to expedite submission of sales certification in Proforma-B so that the manufacturers/importers could be paid in time. Timely certification by the States in Proforma-B and timely payment by the Central Government on the basis of certification, it appears, was the essence of the scheme.

16. The petitioner has at page 275 of the Paper Book filed a Chart showing the period up to which State certification for sales made by the petitioner was complete in various States. From the Chart it is apparent that for Assam, certification of sales had been completed up to July, 2000. In respect of Orissa, Andhra Pradesh, Uttar Pradesh and West Bengal, the certification had been completed up to September 2000, March 2001, March 2000 and July 2001 respectively. Insofar as Bihar was concerned, it was lagging far behind. Certification of sales by the State of Bihar had been completed only up to September 1998. In the course of the arguments, Dr Singhvi, the learned Senior Counsel appearing on behalf of the petitioner, submitted an updated Chart which clearly indicates that in respect of all other States, sale certification has proceeded, however, in respect of Bihar, sale certification has not proceeded beyond September 1998.

17. To unearth the possible reasons for the State of Bihar withholding the submission of sale certification in Proforma-B in respect of the petitioner, the counter-affidavits filed on behalf of the Union of India (Respondent No. 1) and the State of Bihar (Respondent No. 5) need to be examined. As would be clear from paragraph 7 of the Union of India's counter-affidavit, its stand is that it should not be held responsible or be penalised for delay in release of balance payment which was attributable to the concerned State Governments for want of fulfillment of conditions of certification of sales. In fact, this was the stand taken by Mr. Naveen Chawla, the learned counsel who appeared on behalf of the Union of India (Respondent No. 1). He categorically stated that as per the scheme unless the Central Government received the sale certification in Proforma-B, it could not release the balance payments of concessions to the petitioner. It was categorically submitted by him that if the State verified in Proforma-B, then the respondent No. 1 would pay the balance amount subject, however, to the condition that it would not be liable to pay any interest thereon. In this connection, he submitted that the non-release of payment to the petitioner is not on account of any mistake or inaction on the part of the Union of India and as such there would be no question of foisting, upon the Union, the liability to pay interest on the delayed payments to the petitioner. The following statement in para 11 of the Union of India's counter-affidavit crystalises their stand:-

"......the UOI/DOF has at no stage denied its liability for balance payment of concession sought by the petitioner through this petition. However, the receipt of verification/certification of sales from the State Government of Bihar in fulfillment of the mandatory requirement under the guidelines of the Scheme is essential to ascertain the amount of concession payable before its actual release for reasons already explained in the foregoing paras."

Again in para 13 of the said counter-affidavit on behalf of respondent No. 1, the aspect of submission of sale certification within the stipulated period has been pointed out as under:-

"....it is submitted that the allegations made therein that the UOI has failed to discharge its obligation under the Scheme are false and denied. That DAC/DOF have time and again been stressing upon the States/UTs to ensure adherence to time limit of 45 days for verification/certification of sales. The petitioner has also conceded this fact that DAC/DOF have been reminding States/UTs to carryout their obligation under the Scheme. However, the UOI has to keep in view the Centre State relations and its limitations there under."

However, it must be pointed out that in para 10 of the counter-affidavit filed on behalf of the respondent No. 1 there is reference to a CAG Report in connection with an alleged fraud in the Bihar State Agriculture Department regarding payment of subsidy (concession) on sales of fertilisers during the period of 1994-95 to 1997-98. The relevant portion of CAG Report extracted in the said paragraph is as under:-

"During 1994-98 Director issued sale certificates in favor of 22 supplying agencies (vide Appendix xviii) for supply of 13.04 lakh tonne of fertilizers. Against this, supplying agencies received payment of subsidy for Rs. 162.05 crore from Government of India. Scrutiny revealed that the Director of Agriculture, flouted the instruction of the State Government as well as of the Agriculture Directorate while issuing sale certificate to Government of India and relied solely on the information of sales furnished by the supplying agencies and did not verify from the District Agriculture Officers, the quantity and quality of fertilizers sold by the agencies to the farmers, nor did he take action against the District Agriculture Officers for defiance of departmental instructions and for non-submission of required information to the Department/Directorate on sale of fertilizers to farmers. He did not also ensure whether quality of the fertilizers supplied to farmers conformed to the prescribed standard under fertilizer control order of Government of India. The sole reliance of the Director on the information of sales of fertilizers furnished by the supplying agencies involved serious risks of accepting inflated statements of sales or even fake supply of fertilizers. "

It is further mentioned in the said paragraph 10 that the name of the petitioner figured in the list of 22 supplying agencies referred to in CAG's aforementioned report. However, if one were to give a second look to the above extract, it would be clear that the alleged irregularities were committed by the Director of Agriculture, Bihar. There is also alleged dereliction of duty on the part of officials of the Department of Agriculture. The gravamen of the allegations is that certification of sales was done by the officials without proper verification. The petitioner is not claiming (and it is not entitled to so claim) that its sales in Bihar be certified in proforma-B without verification as presecribed under the scheme. Its claim is that as per the scheme the verification be done within 45 days and the certification in Proforma-B be submitted promptly. The CAG report, therefore, cannot be used as an excuse for withholding certification of sales. The lapse in verification was on the part of the State Government/its officials. The State of Bihar cannot be permitted to take advantage of its own wrong. There is another reason why the CAG report and the pending CBI enquiry cannot be used as a ground for withholding sales certification. And, that is because period under investigation is 1994-95 to 1997-98 whereas the period relevant to this petition is 1.10.1998 to 31.10.2001. An entirely different period!

18. In paragraph 12 of the counter-affidavit filed on behalf of the State of Bihar it is stated that samples of fertilisers collected by the Fertiliser Inspectors throughout the State of Bihar, after analysis, were found to be non-standard. Copies of the analysis reports of the fertiliser samples are annexed as Annexure-R-1 (Colly) to the said counter-affidavit of respondent Nos. 5 & 6. In para 13 of the said counter-affidavit, it is admitted that the Department of Agriculture, Bihar had certified sales in Proforma-B of the petitioner from 1994 to 30.09.1998 on the basis of written undertakings from the manufacturers, including the petitioner. A copy on such written undertaking is annexed as Annexure-R-2 to the said counter-affidavit. In the undertaking it is indicated firstly that the amount claimed as concession on the quantity of phosphatic fertilisers supplied through dealers has been passed on to the farmers. It is also stated that if any discrepancy is found later, the petitioner would be liable for necessary legal action as also for refund of the amount found in discrepancy. The sample undertaking filed is dated 01.04.1995. It is further stated in the said paragraph 13 of the counter-affidavit that the alleged irregularities committed between the period 1994-1998 were under investigation by the State Vigilance Department/CBI. And, in para 19 of the said counter-affidavit, it is categorically stated as under:-

"The root cause of delay in certification is entirely due to pending enquiry of this matter by State Vigilance Department/CBI. the Respondents will take immediate action on payment after receiving report from State Vigilance Department/CBI on certification"

Again in para 31, it is stated that:-

"It (is) submitted that the CAG found irregularities in the claims taken by the Petitioner for year 1994 to 1998, which is under investigation by State Vigilance Department. Moreover State Law Department opined in this matter that till vigilance enquiry, no decision could be taken regarding certification payment. Further it was informed to Government of India that in view of enquiries into irregularities certificates would be kept in abeyance."

In para 35, it is stated thus:-

"After final investigation report from enquiring agency, and receiving guidelines for recommendation of subsidy claims by the State Government Director of Agriculture, Bihar will take immediately recommend for payment of pending subsidy of the Petitioner in Proforma-B"

The stand taken in the counter-affidavit was reiterated by the learned Counsel appearing on behalf of the respondent Nos. 5 & 6 at the time of hearing.

19. From the above, it is clear that:-

a) under the concession/subsidy scheme, time was of the essence for submission of the sales certification in Proforma-B by the State Governments. It was also of the essence in respect of payment of the balance concession amount. That the sales certification in Proforma-B was required to be submitted urgently and, in any event, within 45 days was an admitted position;

b) with regard to sale of non-standard fertilisers, it was clearly specified under the scheme itself that Along with the sales certification in Proforma-B, the State Governments were to also give a company-wise report on non-standard quantities of fertilisers very month so that the same is deducted from the amount due to the companies. This implied that sale of non-standard fertilisers ipso facto did not empower and/or permit the State Governments to withhold submission of sales certification in Proforma-B. What the State Governments were required to do in this situation was that Along with the sales certification in Proforma-B, they were to also provide a report with regard to non-standard sales to the Central Government which, in turn, would deduct the amount payable under concessions in respect of non-standard sales. Thus, because of some instances of sales of non-standard fertilisers, the State Government could not withhold submission of sales certification in Proforma-B;

c) the respondent No. 1 is ready and willing to release the payments of the balance amount of concession to the petitioner provided it receives the sale certification in Proforma-B from the State of Bihar (Respondent No. 5) and subject to the fact that it would not be liable to pay any interest in respect of the delayed payments;

d) the delay in the certification by the State of Bihar was entirely due to pending enquiry by the State Vigilance Department/CBI in respect of the alleged irregularities committed between 1994 to 1997-1998 as revealed in the CAG Report. This was, in fact, the only purported reason advanced by the State of Bihar for not certifying the sales. It is pertinent to note here that the CAG Report was with respect to alleged irregularities during the period 1994-95 to 1997-98. Admittedly, sales certification in Proforma-B had been completed by the State of Bihar in respect of the petitioner till September 1998. The petition relates to the period 01.10.1998 to 31.10.2001 which is beyond the period under investigation by the State Vigilance Department/CBI. The CAG Report pertains to a period prior to the period in question in the present writ petition. It is clear that this is an entirely irrelevant consideration for withholding sales certification in respect of the period 01.10.1998 to 31.10.2001.

20. Dr Singhvi referred to the following decisions of the Supreme Court:-

i) Pournami Oil Mills etc. v. State of Kerala & Anr :

;

ii) M P Oil Extraction & Anr. v. State of MP & Ors:

iii) Food Corporation of India v. M/s Kamdhenu Cattlefeed Industries ;

iv) M/s Pine Chemicals Ltd. & ORs. v. Assessing Authority & ORs. ;

v) Shri Bakul Oil Industries & Anr. v. State of Gujarat & Anr:

;

vi) Shri Guru Ashish Wire Industries v. State of Gujarat & Ors:

(1994) 92 STC 286 (at pages 287 to 290);

vii) Tata Metals & Strips Limited v. State of Gujarat & Ors:

(1992) 87 STC 447 (at pages 454 to 456);

viii) Union of India & ORs. v. Godfrey Philips India Ltd:

;

ix) Burma Construction Co. v. State of Orissa & Ors:

;

x) Gurdial Singh v. Union Of India & Ors:

; and

xi) Navinchandra N Majithia v. State of Maharashtra & Ors:

.

However, I need to refer to only some of them. In M P Oil Extraction (supra), the Supreme Court held that the doctrine of legitimate expectation had been judicially recognised and that it operated in the domain of public law and in an appropriate case constituted a substantive and enforceable right. In the case of Food Corporation of India (supra), the Supreme Court held that there is no unfettered discretion in public law: a public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is "fairplay in action". Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision making process in all State actions. The Supreme Court further held as under:-

"To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.

8. The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent."

The petitioner, under the scheme, had a legitimate expectation that as per the scheme, repeated directions of the Central Govt. to expedite, the past practice and as per the position prevailing in other States, sales certification in Proforma-B would not be unreasonably delayed by the State of Bihar. The State of Bihar admittedly delayed the certification. The reason given was the pending CBI enquiry in respect of the alleged irregularities during the period 1994-95 to 1997-98. This is an entirely extraneous consideration. The irregularities which were alleged to have been committed were on the part of the Director of Agriculture and other officials of the State of Bihar. Their dereliction of duty cannot be used as a ground for depriving the petitioner of its right to expeditious certification and submission of Proforma-B. Moreover, as pointed out above, this period does not coincide with the period which is relevant for the present writ petition. The relevant period is 01.10.1998 to 31.10.2001. As such, the legitimate expectation of the petitioner of having the sales certification in Proforma-B completed within the stipulated time has been given a complete go-by and this, in terms of the aforesaid decisions of the Supreme Court, by itself would amount to arbitrariness on the part of the State of Bihar.

21. Dr Singhvi relied on the decision of the Supreme Court in Burma Construction Company (supra) for the proposition that an order for payment of money may be made in a petition under Article 226 of the Constitution against the State or an Officer of the State to enforce a statutory obligation as a consequential relief. He also relied upon the decision of the Supreme Court in Gurdial Singh (supra) to support his proposition that the petitioner was entitled for award of interest from October 1998 till payment on outstanding subsidy amounts which had arbitrarily been withheld. There is no denying that in appropriate cases the High Court in exercise of jurisdiction under Article 226 of the Constitution can make an order for payment of money as well as interest. However, this does not mean that it must do so in every case. In the present case, the primary relief that is claimed is one against the respondents 5 and 6 directing them to complete the sales certification process and to submit the Proforma-B to the respondent No. 1. It is only upon submission of the said sales certification in Proforma-B by the respondent No. 5 to the respondent No. 1 that the liability of the respondent No. 1 to make a payment of the balance amount of concession arises. That event has not yet happened. Respondent No. 1 has also indicated its readiness and willingness to release the balance payment as soon as it receives the sales certification in Proforma-B from the State of Bihar (Respondent No. 5). To this extent, no direction for release of the balance subsidy concession to the petitioner by the Respondent No. 1 can be given in the absence of the submission of the said sales certification in Proforma-B by the State of Bihar (Respondent No. 5). The liability to pay is on the Respondent No. 1. However, that liability would arise only upon the happening of the specific event, that is, the respondent No. 5 (State of Bihar) submitting the sales certification in Proforma-B. That has not happened. As such, as of now, the respondent No. 1 is under no liability. This being the case, there is no question of any interest being foisted on the respondent No. 1 in respect of the delay caused in the submission of the sales certification in Proforma-B by the State of Bihar (Respondent No. 5).

22. As indicated above, the action on the part of the State of Bihar of withholding/delaying the submission of sales certification in Proforma-B is arbitrary and unreasonable. The only reason for such delay which has been put forward by them is the pendency of an enquiry in respect of a period which does not relate to the period with which this petition is concerned. Accordingly, the respondent No. 5 is directed to complete the sales certification process in respect of the fertiliser sales made by the petitioner company in the State of Bihar during 01.10.1998 to 31.10.2001 and to submit the Proforma-B in respect thereof to the respondent No. 1 within 45 days as required under the scheme itself. In case of any sale of non-standard fertilisers, the respondent No. 5 shall submit a report Along with the sale certificates in Proforma-B to the respondent No. 1 in terms of the scheme. Thereafter, the respondent No. 1 shall expeditiously release the payments of balance concession to the petitioner company subject, however, to its right to withhold/deduct amounts in respect of non-standard sales.

23. To this extent, the writ petition is allowed. Parties are left to bear their own costs.