2010 Supreme(SC) 34

2010 (1) Supreme 161
SUPREME COURT OF INDIA
Tarun Chatterjee and Surinder Singh Nijjar, JJ.
State of Bihar & Ors. — Appellants
versus
Kalyanpur Cements Ltd. — Respondent
Civil Appeal No. 5181 of 2002
Decided on : 8-01-2010

IMPORTANT POINTS
1.Government cannot, claim to be exempt from liability to carry out the promise, on some indefinite and undisclosed ground of necessity or expediency
2. In order to invoke doctrine of promissory estoppel it must be established that a party must make an unequivocal promise or representation by word or conduct to the other party,the representation was intended to create legal relations or affect the legal relationship, to arise in the future, a clear foundation has to be laid in the petition, with supporting documents and it has to be shown that the party invoking the doctrine has altered its position relying on the promise.

Headnote:Industrial Policy,1995 – Application filed by respondent company to State Government for grant of Sales Tax exemption for a period of 5 years – The matter remained pending for consideration by State Government and the financial institutions – There were a series of joint meetings of the Government, Financial Institutions and the Company, over the next three years – In all these meetings, as well as correspondence categoric assurances were given that necessary Sales Tax exemption notification would be issued shortly –However, no such notification was issued causing great hardship to the Company –Respondent company was, therefore, constrained to file writ petition praying for issuance of writ in the nature of mandamus directing the State of Bihar to issue necessary Notification under Clause 24 of 1995 Policy – The claim of the Company was that Notification under Clause 24 of the Industrial Policy, 1995 ought to have been issued within one month of release/publication of the Policy in September, 1995 – Said writ petition was allowed by High Court – Appeal – The Company applied to the State Government on 21.11.1997 for grant of sales tax exemption under the Industrial Policy, 1995 – Even though the Company was entitled under said Policy to exemption for 8 years, it made an application only for 5 years’ exemption – This request of the Company was considered by the State – level Committee on Rehabilitation in a meeting held on 07.01.1998 – This was attended by the senior Officers of the State Government, representatives of the financial Institutions and the Company – Thereafter, the representatives of the Company were invited to join the meeting held between the Government of Bihar and financial institutions on 29.10.1999 – Reference was made, in this meeting, to the deliberations at the previous meeting held on 12.07.1999, when it was decided to undertake revised restructuring exercise in respect of the Company – Accordingly, a revised restructuring proposal was formulated by the Industrial Finance Corporation of India Ltd. – In this meeting of the representative of the State Government mentioned that the legal opinion of Advocate General Bihar had been obtained – The financial institutions stated that they would consider granting reliefs only after grant of Sales Tax exemptions by the State Government of Bihar – State Government had been consistently giving assurances not only to Company but also to financial institutions that necessary Sales Tax exemption notification will be issued – Company had laid a clear, sound and a positive foundation for invoking the doctrine of ‘promissory estoppel’ – Therefore, it was not possible to accept submissions that no definite promises were ever made –Material on record would lead to a conclusion that the Company as well as the financial institutions were entitled to rely upon the repeated assurances given by State Government – However, since the promised notification was not forthcoming, the Company was constrained to file writ petition – Held conclusion reached by the High Court was based on due consideration of the material placed before it – No reason to differ with opinion expressed by High Court – Submissions made by appellant that no clear – cut assurances were held out to the Company were held unsustainable – Appeal dismissed. (Paras 54 to 64, 82)

        Industrial Policy,1995 – Application filed by respondent company to State Government for grant of Sales Tax exemption for a period of 5 years – The matter remained pending for consideration by State Government and the financial institutions – There were a series of joint meetings of the Government, Financial Institutions and the Company, over the next three years – In all these meetings, as well as correspondence categoric assurances were given that necessary Sales Tax exemption notification would be issued shortly – However, no such notification was issued causing great hardship to the Company – Respondent company was, therefore, constrained to file writ petition praying for issuance of writ in the nature of mandamus directing the State of Bihar to issue necessary Notification under Clause 24 of 1995 Policy – The claim of the Company was that Notification under Clause 24 of the Industrial Policy, 1995 ought to have been issued within one month of release/publication of the Policy in September, 1995-Said writ petition was allowed by High Court – Appeal – Submission that decisions dated 06.01.2001 and 05.03.2001 had been taken due to the change in the national policy was held unacceptable – This was sought to be justified on the basis of the Conferences of Chief Ministers/Finance Ministers – It is settled law that Government cannot, claim to be exempt from liability to carry out the promise, on some indefinite and undisclosed ground of necessity or expediency – The Government is required to place before the Court the entire material on account of which it claims to be exempt from liability – Thereafter, it would be for the Court to decide whether those 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 liability – It is only when the Court is satisfied that the Court would decline to enforce the promise against the Government – However, burden would be upon the Government to show that it would be inequitable to hold the Government bound by the promise – The Court would insist a highly rigorous standard of proof in the discharge of this burden – Instantly claim of Government was based on a change in policy advocated in the Chief Ministers’ Conference – These Conferences had taken place before the affidavit is filed on 05.12.2001 – Hence High Court concluded that Government had not been candid in disclosure of the reasons for passing order dated 06.01.2001 – Held said decisions with regard to the discontinuance of the Sales Tax exemptions from 01.01.2000 could not have affected the rights of the Company under the Industrial Policy, 1995 – Necessary application was made to the Government seeking exemption on 21.11.1997 – For more than 3 years, the Company and financial institutions had been assured by the Government that the notification will be issued forthwith- However, it was not issued – Action of appellants was held to be arbitrary and indefensible – Appeal dismissed. (Para 68)

        Industrial Policy,1995 – Application filed by respondent company to State Government for grant of Sales Tax exemption for a period of 5 years – The matter remained pending for consideration by State Government and the financial institutions – There were a series of joint meetings of the Government, Financial Institutions and the Company, over the next three years – In all these meetings, as well as correspondence categoric assurances were given that necessary Sales Tax exemption notification would be issued shortly –However, no such notification was issued causing great hardship to the Company – Respondent company was, therefore, constrained to file writ petition praying for issuance of writ in the nature of mandamus directing the State of Bihar to issue necessary Notification under Clause 24 of 1995 Policy – The claim of the Company was that Notification under Clause 24 of the Industrial Policy, 1995 ought to have been issued within one month of release/publication of the Policy in September, 1995 – Said writ petition was allowed by High Court – Appeal – Notification merely had to be published in the Official Gazette – The four reasons given in support of the decision were clearly arbitrary – It was no longer open to the appellant not to issue the notification on the ground that the Policy had lapsed on 31.08.2000. – The second reason that the exemption could not be granted to Company as no notification had been issued under Clause 24 held unacceptable as the appellant – State could not be permitted to take advantage of its own wrong – The third reason given was that the State – level Empowered Committee (SLEC) had not approved the rehabilitation package – This clearly was against evidence on record – Not only the exemption was recommended by the competent Committees under the Industrial Policy, 1995, emphatic assurances were given that the notification Would be issued within a very short period – The fourth reason with regard to resolution passed at Chief Ministers’ Conference was equally extraneous to the issue – The Company had made the application for exemption at a much prior time in 1997 – No material had been placed before High Court about legal enforceability of resolutions passed at the Chief Ministers’ Conference – Hence held that decision making process which culminated in passing of the orders dated 06.01.2001 and 05.03.2001 being seriously flawed, therefore, same had been justifiably quashed by High Court – Appeal dismissed. (Para 73)

       Facts of the Case :

        An Application was filed by respondent company herein in the instant case to State Government for grant of Sales Tax exemption for a period of 5 years .The matter remained pending for consideration by State Government and the financial institutions. There were a series of joint meetings of the Government, Financial Institutions and the Company, over the next three years. In all these meetings, as well as correspondence categoric assurances were given that necessary Sales Tax exemption notification would be issued shortly. However, no such notification was issued causing great hardship to the Company-. Respondent company was, therefore, constrained to file writ petition praying for issuance of writ in the nature of mandamus directing the State of Bihar to issue necessary Notification under Clause 24 of 1995 Policy. The claim of the Company was that Notification under Clause 24 of the Industrial Policy, 1995 ought to have been issued within one month of release/publication of the Policy in September, 1995.Said writ petition was allowed by High Court.

        2. Present appeal has been filed against said order of High Court.

       Findings of the Court :

        The Company applied to the State Government on 21.11.1997 for grant of sales tax exemption under Industrial Policy, 1995. Even though the Company was entitled under said Policy to exemption for 8 years, it made an application only for 5 years’ exemption. This request of the Company was considered by the State-level Committee on Rehabilitation in a meeting held on 07.01.1998.This was attended by the senior Officers of the State Government, representatives of the financial Institutions and the Company. Thereafter, the representatives of the Company were invited to join the meeting held between the Government of Bihar and financial institutions on 29.10.1999.Reference was made, in this meeting, to the deliberations at the previous meeting held on 12.07.1999, when it was decided to undertake revised restructuring exercise in respect of the Company. Accordingly, a revised restructuring proposal was formulated by the Industrial Finance Corporation of India Ltd. In this meeting of the representative of the State Government mentioned that the legal opinion of Advocate General Bihar had been obtained. The financial institutions stated that they would consider granting reliefs only after grant of Sales Tax exemptions by the State Government of Bihar. State Government had been consistently giving assurances not only to Company but also to financial institutions that necessary Sales Tax exemption notification will be issued. Company had laid a clear, sound and a positive foundation for invoking the doctrine of ‘promissory estoppel’. Therefore, it was not possible to accept submissions that no definite promises were ever made. Material on record would lead to a conclusion that the Company as well as the financial institutions were entitled to rely upon the repeated assurances given by State Government. However, since the promised notification was not forthcoming, the Company was constrained to file writ petition. Held conclusion reached by the High Court was based on due consideration of the material placed before it.No reason to differ with opinion expressed by High Court. Submissions made by appellant that no clear-cut assurances were held out to the Company were held unsustainable. Appeal was dismissed.

       Result : Appeal dismissed.