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2003 Supreme(All) 2427
IN THE HIGH COURT OF ALLAHABAD
M. KATJU, R. S. TRIPATHI
DUNCANS INDUSTRIES LTD. - Appellant
Versus
UNION OF INDIA - Respondents
C. M. W. P. 43042 Of 2002
Decided On : 11/07/2003
B.N.SINGH, RAJIV DHAWAN, S.M.A.Kazmi, S.P.GUPTA, SIDDHARTHA SHANKAR RAY
The government has the authority to revise the parameters of a non-statutory scheme retrospectively, provided that the manufacturers are not entitled to any vested right in the parameters and that they have been aware that the parameters could be revised.
Headnote:
The Supreme Court of India upheld the government's decision to revise the pricing policy parameters for urea manufacturers retrospectively from 1-7-1997. The court held that the government had the authority to revise the parameters and that the manufacturers were not entitled to any compensation for the losses they incurred as a result of the revision.
Fact of the Case:
The government of India introduced a Retention Price Scheme (RPS) for urea manufacturers in 1977. The RPS fixed a maximum retail price for urea and provided for a subsidy to manufacturers to cover their costs of production and a 12% post-tax return on their net worth. The RPS was operated through 3-year pricing periods, with the government fixing the retention price for each period in advance. In 1997, the government revised the RPS parameters retrospectively from 1-7-1997. The revision resulted in a reduction in the subsidy paid to manufacturers and a corresponding increase in the price of urea to farmers. Several urea manufacturers challenged the retrospective revision of the RPS parameters, arguing that it was arbitrary and violative of their legitimate expectations and promissory estoppel.
Finding of the Court:
The Supreme Court held that the government had the authority to revise the RPS parameters retrospectively. The court noted that the RPS was not a statutory scheme and that the manufacturers were not entitled to any vested right in the parameters. The court also held that the manufacturers had not been given any assurance that the parameters would not be revised retrospectively. The court further held that the revision of the parameters was not arbitrary or violative of the manufacturers' legitimate expectations or promissory estoppel. The court noted that the manufacturers had been aware that the parameters could be revised and that they had continued to operate under the RPS despite the risk of revision.
Issues: 1. Whether the government had the authority to revise the RPS parameters retrospectively. 2. Whether the manufacturers were entitled to any compensation for the losses they incurred as a result of the revision.
Ratio Decidendi: 1. The government had the authority to revise the RPS parameters retrospectively because the RPS was not a statutory scheme and the manufacturers were not entitled to any vested right in the parameters. 2. The manufacturers were not entitled to any compensation for the losses they incurred as a result of the revision because they had been aware that the parameters could be revised and they had continued to operate under the RPS despite the risk of revision.
Final Decision: The Supreme Court dismissed the petition challenging the retrospective revision of the RPS parameters.
( 1 ) THIS writ petition has been filed for a writ of certiorari for quashing the pricing policy parameters for the viith and VIIIth pricing periods issued by the respondent and communicated to the petitioners by letter dated 4-6-2002 vide annexure 1 to the petition as well as the impugned fixation of the retention price by communication dated 19-8-2002 vide annexure 2 to the petition particularly in respect of the parameters/norms mentioned in para 32 of the petition as null and void. The petitioners have prayed for a direction that the pricing policy parameters for the vllth and Vlllth pricing periods cannot be given retrospective operation, and have prayed for a mandamus directing the respondents to continue to determine and notify the retention prices of the petitioners in accordance with the pricing policy parameters for the VIth pricing period as communicated to the petitioners vide letter dated 24-7-1997/5-8-1997 Annexure 4 to the petition and to continue to make monthly payments to the petitioners on that basis. They have also prayed for a direction restraining the respondents from recovery of any amount from the petitioner and doing any act in furtherance of the pricing policy parameters for the Vllth and Vlllth periods issued by the respondent and have prayed for refund of an amount illegally realized from the petitioners with interest.
( 2 ) HEARD learned counsel Dr. Rajeev dhawan, senior Advocate and Sri S. M. A. Kazmi for the petitioners, and Sri S. P. Gupta for the respondents.
( 3 ) THE petitioner No. 1 is a company registered under the Indian Companies Act having its registered office at Kolkata. The petitioner No. 2 is a shareholder of the petitioner No. 1 and most of the shareholders are citizens of India. The petitioner company is engaged in the business inter alia of manufacturing urea at its factory located at panki, Kanpur, U. P. and distribution and sale thereof. Urea is an essential commodity under the Essential Commodities Act. The respondent Union of India introduced and has administered since 1977 a rentention Pricing Scheme (RPS) for pricing of fertilizers. This system was developed with a view to introducing a rational system of pricing of fertilizers. Under the scheme a maximum retail price (MRP) of fertilizers that could be charged to farmers was fixed at low, controlled levels unrelated to the cost of production and distribution of the same. At the same time a reasonable return on the investment by manufacturers was also granted under the scheme to give incentive to businessness. Under the scheme, the Central Government decided to fix a price called the retention price for each manufacturer to cover his cost of production and to yield to him a post tax return of 12% on his net worth. The retention price scheme stated :"the system provides for a fair ex factory retention price per tonne of urea (hereinafter referred as retention price) for each plant based on a capacity utlization of 80 per cent and a combination of norms and actuals in regard to the consumption of raw materials, utilites and other inputs, maintenance and other costs and provides for a post tax return of 12 per cent on net worth. "
( 4 ) TRUE copy of the gazette notification dated 1-11-1997 introducing the system of retention price is Annexure 5. It is alleged in para 16 that the Gazette notification dated 1-11-1997 contained a clear and unequivocal representation and assurance by the Central Government to all fertilizer manufacturers to the effect that the price controls in respect of fertilizers would not adversely affect the profitability and return to the fertilizer manufacturer which would remain at a reasonable post tax level of 12% on net worth at a normative capacity utlization of 80%. It is alleged that on the basis of this representation and assurance all manufacturers of fertilizers, including the petitioners, continued their operations otherwise they would have been constrained to close down their business
