Punjab-Haryana High Court
Gupta Steel Udyog vs State Of Punjab And Others on 31 January, 2025
Neutral Citation No:=2025:PHHC:017308
CWP-10749-2020 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
274 CWP-10749-2020
Reserved on : January 23, 2025
Pronounced on : January 31, 2025
GUPTA STEEL UDYOG -PETITIONER
V/S
STATE OF PUNJAB AND OTHERS -RESPONDENTS
CORAM: HON'BLE MR. JUSTICE KULDEEP TIWARI
Present: Mr. Sunil Chadha, Sr. Advocate with
Mr. Lakshay Bector, Advocate
Ms. Taanvi Dhull, Advocate and
Mr. Raghav Chadha, Advocate
for the petitioner.
Ms./Mrs. Arundhati Kulshreshta, A.A.G, Punjab.
***
KULDEEP TIWARI, J. (ORAL)
1. Through the instant writ petition, as cast under Articles
226/227 of the Constitution of India, the petitioner, which is a partnership
firm, has besought quashing of the letter dated 15.05.2020 (Annexure P-
10), whereby, the respondent concerned has, in view of the guidelines
adopted by the department concerned on 13.11.2019, refused to release
the sanctioned investment incentive in its favour. Moreover, the petitioner
has prayed for issuance of directions upon the respondent concerned to
release the sanctioned investment incentive/subsidy amount of ₹
9,82,000/-, along with interest, in favour of the petitioner.
2. Before gauging the validity of the impugned refusal letter, it
is deemed apposite to make a compendious study of the factual
background of the case at hand.
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FACTUAL MATRIX
3. The State of Punjab, with a view to attracting fresh industrial
investment and boosting the growth of industry, came up with the policy
namely "Package of Incentives- 1992" (hereinafter referred to as the
"Incentive Policy") for new industrial units set up in the State on or before
01.10.1992. The Incentive Policy was issued vide Notification dated
28.09.1992.
4. On account of the assurance purveyed through the Incentive
Policy for grant of various incentives, the petitioner also set up a Small
Scale Industrial (S.S.I.) Unit of Steel Rolling Mill after obtaining
registration thereof from the department concerned. The production of the
petitioner's unit commenced on 08.06.1995, and thereupon, vide
application dated 28.11.1995, the petitioner applied for release of capital
incentive to the respondent concerned. Accordingly, after assessing the
total expenditure incurred by the petitioner in setting up its unit and
starting production thereof, the respondent concerned drew the report
dated 08.12.1995, thereby recommending that the petitioner is entitled to
receive an amount of ₹ 9,84,093.80, i.e. equivalent to 20% of the total
invested amount. Resultantly, vide letter dated 15.07.1996, a sum of ₹
9,82,000/- was sanctioned as investment incentive in favour of the
petitioner. However, despite valid sanction, the investment incentive was
not released.
5. The petitioner continued the operations of its unit till June,
1996, but it was thereafter shut down owing to various reasons. Although
the petitioner's unit of Steel Rolling Unit was shut down, however, the
petitioner firm continued to operate. On 21.10.2015, the petitioner firm
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received a letter from the office of respondent No.3, which embodied
instructions that, in order to implement the directions of this Court issued
in the case of "M/s Balak Gases Oxygen Gas Plant and another Vs.
State of Punjab and others", CWP-19007-2002, Decided on: 20.05.2011,
the petitioner firm was required to submit certain relevant documents for
release of the sanctioned investment incentive. Accordingly, the petitioner
firm submitted all the relevant documents as spoken to in the letter dated
21.10.2015, however, neither the sanctioned investment incentive was
released, nor any intimation in this regard was received from the
respondent concerned. This inaction led to making of various
representations by the petitioner to the respondent concerned. Ultimately,
vide the impugned letter dated 15.05.2020 (Annexure P-10), the
petitioner's request for release of the sanctioned investment incentive was
declined by the respondent concerned, on the ground that, owing to
change in constitution of the petitioner firm, the investment incentive
cannot be released in view of the guidelines dated 13.11.2019.
6. In this way, fetching grievance from the impugned letter
dated 15.05.2020, the petitioner has accessed this Court for redressal of its
grievance.
SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR
THE PETITIONER
7. Opening his arguments, the learned senior counsel for the
petitioner submitted that, the decision of the respondent concerned, as
encapsulated in the impugned refusal letter, is in fact contrary to the
directions issued by this Court in M/s Balak Gases Oxygen Gas Plant's
case (supra). He further submitted that, the respondent concerned has,
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while drawing the impugned refusal letter, failed to be mindful of the fact
that, the partnership status of the petitioner firm has to be considered as it
was existing on the date of sanction of the investment incentive, i.e. on
15.07.1996, and not when the same was considered to be released, i.e. on
21.10.2015 (almost two decades later).
8. The learned senior counsel also placed reliance upon the
judgment rendered by the Co-ordinate Bench of this Court in "M/s Medi
Gas Corporation Vs. State of Punjab and others", CWP-5575-2023,
Decided on: 13.03.2024, wherein, it has been observed that, the
restrictions brought into effect by way of the guidelines dated 13.11.2019
cannot be applied retrospectively even when the subsidy fell due prior
thereto. Therefore, he submitted that, the guidelines dated 13.11.2019,
which were banked on while lending vigor to the impugned refusal letter,
cannot be given retrospective effect especially to deny the rightful claim
of the petitioner, which generated in the year 1996. He submitted that,
even as per the guidelines (supra), the petitioner firm is entitled for the
sanctioned investment incentive. By drawing attention of this Court
towards Clause 1.2 of the guidelines (supra), which deals with
"Partnership Firm", he submitted that, if the petitioner firm is still in
existence, then it is not a case of deemed dissolution, based whereon the
rightful claim of the petitioner firm has been declined.
SUBMISSIONS OF THE LEARNED STATE COUNSEL
9. The learned State counsel vociferously opposed the
submissions made by the learned senior counsel for the petitioner. She
drew attention of this Court towards the sanction letter dated 15.07.1996
to submit that, it was in fact a conditional sanction and the disbursement
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of the investment incentive was subject to availability of funds and strictly
as per seniority. She submitted that, the respondent concerned had
sanctioned capital subsidy to the industrial units under the Industrial
Policy, 1978, 1989, 1992, 1996 and 2003 subject to the condition(s)
mentioned in the sanction letter(s) but the sanctioned subsidy was not
disbursed to the closed units.
10. The learned State counsel further submitted that, although
the verdict rendered in M/s Balak Gases Oxygen Gas Plant's case
(supra), wherethrough, this Court ordered the release of sanctioned
investment incentive along with other benefits, was assailed by the State
of Punjab, however, the desired fruits were not yielded and consequently,
the judgment (supra) attained finality. Therefore, in order to implement
the directions enclosed in the judgment (supra), the State of Punjab
constituted a High Level Committee on 21.01.2016, under the
chairmanship of the Chief Secretary, to frame guidelines for disbursement
of the sanctioned capital subsidy to the closed units along with other
benefits. Finally, the guidelines (supra) were prepared and were adopted
by the department concerned.
11. Continuing her arguments, the learned State counsel
submitted that, the sanctioned capital subsidy is purely in the nature of
privilege/concession extended by the State of Punjab, therefore, it cannot
be claimed as a matter of right. Moreover, the guidelines (supra), which
yet hold legal sanctity, set out specific circumstances under which the
department concerned shall have to release the sanctioned capital
subsidy/investment incentive under the Industrial Policy, 1978, 1987,
1989, 1992, 1996 and 2003 to the entity(ies), which were not released
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such subsidies. In the instant case, after various changes in the
constitution of the petitioner firm, it has now become a sole proprietorship
with proprietor Mr. Brij Lal. Therefore, upon its becoming a sole
proprietorship, the petitioner is, in view of the guidelines (supra), not
entitled for receiving the sanctioned investment incentive/subsidy.
12. Concluding her arguments, the learned State counsel
submitted that, the petitioner firm has, by incorporating new partners, got
a new firm registered on 29.02.2012 under the name and style of M/s
Gupta Steel Udyog, Khanna, and, after lapse of almost a decade, instituted
the instant petition for release of the sanctioned investment incentive by
concealing this material fact.
PROCEEDINGS BEFORE THIS COURT
13. During pendency of the instant writ petition, the Co-ordinate
Bench of this Court drew the hereinafter extracted order:-
"Learned senior counsel for the petitioner submits that
entitlement of the petitioner is to be seen at the time of issuance of
notification dated 28.09.1992. Petitioner fulfilled all the
necessary criteria and subsidy amount of Rs.9,82,000/- was
sanctioned on 15.07.1996. The aforesaid amount could not be
disbursed to the petitioner as the petitioner itself showed its unit
to be closed. Similarly situated units ventured to file CWP No.
19007 of 2002 and other connected petitions in the High Court. A
bunch of 44 cases was ultimately allowed by the co-ordinate
bench vide order dated 20.05.2011. The co-ordinate bench has
taken cognizance of grounds of closure of the units and non
availability of funds etc. while deciding those cases in favour of
the manufacturing units. At one point of time, even the respondent
State sought to implement the decision taken in the case of M/s
Balak Gasses Oxygen Plant, Mandi Gobindgarh in respect of the
petitioner also and sought necessary information to be furnished
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vide letter dated 21.10.2015. In compliance of the said letter, the
petitioner has furnished all the requisite information viz. name of
the bank account, IFSC Code, affidavit and other necessary
documents regarding change or no change in the Constitution.
Change in the Constitution of the partnership firm cannot be
relied upon against the petitioner on the strength of notification
dated 13.11.2019 as the said notification has no retrospective
effect. The entitlement of the petitioner is to be seen at the time of
issuance of notification dated 28.09.1992. Similarly situated units
have been granted benefit of subsidy on that count on the date of
notification or at the time of sanctioning of subsidy i.e. on
15.07.1996.
At this stage, learned State counsel seeks time to respond
to the aforesaid submissions made by learned senior counsel for
the petitioner.
List again on 30.05.2022.
A photocopy of this order be placed on the file of
connected case."
14. Post making of the hereinabove extract order, the Co-ordinate
Bench of this Court, vide order dated 14.12.2022, directed the respondent
concerned to file a specific affidavit disclosing therein the reasons for not
releasing the sanctioned investment incentive to the petitioner and in
pursuance thereto, the affidavit of Rakesh Kumar Kansal, General
Manager, District Industries Centre, Ludhiana, was furnished. This
affidavit merely reiterating in nature inasmuch as the contents of the
previously furnished reply on behalf of the respondents were voiced
therein.
REASONS FOR RENDERING AN AFFIRMATIVE ORDER UPON
THE INSTANT WRIT PETITION
15. Before authoring the reasons for penning down an
affirmative order upon the instant writ petition, it is deemed imperative to
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record some undisputed facts:-
(a) Consequent upon the petitioner firm, upon its making
request/application, found eligible and entitled for grant of
investment incentive under the Incentive Policy, a sum of ₹
9,82,000/- was sanctioned, on 15.07.1996, as investment
incentive in its favour.
(b) The sanctioned investment incentive/capital subsidy
was never disbursed to the petitioner and the delay in
disbursement thereof is attributable to the State of Punjab.
(c) The petitioner's Unit of Steel Rolling Mill was shut
down in the year 1996, however, the petitioner firm
continued to operate.
16. Proceeding further; the issue(s) inhering the case at hand has
already been thoroughly examined by the Co-ordinate Bench of this Court
in M/s Balak Gases Oxygen Gas Plant's case (supra) and it has been
held therein that, the respondent-State of Punjab cannot retract from its
promise made in the Incentive Policy. Hence, applying the doctrine of
promissory estoppel, the State of Punjab was directed to make release of
the sanctioned sums. The relevant paragraphs of the said verdict are
reproduced hereunder:-
"39. In the present cases, the offer of subsidy is a manner of
providing incentives for such investment and an entrepreneur that
assumes a business risk in investment, is entitled to believe that
the scheme is not an empty promise but rooted on a sound
government policy and is squarely covered under the regime of
promissory estoppel of the industrial units. The State could not
legally be permitted to completely defeat the rights of petitioner-
Industries by constant reappraisal of the scheme retrospectively,
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that too by issuing administrative instructions of any kind and by
its officers by passing the impugned orders. Even in case of those
industries, which after several years of operation has perforce to
close its business by the only reason that assured subsidy did not
reach him or any other valid ground beyond their control. A
businessman, who makes investment and obtains loans from the
market or financial institution for establishment of the industry, is
at least entitled to assume that a portion of debt could be
redressed from the amount of subsidy/incentive and benefits as
promised by the State emanating from the Industrial Policies and
relevant rules framed thereunder.
40. Now adverting to the next celebrated contention of the State
counsel the respondents have issued administrative
instructions/guidelines, altering the original Industrial Policies
(Annexure P1) and the relevant rules framed thereunder, so, the
petitioner-Industries, as such, are not entitled to the
subsidies/incentives contrary to the guidelines, is not only devoid
of merit but misplaced as well. Once the Governor has issued the
notifications publishing the Industrial Policies (Annexure P1) in
Government Gazette and State Govt. notified the relevant rules
(Annexure P2) to implement the indicated Policies, then, to my
mind, the administrative/executive instructions/guidelines cannot
legally be issued, unilaterally to alter the eligibility criteria and
imposing such restrictions on the payment of amount of incentives
detrimental to already accrued valuable rights of the petitioner-
Industries, that too, without issuing any notice and providing
adequate opportunity of hearing to them. Such substantive rights
of the petitioner-Industries cannot be taken away by issuing the
executive instructions/guidelines, which have no sanctity of law
and did not contain any legal force. It cannot possibly be denied
that only the State Government (not its officers) has the power to
amend the rules in a legal manner that too prospectively and even
State cannot take away any such rights already accrued to a party
by way of subsequent amendment. In the present cases, as the
impugned guidelines are based on recommendations of the
officers' committees, therefore, the administrative
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instructions/guidelines will not in any way override the effect and
operation of Industrial Policies and relevant rules framed
thereunder in this regard by the State.
41. Moreover, the respondents cannot be permitted to keep on
changing the eligibility criteria for the benefit emitting from the
scheme, which was primarily intended to promote the industrial
growth in the specified category of area and industry in general
and production and employment in border area in particular. As
indicated earlier, the entitlement of petitioner-Industries to claim
the incentives and subsidies under the scheme has not been
denied and was sanctioned, but the respondents did not release
the amount for one or the other untenable grounds in the garb of
impugned orders, which are entirely beyond the scope and
jurisdiction of the original Industrial Policies and relevant rules
framed thereunder. In the same manner, a welfare State cannot
possibly be heard to say that the amount was not released on
account of paucity of funds with it.
42. In this manner, to my mind, any subsequent administrative
instructions/guidelines issued by the State or any orders passed
by its officers, impugned in the present writ petitions, which have
no sanctity of law and legal force, are illegal, contrary to the
Industrial Policies and indicated relevant rules, without
jurisdiction and in operative on the rights of the petitioner-
Industries. The State cannot deny the release of the amount of
incentive/subsidies to them (petitioner-Industries) in this relevant
connection.
43. Therefore, there cannot be any gainsaying that the petitioner-
Industries did act on the assurance of the State. If the crux of the
pleadings, materials placed on the records and admission of the
respondents, as discussed hereinabove, is put together and the
case is construed in its totality, then the only possible conclusion,
that can be drawn, is that the petitioner-Industries were given an
assurance by the respondents-State and they actually acted in
pursuance of the assurance in this behalf. That by itself would be
sufficient to attract the doctrine of promissory estoppel.
44. In this view of the matter, it is held that the State and its
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instrumentality/officers are legally duty bound to fulfill their
promises and are liable to release the indicated benefits to the
petitioner-Industries on the principle of promissory estoppel,
which is deeply applicable to the facts and in the special
circumstances of the present cases. Therefore, the contrary
arguments of State counsel "stricto sensu" deserve to be and are
hereby repelled under the present set of circumstances as the law
laid down in the aforesaid judgment "mutatis mutandis" is
applicable to the present controversy and is the complete answer
to the problem in hand in this context.
XX XX XX
46. In the light of aforesaid reasons, all the writ petitions are
accepted. Consequently, the impugned guidelines and the
impugned orders, in all the cases, having the effect of denying the
incentives/subsidies and other benefits to petitioner-Industries,
emanating from the Industrial Policies and relevant rules framed
thereunder, are hereby set aside in the obtaining circumstances of
the case. The respondents are directed to release the amount of
incentive/subsidies and other benefits, to the petitioner-Industries,
(if they are otherwise eligible and entitled to it), within a period of
six months from the date of receipt of certified copy of this
judgment, failing which, thereafter six months, they (petitioner-
Industries) would also be entitled to interest at the rate of 6% per
annum on the accrued benefits till the realization of the amount in
this context."
17. Consequent upon the verdict (supra) becoming
unsuccessfully challenged before the Hon'ble Supreme Court, and,
consequent upon its attaining a conclusive and binding effect, the State of
Punjab, instead of implementing the directions embodied therein and
resultantly granting the sums of sanctioned investment incentive to the
beneficiaries having right claims, adopted the new guidelines dated
13.11.2019 for the purpose of releasing the sanctioned investment
incentive. These guidelines set out specific instances and circumstances
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under which the Department of Industries and Commerce, Punjab, has to
release and disburse the sanctioned investment incentive/capital subsidy
under the Industrial Policy, 1978, 1987, 1989, 1992, 1996 and 2003 to the
entities, which were not released such subsidies/incentives. Not only this,
certain restrictive conditions were also carved out in these guidelines and
with the aid of such restrictive conditions, the rightful claim of the
petitioner was denied on the ground that, its partnership has now been
dissolved.
18. The learned State counsel, in her endeavour to defend the
impugned refusal letter, although laid emphasis on the hereinafter
extracted Clauses 1.2.1 and 1.2.3 of the guidelines dated 13.11.2019,
however, the same is in fact a misplaced emphasis.
"1.2.1. Dissolution of a Partnership Firm
A dissolved partnership ceases to be a legal person/juristic entity
and is thus not entitled to be released/disbursed the sanctioned
capital subsidy/investment incentive upon/after its dissolution. A
Partnership Firm is governed by a Partnership Deed/Contract if
any and the provisions of the Partnership Act, 1932.
A Partnership Firm which dissolves for the reasons set out in the
Partnership Act, 1932 or the Partnership Contract/Deed ceasing
to be a juristic entity would not be entitled to the sanctioned
capital subsidy/incentive. Needless to say, the provisions of the
Partnership Act, 1932 would be taken into account while deciding
not to release/disburse sanctioned capital subsidy/incentive under
this category. In addition to any events/type of dissolution
contemplated in the Partnership Deed/Contract rendering the
Entity/Industrial Unit disentitled to release/disbursal of capital
subsidy/investment incentive, the following types and/or events of
dissolution would also render the Industrial Unit disentitled to
release/disbursal of sanctioned capital subsidy/investment
incentive:-
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(1) Dissolution by agreement/consent of all Partners or in
accordance with a contract/deed between Partners under Section
40 of the Partnership Act, 1932
(2) Compulsory Dissolution as contemplated under Section 41 of
the Partnership Act, 1932 upon either of the following two events
happening:
(a) by the adjudication of all the partners or of all the
partners but one as insolvent, or
(b) by the happening of any event which makes it unlawful
for the business of the firm to be carried on or for the
partners to carry it on in partnership.
Provided that where more than one separate adventure or
undertaking is carried on by the firm, the illegality of one or more
shall not of itself cause the dissolution of the firm in respect of its
lawful adventures and undertakings.
(3) Dissolution upon happening of certain contingencies/events as
contemplated under Section 42 of the Partnership Act, 1932
which is subject to contract between the partners/Partnership
Deed:
(a) if constituted for a fixed term, by the expiry of that
term;
(b) if constituted to carry out one or more adventures or
undertakings, by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.
(4) Dissolution by Notice of Partnership at Will as contemplated
under Section 43 of the Partnership Act, 1932:
(a) Where the partnership is at will, the firm may be
dissolved by any partner giving notice in writing to all the
other partners of his intention to dissolve the firm.
(b) The firm is dissolved as from the date mentioned in the
notice as the date of dissolution or, if no date is so
mentioned, as from the date of the communication of the
notice.
(5) Dissolution of the Partnership Firm by Court for the grounds
mentioned in Section 44 of the Partnership Act 1932.
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XX XX XX
1.2.3 Other cases
(1) Deemed Dissolution- A Partnership Firm contemplates/
presupposes at least/minimum two persons as Partners.
Therefore, where there are only two Partners constituting the
Partnership Firm, upon the death of one of them, the Partnership
Firm is deemed to be dissolved irrespective of the Partnership
Deed if any, and is legally non-existent. Hence, sanctioned capital
subsidy/incentive is not payable in such event.
(2) Resignation/Retirement of all Partners except one- Where all
the partners of the Partnership Firm retired or resigned except
one partnership leaving the Partnership Firm to be run only by
one partner would be sufficient to conclude that the Partnership
Firm stands dissolved. This is because a legally subsisting
Partnership Firm presupposes a minimum of two persons as
Partners. Thus, in this event, the capital subsidy/investment
incentive which was originally sanctioned to the Partnership can
not be disbursed to the Industrial Unit which has now been/stands
reduced to a sole proprietorship.
(3) Partnership run by family members -A Partnership of family
members where all the family members decide to quit the
Partnership Firm except one family member, is no longer a
legally subsisting Partnership Firm. Upon the
resignation/exit/retirement of all family members except one, such
an Industrial Unit stands reduced to a sole proprietorship which
is legally not the same entity as the Partnership Firm in whose
favour the capital subsidy/investment incentive stood sanctioned.
Thus, in such an event, the Industrial Unit is not entitled to
release/disbursal of the sanctioned capital subsidy/investment
incentive.
(4) Exit of Partners with simultaneous induction of New
Partners- Where the Entity/Industrial Unit being a Partnership
Firm had inducted new partners upon exit of old partners then the
Partnership Deed/Contract may be adverted to understand
whether a new Partnership comes into existence or the old
Partnership survives:
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a. If a new Partnership Firm comes into existence, then the
Entity/Industrial Unit is not entitled to the
release/disbursal of the sanctioned capital
subsidy/investment incentive (originally in favour of the
old Partnership Firm)
b. If the Partnership Firm (old) continues despite induction
of new partners and exit of old partners, then the
entity/Industrial Unit is entitled to the release/disbursal of
the sanctioned capital subsidy/investment incentive.
If there is no Partnership Deed/Contract in place, there being no
impediment in the relevant policy/scheme of the time to
release/disbursal of sanctioned capital subsidy/investment
incentive upon such Reconstitution/Change in Constitution, the
Entity/Industrial Unit may be released such sanctioned capital
subsidy/investment incentive.
(5) A Partnership Firm that has reconstituted/reincorporated as
a Limited Company- An Entity/Industrial Unit that was a
Partnership Firm at the time of sanction of capital
subsidy/investment incentive but has post such sanction
become/reincorporated/changed into a Limited Company, would
not be entitled to release/disbursal of such sanctioned capital
subsidy/investment incentive. This is because a Partnership Firm
is fundamentally and legally distinct from a Limited Company and
once a new entity has emerged as a Limited Company its legal
identity as Partnership Firm is no longer in existence."
19. The reason for drawing the above inference stems from the
factum that, the issue "whether the petitioner firm has been dissolved or it
is a case of deemed dissolution" needs to be examined as per the apt
provisions of law. The fact, which is not under dispute is that, originally
the petitioner firm was constituted on 04.07.1994 with four partners,
namely, Brij Lal, Rajiv Kumar, Ramesh Chander and Kuldeep Rai. Soon
thereafter, one Satyapal Sharma was inducted as the fifth partner in the
petitioner firm on 16.09.1994. In June, 1996, the petitioner firm shut
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down its unit of Steel Rolling Mill, and thereafter, three out of the five
partners retired from the petitioner firm w.e.f. 31.12.1996, whereupon, the
petitioner firm continued with only two partners, namely, Brij Lal and
Rajiv Kumar. However, vide retirement deed dated 31.03.2000, Rajiv
Kumar also retired from the petitioner firm, which resulted in the
petitioner firm continuing with only one Brij Lal. Thereafter, w.e.f.
01.04.2010, Rajiv Kumar (one of the erstwhile partners) along with his
son Vinod Kumar joined as partners with Brij Lal in the petitioner firm.
On 26.06.2018, the demise of Brij Lal occurred, whereupon, his
grandsons Chirag Gupta and Sarthak Gupta joined as partners with Rajiv
Kumar and Vinod Kumar in the petitioner firm. In this way, as on date,
Rajiv Kumar, Vinod Kumar, Chirag Gupta and Sarthak Gupta are partners
in the petitioner firm.
20. Moreover, as per Section 25 of the Partnership Act, 1932,
every partner has an unlimited obligation/liability against the partnership
firm and has all rights to operate the accounts. Therefore, each partner,
who has an obligation towards all other partners, can act and/or operate
account and receive payments for and on behalf of other partners. Gainful
reference in this regard can be made to M/s Medi Gas Corporation's case
(supra), wherein, this issue has been examined by the Co-ordinate Bench.
The relevant paragraphs of this verdict are reproduced hereunder:-
"16. That even otherwise, as per the law, every partner has an
unlimited obligation/liability against the partnership firm and has
all rights to operate the accounts as per Section 25 of the
Partnership Act, 1932. Therefore, each partner has an obligation
towards all other partners and that he can act and/or operate
account and receive payments for and on behalf of other partners.
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Such a distinction, which has been referred to by the respondents
to portray that the earlier identity of the petitioner firm having
undergone material change, it would be deemed to have been
dissolved (notwithstanding reconstitution of the partnership) even
though new partnership is admitted by the respondents in their
own communication dated 18.11.2022 bearing Memo No.
INC/Sub/Ludhiana/M-259/5420-A.
XX XX XX
18. A perusal of the Notification shows that the same was
intended to ensure release of capital subsidy and attempts to
streamline the process in light of the judgment in Balak Gases
(supra).
19. Surprisingly, the said guidelines permit change in constitution
or reconstitution of a partnership firm but disentitle the petitioner
for an event of change of event and does not recognize the
petitioner regaining the same status.
20. The respondent cannot be allowed to read a change merely to
the prejudice of the petitioner and discard a change which fulfills
the requirement. The exercise of power to determine eligibility
cannot be selective and even a change which favours the
petitioner too need to be considered by the respondent especially
when the petitioner regained its status before the release of
subsidy. It is required to be kept in mind that all these restrictions
are being apprised only by way of notification dated 13.11.2019
and cannot be applied retrospectively even when the subsidy fell
due in 2011.
21. The respondents cannot be permitted to take a stand at their
convenience. Vide the aforesaid communication, they have
acknowledged that the status of the petitioner is that of a
partnership unit, while declining the case of the petitioner unit for
release of the capital subsidy. The stand of the respondents is
nothing more than a self serving statement to cover up their lapse
and to find a justification for their acts before this Court. The
provisions as contained in the operational guidelines notified in
the year 2019 need to be reconciled and harmoniously
constructed. A brief status of a partnership firm, as a sole
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proprietor on account of resignation of one of the partners, and
before execution of fresh partnership deed, inducting new
partners cannot be construed as conferring the status of a sole
proprietorship so as to attract Clause 1.2.3 (2) of the Operational
Guidelines and to hold a partnership firm disentitled from the
benefits that have already enured in its favour. This would not
have been the intent even of the appropriate government since
any such clause would easily be avoided by mere induction of an
additional partner before resignation of an existing partner. Thus,
a mere logistic lapse cannot be construed as depriving a person
of a right that has accrued in his favour."
21. This Court concurs with the hereinabove extracted view
taken by the Co-ordinate Bench. The Incentive Policy entitled the
petitioner firm to investment incentive, which was duly sanctioned in its
favour on 15.07.1996. Therefore, the subsequent guidelines dated
13.11.2019, which were framed only for the purpose of setting out
circumstances for disbursement of investment incentive/capital subsidy,
cannot snatch the preexisting rights of the petitioner firm. The respondent-
State of Punjab cannot be expected to act arbitrarily by taking shelter of
the guidelines dated 13.11.2019 and thus declining the rightful claim of
the petitioner firm. Moreover, the petitioner firm has a legitimate
expectation, inasmuch as, on account of the promise made by the
respondent-State of Punjab, it established its unit of Steel Rolling Mill
and brought capital in the State of Punjab. Therefore, the doctrine of
estoppel restrains the respondent-State from denying the rightful claim of
the petitioner firm.
FINAL ORDER
22. In summa, this Court is of the firm opinion that, the
impugned letter dated 15.05.2020 (Annexure P-10) does not pass the test
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of legality and requires interference. Consequently, the instant writ
petition is allowed and the impugned letter is set aside. The
respondent(s) concerned is directed to forthwith release the sanctioned
investment incentive/subsidy amount of ₹ 9,82,000/-, along with 6%
interest from the date of its sanction, in favour of the petitioner firm.
(KULDEEP TIWARI)
January 31, 2025 JUDGE
devinder
Whether speaking/reasoned : Yes/No
Whether Reportable : Yes/No
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