Judgment

Srikrishna, J.—Delay condoned in the Special Leave Petition arising out of CC No. 12164 of 2004. Leave granted in both the Special Leave Petitions.

2. The question to be answered in this case is: whether the scheme of subsidies (known as the “Retention Price Scheme”) granted by the Respondent-Union of India (hereinafter “the Government”) to fertilizer manufacturers, could be retrospectively modified to the detriment of these manufacturers. In our view, this question needs to be answered in the affirmative.

The Retention Price Scheme

3. M/s Duncan Industries Ltd. (hereinafter “the First Appellant”) is engaged in the business of manufacturing and selling urea (a fertilizer). In 1993, the First Appellant acquired the urea plant of M/s Indian Explosives Ltd. (a unit of ICI India Ltd.). The Second Appellant is a shareholder in the First Appellant-Company (hereinafter, collectively “the appellants”).

4. In 1957, the Government notified fertilizers (including urea) as an “essential commodity”, under the Essential Commodities Act, 1955 (hereinafter “the EC Act”). The Fertilizer (Control) Order, 1957 (hereinafter “the Fertilizer (Control) Order”) was made in exercise of the powers confe