M/S. Maa Bhairabi Industries Llp vs State Of Odisha And Others
2021 Latest Caselaw 7064 Ori

   IN THE HIGH COURT OF ORISSA AT CUTTACK

         WRIT PETITION (CIVIL) No.5449 of 2018


(An application under Articles 226 & 227 of the Constitution of
India)



 M/s. Maa Bhairabi Industries LLP           ....             Petitioner

                               -versus-
 State of Odisha and Others                 ....       Opposite Parties


Appeared in this case by Video Conferencing mode:

 For Petitioner            :              Mr. Rajendra Kumar Pradhan
                                                           Advocate

 For Opposite Parties      :                      Mr. M.S. Sahoo
                                  Additional Government Advocate
                                                         For State
                                                   Mr. S.S. Padhy
                                      Additional Standing Counsel
                                          For Opposite Party No.4


 CORAM:
 THE CHIEF JUSTICE
 JUSTICE S.K. PANIGARHI
                          JUDGMENT

13.07.2021 Dr. S. Muralidhar, CJ

1. The short question that arises for consideration in this writ petition is whether the benefit under the Orissa Food Processing Policy, 2013 (OFP Policy, 2013) can be sought to be withdrawn

retrospectively and particularly after the Petitioner has altered its position in the expectation of grant of capital investment subsidy (CIS) as assured in the said policy ?

2. The Petitioner is a registered partnership firm, which is running a rice mill unit at Angul District in the State of Odisha. The Petitioner was issued by the District Industries Centre, Angul (DIC) (Opposite Party No.3) an acknowledgement on 12th May, 2015 for establishment of a rice mill with reference to online application submitted by it on 9th May, 2017. The date of the first fixed capital investment was taken as 12th May 2015.

3. On 29th May, 2017, the DIC received the Petitioner's application form for grant of CIS under the OFP Policy, 2013 enclosing all the relevant documents. Importantly, it was mentioned therein that the Petitioner had completed the construction of new 8 ton per hour (TPH) parboiling rice mill plant at Mukundapur, District Angul and had already obtained DIC registration on 22nd May, 2017.

4. As admitted by the Opposite Parties 1 to 3 in their counter affidavit, on receipt of the above application, the DIC advised the Petitioner to obtain a production certificate. The Opposite Parties 1 to 3 have in their counter affidavit further acknowledged that the Petitioner's unit was inspected and found running and on that basis, a production certificate was issued on 30th October, 2017 indicating the date of commercial production as 14th March, 2017.

5. Thereafter, on 29th November, 2017 the proposal for sanction of CIS in favour of the Petitioner under the OFP Policy, 2013 was recommended by the General Manager, DIC, Angul to the Director of Industries of Odisha, Cuttack (Opposite Party No.2).

6. It appears that one day prior thereto i.e. on 28th November, 2017 unknown to even Opposite Party No.3 a letter was written by the Special Secretary to Government, MSME Department (Opposite Party No.1) to Opposite Party No.2 on the subject of "Limiting Capital Investment Subsidy". The said letter read as under:

"Sir,

I am directed to say that, during the last review meeting of the activities of the MSME Department undertaken by the Chief Secretary, Odisha held on 02.02.2017, it was observed that a good number of Rice Mills, Dal Mills and Rice & Dal Mills may be included in the negative list of OFPP-2016. Accordingly Rice Hullers and Rice Mills, Flour Mills (excluding Roller Flour Mills), Pulse Mills and Besan Mills have been included in the list of ineligible enterprises/industries of OFPP-2016 vide amendment Notification No.4652/MSME dt. 31.07.2017 to OFPP-2016.

As regards CIS under OFPP-2013, no proposal for assistance would be entertained after 12.04.2017, DICs/RICs may be informed accordingly."

7. At no point prior to the above letter was any intimation sent to the DIC, or made public, that the CIS for rice mills under the OFP Policy 2013 was being withdrawn and that too retrospectively from 12th April, 2017 onwards. In fact the above letter gives no

reason for the above date of 12th April, 2017 being chosen as the cut-off date. The letter itself refers to a decision regarding inclusion of Rice Mills, Dal Mills and Rice and Dal Mills in the negative list of the subsequent policy i.e. the OFP Policy, 2016. Even in the counter affidavit of Opposite Parties 1 to 3 no reasons whatsoever have been given for retrospectively withdrawing the CIS benefits under the OFP Policy, 2013 fro 12th April, 2017 onwards.

8. On the basis of the above communication, a letter was written by the Additional Director of Industries in the Office of the Director of Industries (Opposite Party No.2) to the General Manager, DIC, Angul (Opposite Party No. 3) that since the CIS application from the Petitioner Unit was received on 29th May, 2017, and since no proposal of rice mills were to be entertained after 12th April 2017, the CIS proposal of the Petitioner's unit was rejected. A copy of this communication was sent to the Petitioner. This rejection has been challenged by the Petitioner in the present writ petition.

9. To complete the narration of facts on 7th February, 2018 the Petitioner was issued a notice by the Deputy Commissioner of Commercial Taxes, Angul Circle (Opposite Party No.4) demanding Central Sales Tax (CST) and Entry Tax for the period from 1st October, 2016 to 31st December, 2016. In response thereto, the Petitioner wrote to the Opposite Party No.4 on 9th February, 2018 stating that it had applied for subsidy for the manufacturing unit under the OFP Policy, 2013 which contained a

provision for exemption from entry tax on plant, machinery and balancing equipments on raw materials incidental goods and packing materials for a period of five years from the date of its purchase. Accordingly, the Petitioner requested for some time since its application dated 29th November, 2017 was pending consideration by the Government.

10. The present petition that was filed on 2nd April, 2018. The counter affidavit on behalf of Opposite Party Nos.1 to 3 was filed only on 6th December, 2018. In the reply affidavit, apart from enclosing the copy of letter written by the Special Secretary to Government in the MSME Department to the Opposite Party No.2 on 28th November, 2017 and the consequential further letter dated 15th January, 2018 by the Opposite Party No.2 to the General Manager, DIC, no justification has been given for withdrawing the CIS benefits for Rice Mills under the OFP Policy, 2-13 retrospectively from 12th April, 2017.

11. The Petitioner filed a rejoinder to the said affidavit on 2nd April, 2018 where inter alia it was pointed out that under the subsequent policy i.e. OFP Policy, 2016 a clarification was issued that all food processing enterprises that had commenced fixed capital investment prior to the notification of the OFP Policy, 2016 would continue to be governed and assisted under the OFP Policy, 2013. Therefore, the intention was to only prospectively apply the OFP Policy, 2016.

12. This Court has heard the submission of Mr. R.K. Pradhan, learned counsel appearing for the Petitioner and Mr. M.S. Sahoo, learned Additional Government Advocate appearing for the State (Opposite Party Nos.1 to 3) as well as Mr. S.S. Padhy, learned Additional Standing Counsel for the Opposite Party No.4 (Commercial Taxes).

13. Mr. Pradhan, pointed out that the Petitioner had diligently complied with all the requirement of OFP Policy, 2013 and had in fact proceeded with setting up 8 TPH parboiling rice mill plant in the expectation of receiving of CIS under the OFP Policy, 2013. He submitted that the DIC granted the Petitioner the requisite certificate of registration and also the production certificate on 10th October, 2017. In this production certificate the date of commercial production was indicated as 14th March, 2017. Throughout this time when the papers of the Petitioner were being processed, there was no inkling that nearly a month after the issue of the production certificate, a decision would be taken by the Opposite Party No.1 to arbitrarily apply a cutoff date 12th April, 2017 for declaring all proposals under the OFP Policy, 2013 received after that date as "ineligible" for the grant of subsidy. According to Mr. Pradhan with the OFP Policy 2013 not having been withdrawn or rescinded till the date of coming into force of the OFP Policy, 2016 all applications received till then ought to be processed and given effect to under the earlier policy i.e. OFP Policy, 2013. The very object of the OFP Policy, 2013 was to encourage food processing industries with a view to value addition, waste production of farm produce, maximization of

employment opportunities and providing infrastructural, institutional and fiscal support. He pointed out that the Petitioner had taken all the necessary steps of submitting the application in time, obtaining registration, and production certificate and submitting all the necessary documents for grant of CIS under the OFP Policy, 2013. This was even acknowledged by the DIC. Therefore, there was no rational basis on which the CIS under OFP Policy, 2013 could have been withdrawn, and that too retrospectively.

13. Mr. M.S. Sahoo, learned Additional Government Advocate for the State (Opposite Parties) referred to the counter affidavit filed and submitted that the sole basis on which the Petitioner's proposal for grant of CIS was rejected was the policy decision taken by the MSME Department not to entertain the proposal for assistance under the OFP Policy, 2013 after 12th April, 2017. Mr. Sahoo was unable to explain why this particular date was chosen and why the decision in that regard taken on 28th November, 2017 was applied retrospectively from 12th April, 2017. He could not deny that no such intimation of the retrospective withdrawal of the benefit was ever given to the DIC which in the meanwhile went ahead with processing the Petitioner's application for grant of the CIS benefit.

14. The above submissions have been considered. The counter affidavit of the Opposite Parties makes it clear that the essential facts are not in dispute. This includes the fact that the very purpose of the OFP Policy, 2013 was to support establishment of

industrial areas in potential food clusters, provide infrastructural institutional and fiscal support to the food processing industries keeping in view of the object of the value addition, waste production of farm produces and maximization of employment opportunities. What is also not in dispute was that the OFP Policy, 2013 was consistent with and in continuation of the Industrial Policy Resolution, 2007 of the Government of Odisha under which rice mills with machinery cost not above Rs. 2 crores would be eligible for getting incentives. There is no dispute that the Petitioner was fully qualified to receive the CIS under the OFP Policy, 2013. It had obtained the necessary certificate for establishment of the rice mill unit, the necessary production certificate and the recommendation of the General Manager of the DIC which forwarded its proposal to Opposite Party No.2 on 29th November, 2017. What is also not in dispute is that during this entire time, even Opposite Party No.2 was not aware that a decision had been taken to retrospectively withdraw the benefit of CIS under the OFP Policy, 2013 from 12th April, 2017.

15. In the considered view of the Court, the facts of the case attract both the principles of promissory estoppel as well as legitimate expectation. The earliest enunciation of the doctrine of promissory estoppel was in M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of U.P. (1979) 2 SCC 409 where the Supreme Court observed:

"36. 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. It is elementary that in a Republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of "honesty and good faith"? Why should the Government not be held to a high "standard of rectangular rectitude while dealing with its citizens"? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies case and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promise

and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction.

37. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise equity in favour of the promise and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and after this position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that

the public interest would suffer if the Government were required to honour it. The Government cannot, as Shah, J., pointed out in the Indo-Afghan Agencies case, claim to be exempt from the liability to carry out the promise "on some indefinite and undisclosed ground of necessity or expediency", nor can the Government claim to be the sole judge of its liability and repudiate it "on an ex-parte appraisement of the circumstances". If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Court to decide whether these facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, the over- riding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. But even where there is

no such over-riding public interest, it may still be competent to the Government to resile from the promise "on giving reasonable notice which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position" provided of course it is possible for the promisee to restore status quo ante. If however, the promisee cannot resume his position, the promise would become final and irrevocable. (See Emmanuel Ayodeji Ajayi v. Briscoe [1964] 3 All. E.R. 556"

15. The above doctrine was further elaborated by the Supreme Court in State of Bihar v. Kalyanpur Cement Limited (2010) 3 SCC 274; Manuelsons Hotels Private Limited v. State of Kerala (2016) 6 SCC 766.

16. The present case will also attract the principles of legitimate expectation as explained in National Buildings Construction Corporation v. S. Raghunathan (1998) 7 SCC 66 by the Supreme Court as under:

"18. The doctrine of "legitimate expectation" has its genesis in the field of administrative law. The Government and its departments, in administering the affairs of the country, are expected to honour their statements of policy or intention and treat the citizens with full personal consideration without any iota of abuse of discretion. The policy statements cannot be disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is akin to violation of natural justice. It was in this context that the doctrine of "legitimate expectation" was evolved which has today become a source of substantive as well as procedural rights. But claims based on "legitimate expectation" have been held to require reliance on representations and resulting detriment to the claimant in the same way as claims based on promissory estoppel."

17. Subsequently, in Monnet Ispat and Energy Ltd. v. Union of India (2012) 11 SCC 1, the different considerations that would apply in the cases of two doctrines i.e. promissory estoppel and legitimate expectation were elaborated as under:

"289. As we have seen earlier, for invoking the principle of promissory estoppel there has to be a promise, and on that basis the party concerned must have acted to its prejudice. In the instant case it was only a proposal, and it was very much made clear that it was to be approved by the Central Government, prior whereto it could not be construed as containing a promise. Besides, equity cannot be used against a statutory provision or notification.

290.....In any case, in the absence of any promise, the Appellants including Aadhunik cannot claim promissory estoppel in the teeth of the notifications issued under the relevant statutory powers. Alternatively, the Appellants are trying to make a case under the doctrine of legitimate expectations. The basis of this doctrine is in reasonableness and fairness. However, it can also not be invoked where the decision of the public authority is founded in a provision of law, and is in consonance with public interest."

18. Thereafter in Union of India v. Lt. Col. P.K. Choudhary (2016) 4 SCC 236, the Supreme Court explained the link between a denial of legitimate expectation and the violation of Article 14 of the Constitution. In NOIDA Entrepreneurs Assn. v. NOIDA (2011) 6 SCC 508, the relationship between an arbitrary action and that contradicting the principle of legitimate expectation was explained as under:

"39. State actions are required to be non-arbitrary and justified on the touchstone of Article 14 of the

Constitution. Action of the State or its instrumentality must be in conformity with some principle which meets the test of reason and relevance. Functioning of a "democratic form of Government demands equality and absence of arbitrariness and discrimination". The rule of law prohibits arbitrary action and commands the authority concerned to act in accordance with law. Every action of the State or its instrumentalities should neither be suggestive of discrimination, nor even apparently give an impression of bias, favouritism and nepotism. If a decision is taken without any principle or without any rule, it is unpredictable and such a decision is antithesis to the decision taken in accordance with the rule of law. ...

41. Power vested by the State in a public authority should be viewed as a trust coupled with duty to be exercised in larger public and social interest. Power is to be exercised strictly adhering to the statutory provisions and fact situation of a case. "Public authorities cannot play fast and loose with the powers vested in them." A decision taken in an arbitrary manner contradicts the principle of legitimate expectation. An authority is under a legal obligation to exercise the power reasonably and in good faith to effectuate the purpose for which power stood conferred. In this context, "in good faith" means "for legitimate reasons". It must be exercised bona fide for the purpose and for none other..."

19. Recently, in State of Jharkhand v. Brahmputra Metallics Ltd. (Civil Appeal Nos.3860-3862 of 2020 decided on 1st December, 2020), the Supreme Court partly upheld the decision of the High Court of Jharkhand as regards the entitlement for exemption of the Respondent unit for reduction of electricity duty for the financial years 2012-13 and 2013-14. In that process the Supreme Court held as under:

"46. Therefore, it is clear that the State had made a representation to the respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, we hold that such a course of action by the State is arbitrary and is violative of Article

14."

20. In the present case, as already noticed, the Petitioner had altered its position by proceeding to establish its 8TPH parboiling rice mill unit and complied with all the requirements for obtaining the CIS under the OFP Policy, 2013. When it submitted an application on 29th May 2017, which was duly received by the General Manager of the DIC at Angul, it was not known to any one that a decision would be taken six months thereafter to retrospectively withdraw the benefit from the earlier date i.e. 12th April, 2017. Even when the production certificate was issued to the Petitioner by the DIC on 30th October, 2017 and thereafter the Petitioner's proposal was forwarded to Opposite Party No.2 by the General Manager, DIC, Angul on 29th November, 2017 the retrospectively withdrawal of the OFP Policy was not known.

21. Even in the counter affidavit filed by the Opposite Parties Nos.1 to 3, there is no explanation offered for the decision to stop

entertaining applications for CIS under the OFP Policy, 2013 after 12th April, 2017. In fact this appears to have been taken while deciding to include rice and dal mills in the negative list of the subsequent policy i.e. OFP Policy, 2016. In the circumstances, this Court holds that the retrospective denial of the CIS benefits under the OFP Policy, 2013 retrospectively from 12th April, 2017 and thereby reject the Petitioner's proposal was entirely arbitrary and in violation of Article 14 of the Constitution.

22. For all of the aforesaid reasons, this Court quashes the decision contained in the letter dated 15th January, 2018 from Opposite Party No.2 to the General Manager, DIC, Angul rejecting the Petitioner's proposal for CIS under the OFP Policy, 2013. As a consequence, necessary orders granting the Petitioner the CIS are directed to be issued by the Opposite Party No.2 not later than four weeks from today. Correspondingly, the Petitioner would be entitled the benefit of exemption from payment of entry tax under the OFP Policy, 2013 and in that regard appropriate orders shall be issued, within the same period of four weeks, by Opposite Party No.4 withdrawing the demand raised against the Petitioner by the letter dated 7th February, 2018 for CST and Entry Tax for the period from 1st October, 2016 to 31st December, 2016.

23. The writ petition is allowed in the above terms, but in the circumstances, with no order as to costs.

24. As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a

printout of the order available in the High Court's website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court's Notice No.4587, dated 25th March, 2020 as modified by Court's Notice No.4798, dated 15th April, 2021.

(S. Muralidhar) Chief Justice

(S.K. Panigrahi) Judge

S.K.Jena/PA