Supreme Court of India
STATE OF BIHAR & ORS.versusKALYANPUR CEMENTS LTD.
- Citation
- 2010 INSC 25
- Decided
- 8 January 2010
- Disposal
- Dismissed
- Bench
- TARUN CHATTERJEE
Holding
The State is estopped from denying the sales‑tax exemption; the doctrine of promissory estoppel applies, but the company must not retain the tax amount and must release it to the State.
Summary
Kalyanpur Cement Ltd., a sick industrial unit, sought a five‑year sales‑tax exemption under Bihar's Industrial Policy, 1995, as a condition for a financial restructuring package. The State repeatedly assured the company that a notification would be issued, but later withdrew the promise and issued orders on 6 January 2001 and 5 March 2001 denying the exemption. The High Court quashed those orders and directed the State to issue the notification. The Supreme Court, while directing the company to deposit the tax amount in a bank, held that the State was estopped from denying the exemption because it had made unequivocal promises that the company relied upon, invoking the doctrine of promissory estoppel. However, the Court ruled that the company could not retain the tax collected from customers and must release the deposited amount to the State to avoid unjust enrichment. The appeal by the State was dismissed and the interim application allowing the release of the amount to the State was upheld.
Issues considered
- The State's denial of the sales‑tax exemption after giving repeated assurances – whether the doctrine of promissory estoppel applies.
- Whether the company altered its position in reliance on the State's promise and is therefore entitled to the exemption.
- Whether the lapse of the Industrial Policy, 1995, bars the company from claiming the exemption.
- Whether the company may retain the amount collected under the Supreme Court’s interim order.
- Whether the State can rely on a change in policy or the Chief Ministers' Conference to withdraw the promise.
Legislation cited
- Bihar Finance Act, 1981s. 7(3)(b)
- General Clauses Act, 1897s. 6
- Industrial Policy, 1995 (Bihar)s. Clause 22(2)(i), s. Clause 24
Subjects
promissory estoppelsales tax exemptionindustrial policysick industrial unitestoppelunjust enrichmentadministrative lawtax exemption vs refundArticle 14legitimate expectationpublic policy
Judgment
[2010] 1 S.C.R. 928
A STATE OF BIHAR & ORS.
v.
KALYANPUR CEMENTS LTD.
(Civil Appeal No. 5181 of 2002)
JANUARY 8, 201.0
B
[TARUN CHATTERJEE AND SURINDER SINGH
NIJJAR JJ.]
Industrial Policy, 1995 - Clauses 22(2)(i) and 24 - Sales
C tax exemption - Sick company .:... Assistance to the company
for restructuring agreed by financial institutions, on the
condition that it obtained sales tax exemption from State
Government - Repeated assurance by State Government to
issue sales tax exemption Notification - Writ petition seeking
D direction to issue the Notification - State first informed the
High court that it would issue Notification after approval of
proposal of Notification - Later informed the Court that State
has decided not to grant sales tax incentives to sick
companies - High Court quashed the decision of the State
E and directed it to issue the Notification - On appeal, Supreme
Court by interim order directing the company to deposit an
amount equivalent to sales tax payable by it in a Bank - The
amount to be payable to the party which ultimately succeeded
- State issuing the Notification - Failure of company to
F deposit the amount taking the plea that it was sick - Held:
Denial of sales tax exemption is arbitrary - The State initially
having given repeated assurances, was estopped from
denying the grant of exemption at later stage - Company
rightly invoked the doctrine of promissory estoppel - State
G cannot take advantage of its own lapses in implementing the
Industrial Policy for denying the claim of the company - The
decision making process culminating into orders denying
grant of exemption is seriously flawed - However, the
company, in view of its financial condition, cannot be permitted
H 928
. .
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 929
LTD_
to retain the amount collected from the customer on sale of A
its product - This would amount to unjust enrichment -
Direction to release the amount deposited by the company
pursuant to interim order of Supreme Court, to the State -
Doctrine of Promissory estoppel - Unjust Enrichment.
B
Administrative Law - Doctrine of promissory estoppel -
lnvokabi/ity of - Discussed.
Taxation - exemption of tax and refund of tax - Difference
between.
c
Words and Phrases - 'Sick unit' - Meaning of, in the
context of Industrial Policy, 1995.
Respondent-Company was declared as a sick unit,
by the Board for Industrial and Financial Reconstruction.
0
The company, in order to rehabilitate itself sought
assistance from financial institutions for restructuring
package. The proposal for financial assistance and
restructuring was approved by various financial
institutions subject to the condition that the company
obtained a sales tax exemption for a period of 5 years E
from the State Government, in terms of Industrial Policy,
1995. The company applied for grant of sales tax
exemption. Thereafter the matter remained pending for
consideration by the State Government and financial
institutions. In various meetings of the State, the F
Company and the financial institutions, categoric
assurances were given by the State that necessary sales
tax exemption Notification would be issued. However, no
such Notification was issued.
G
The company filed a writ petition seeking direction
to the State to issue necessary Notification. The State
stated that it would be possible to issue the Notification
after approval of proposal of Notification by the Chief
H
930 SUPREME COURT REPORTS [2010] 1 S.C.R.
A (Finance) Minister. Thereafter the State informed the Court
that the State by order dated 6.1.2001 had decided not to
grant any sales tax incentives to sick industrial units, and
therefore the claim of the company was rejected. The
company, therefore, amended the petition, challenging
B the decision dated 6.1.2001. The State in its further
affidavit stated that the decision of the State was later
considered by the Cabinet on 5.3.2001 and it was decided
not to issue any Notification. High Court allowed the writ
petition quashing the decisions dated 6.1.2001 and
c 5.3.2001. The Court directed the State to issue follow up
Notification to give effect to the provisions of the Policy.
Hence the present appeal.
Supreme Court by an interim order dated 18.11.2002
directed the respondent-company to deposit an amount
D equivalent to the sales tax payable by it as and when it
became due, in an interest bearing account of a Bank;
and that the amount so kept would be payable to the
party which ultimately succeeded.
£ The State filed IA No. 3 of 2006, seeking stay of the
judgment of High Court. It was stated in the application
that the State issued the Notification in pursuance of
order dated 18.11.2002, granting exemption for five years
or till disposal of SLP. The respondent-company,
F however, informed the State that it was unable to comply
with the directions because of its sickness. As the
company failed to comply with the directions, prayer was
made to recall the same.
Dismissing the appeal, and allowing the application,
G the Court
HELD: 1.1. In order to invoke the doctrine of
promissory estoppel, it must be established that (a) a
party must make an unequivocal promise or
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 931
LTD.
representation by word or conduct to the other party (b) A
the representation was intended to create legal relations
or affect the legal rel~tionship, to arise in the future (c) a
clear foundation has to be laid in the petition, with
supporting documents (d) it has to be shown that the
party invoking the doctrine has altered its position relying B
on the promise (e) it is possible for the Government to
resile from its promise when public interest would be
prejudiced if the Government were required to carry out
the promise (f) the Court will not apply the doctrine in
abstract [Para 26) [956-B-E] c
1.2. From the facts of the case, it is apparent that the
State Government had been consistently giving
assurances not only to the company but also to the
financial institutions that the necessary sales tax
exemption Notification will be issued. The company had D
laid a clear, sound and a positive foundation for invoking
the doctrine of 'promissory estoppel'. The company as
well as the financial institutions were entitled to rely upon
the repeated assurances given by the State Gov.ernment.
[Paras 56 and 59) [969-C-D; 971-C] E
1.3. Having made the statement before the High
Court that it would be possible to issue necessary
Notification after approval of the proposal by the Chief
(Finance) Minister, the Government has resiled from the F
unequivocal representations in the decisions dated
06.01.2001 and 05.03.2001. Therefore, strong reliance was
placed on clauses 22 and 24 of the Industrial Policy, 1995
and the doctrine of 'promissory estoppel' in support of
the plea that the action of the State Government in issuing G
orders· dated 06.01.2001 and 05.03.2001 are wholly
arbitrary and unjust. [Para 61) [972-A-B]
1.4. The conclusion reached by the High Court that
when the State Government gives an assurance and
H
932 SUPREME COURT REPORTS [2010] 1 S.C.R.
A undertaking, in form of a policy then in fact it allures person/
industries to enter into the individual ventures, invest money
on the assurances contained in the policy, it would not be
justified on the part of the State Government to say later on
that on a second thought they were withdrawing the policy and
B the benefits flowing from that policy, is based on due
consideration of the material placed before it. There is no
reason to differ with the opinion expressed by the High
Court. [Paras 62 and 63] [972-D-F; G)
Mangalore Chemical and Fertilizer Ltd. vs. Deputy
C Commissioner of Commercial Taxes and Ors. (1992) Suppl.
1 SCC 21; State of Punjab vs. Nestle India Ltd. and Anr.
(2004) 6 SCC 465; Southern Petrochemical Industries Co.
Ltd. vs. Electricity Inspector and ETIO and Ors. (2007) 5 SCC
447; MRF Ltd. Kottayam vs. Asstt.Commissioner
D (Assessment) Sa/es Tax and Ors. (2006) 8 SCC 702; Motilal
Padampat Sugar Mills Co. Ltd. vs. State of UP (1979) 2 SCC
409, relied on.
Kasinka Trading vs. Union of India (1995) 1 SCC 274;
E STO vs. Shree Durga Oil Mills (1998) 1 SCC 572; Baku/
Cashew Co. vs. STO (1986) 2 SCC 365; Sharma Transport
VS. Govt. of A.P. (2002) 2 sec 188; Shri Baku/ Oil Industries
vs. State of Gujarat (1987) 1 SCC; Motilal Padampat Sugar
Mills Co. Ltd. vs. State of UP (1979) 2 SCC 409; DCM Ltd.
F vs. Union of India (1996) 5 SCC 468; Shrijee Sa/es Corpn.
vs. Union of India (1997) 3 SCC 398; Pf!wan Alloys and
Castings (P) Ltd. UPSEB (1997) 7 SCC 251; Bannari Amma
Sugars Ltd. VS. Commercial Tax Officer (2005) 1 sec 625;
Rom Industries Ltd. vs. State of J & K (2005) 7 SCC 348;
G State of Jharkhand VS. Ambay Cements (2005) 1 sec 368;
M.P. Mathur vs. OTC (2006) 13 SCC 706; Excise
Commissioner vs. Ram Kumar (1976) 3 SCC 540, referred
to.
Central London Property Trust, Ltd. vs. High Trees
H House, Ltd. (1956) 1 All ER 256, referred to.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 933
LTD.
'Statutory Interpretation' by Francis Bennion 1984 edn. A
683, referred to.
2.1. h1 the present case, the claim of the Government
is based on a change in policy advocated in the Chief
Ministers' Conference. These Conferences have taken 8
place before the affidavit is filed on 05.12.2001. Therefore,
the High Court concluded that the Government has not
been candid in disclosure of the reasons for passing the
order dated 06.01.2001. The aforesaid decisions with
regard to the discontinuance of the sales tax exemptions C
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 the financial institutions h3d been assured
by the Government that the Notification will be issued D
forthwith. However, it was not issued. The action of the ·
appellants is arbitrary and indefensible. [Para 68) [981-A-
E]
2.2. A perusal of the aforesaid policy clearly shows E
that the Government was determined to take effective
measures to render all possible assistance for
amelioration of the continuing problem of industrial
sickness in the State. It was viewed as a matter of great
concern for the Government. Clause 22(2) deals with F
sickness in large and medium sectors. Under clause
22(2)(i) of Industrial Policy, 1995 a Committee headed by
the Industrial Development Commissioner, was to
recommend concessions and facilities which were
considered necessary for revival of the-potentially viable G
non-BIFR sick industrial units. The Company was,
therefore, eligible under Clause 22(2)(ii). The Industrial
Policy, 1995 did not envisage sickness in its strict terms .-
as defined under the Sick Industrial Companies (Special
Provisions) Act, 1985. The policy was of a wider
application and included industrial sickness not only qua H
934 SUPREME COURT REPORTS [2010) 1 S.C.R.
A BIFR companies but also in relation to non-BIFR
potentially viable sick companies. [Para 70) (984-F-H; 985-
A-B]
2.3. The definition of 'sick unit' in Clause 6 of
annexure to the Policy, makes it abundantly clear that the
8
sickness of the company (SLEC) could also be decided
by the State Level empowered Committee headed by the
Chief Secretary. The exemption claim of the company
was duly considered by the Committee constituted under
C Clause 22(2)(i). Its recommendations were duly placed
before the SLEC under Clause 22(2)(ii). The
recommendations were not implemented only because
the Government failed to issue a Notification under
Clause 24 of the Industrial Policy, 1995 within the
stipulated period of one month. Even if it is accepted that
D the provisions contained in Clause 24 was mandatory,
the time of one month for issuing the Notification could
only have been extended for a reasonable period. It is
inconceivable that it could have taken the Government 3
years to issue the follow up Notification. The failure of the
E appellants to issue the necessary Notification within a
reasonable period of the enforcement of the Industrial
Policy, 1995 has rendered the decisions dated 06.01.2001
and 05.03.2001 wholly arbitrary. The appellant cannot be
permitted to rely on its own lapses in implementing its
F policy to defeat the just and valid claim of the company.
[Para 71) (985-E-H; 986-A)
2.4. It is not correct to say that no relief can be
granted to the Company as the Policy has lapsed on
G 31.08.2000. Accepting such a plea would be to put a
premium and accord a justification to the wholly arbitrary
action of the appellant, in not issuing the Notification in
accordance with the provisions contained in Clause 24
of the Industrial Policy, 1995. [Para 72) [986-8-C]
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 935
LTD.
2.5. The assurances given in various meetings were A
reiterated before the High Court in the Affidavit dated
05.12.2000. It was clearly stated that the draft Notification
was being prepared and being approved. It was thus
obvious that the Notification merely had to be published
in the Official Gazette. After making the aforesaid B
statements in the affidavit, order dated 06.01.2001 was
issued. 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 the company as no c
Notification had been issued under Clause 24 cannot be
accepted as the appellant-State'cannot be permitted to
take advantage of its own wrong. The third reason given
is that the State-Level Empowered Committee (SLEC) had
not approved the rehabilitation package. This clearly is
0
against the record. Not only the exemption was
recommended by the competent Committees under the
Industrial Policy, 1995, emphatic assurances were given
that the Notification will be issued within a very short
period. The fourth reason with regard to the resolution E
passed at the Chief Ministers' Conference is equally
extraneous to the issue. The company had made the
application for exemption at a much prior time in 1997.
No material has been placed either before the High Court
or before this Court about the legal enforceability of the
resolutions passed at the Chief Ministers' Conference. F
The decision making process which culminated in
passing of the orders dated 06.01.2001 and 05.03.2001 is
seriously flawed, therefore, the same have been
justifiably quashed by the High Court. [Para 73) [986-E-
H; 987-A-C] G
State of UP and Anr. vs. Dinakar Sinha (2007) 10 SCC
548; Mis. Ve/ji Lakhamsi and Co. and Ors. vs. Mis. Benett
Coleman and Co. and Ors. (1977) 3 SCC 160; District Mining
H
936 . SUPREME. COURT REPORTS [2010) 1 S.C.R.
A Officer and Ors. vs. Tata Iron and Steel Co. and Anr. (2001)
7 sec 358, referred to.
3.1. It would not be possible to accept the plea of the
company that in view of the financial condition of the
company, it may be permitted to retain the amount
8
collected under the orders of Supreme Court. The
amount was collected from the consumer to offset the tax
liability. Such amount cannot be permitted to be retained
by the company. Exemption and refund of tax are two
different legal and distinct concepts. The objective of the
C exemption is to grant incentive to encourage
industrialization. It is to enable the industry to compete
in the market. On the other hand, refund of tax is made
only when it has been realized illegally or contrary to the
provisions of law. Tax lawfully levied and realized cannot
D be refunded. [Para 79] [989-E-G]
3.2. The company has collected more than Rs.60
crores on the sale of cement by virtue of the directions
issued by Supreme Court in the Order dated 18.11.2002.
E The company cannot be permitted to retain the amount
collected from the customers. This would amount unjust
enrichment. Therefore, a direction is required to be
issued that the amount deposited by the company with
the Bank pursuant to the orders of this Court, be released
F to the appellant-State. Even if the delay in issuance of the
exemption Notification by the State has crippled the
company financially, ~hen the company is trying to revive
itself through financial restructuring. The survival of the
company now depends on the approval of the Financial
Restructuring Package prepared by respondent No.2.
G This package has been submitted to the Chief Minister
of Bihar which is still on the consideration of the
Government. [Para 78] [988-G-H; 989-A-D]
3.3. Direction is, therefore, issued that the amount
H deposited by the company in the designated account
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 937
LTD.
opened and operated pursuant to the order of this Court A
dated 18.11.2002 together with accrued interest shall be
released to the appellant-State, forthwith. (Para 80) (989-
H; 990-A)
Prestige Lights Ltd. vs. StateBank of India (2007) 8 SCC B
449; Amrit Banaspati Co. Ltd and Anr. vs. State of Punjab
(1992) 2 sec 411, referred to.
Case Law Reference:
(1956) 1 All ER 256 Referred to. Para 24 c
(1995) 1 sec 214 Referred to. Para 25
(1998) 1 sec 572 Referred to. Para 27
(1986) 2 sec 365_ Referred to. Para 28
D
(2002) 2 sec 188 Referred to. Para 29
(1987) 1 sec 31 Referred to. Para 30
(1996).5 sec 468 Referred to. Para 33
(1997) 3 sec 398 Referred to. Para 36 E
(1997) 1 sec 251 Referred to. Para 35
(~005) 1 sec 625 Referred to. Para 37
(2005) 1 sec 348 Referred to. Para 38
F
(2005) 1 sec 368 Referred to. Para 42
2006) 13 sec 706 Referred to. Para 44
(1976) 3 sec 540 Referred to. Para 45
(2001) 8 sec 449 Referred to. Para 46 G
(1992) 2 sec 411 Referred to. Para 47
(2001) 1o sec 548 Referred to. Para 48
(1977) 3 sec 160 Referred to. Para 49
H
938 SUPREME COURT REPORTS (2010] 1 S.C.R.
A (2001) 1 sec 358 Referred to. Para 50
(1992) Suppl. 1 sec 21 Relied on. Para 64
(2004) 6 sec 465 Relied on. Para 64
(2007) 5 sec 447 Relied on. Para 66
B
(2006) 8 sec 102 Relied on. Para 67
(1979) 2 sec 409 Relied on. Para 68
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
c 5181 of 2002.
From the Judgment & Order .dated 24.4.2002 of the High
Court of Judicature at Patna in C.W.J.C. No. 6838 of 2000.
Dr. Rajiv Dhawan, Dii:iesh Dwivedi, Mohit Kumar Shah,
D Gopal Singh, Ravi Bhushan, Pallavi Mohan for the Appellants.
Ravi Shankar Prasad, Ranjit Kumar (for Suresh A. Shroof
& Co.), Suprarna, Srivastava, Rajiv Ranjan, Sudershini Ray,
Ram Swarup Sharma for the Respondent.
E The Judgment of the Court was delivered by
SURINDER SINGH NIJJAR, J. 1. This appeal has been
filed by the State of Bihar challenging the judgment and order
dated 24.04.2002 of the High Court of Judicature at Patna in
F CWJC No.6838 of 2000, whereby, the High Court has allowed
the writ petition filed by the respondent herein. The respondent
- M/s. Kalyanpur Cement Ltd. (hereinafter referred to as 'the
Company'), is a public sector company incorporated in the year
1937 as a Lime-producing Company. It is engaged in the
G business of cement manufacturing and marketing operations
since 1946. It had commenced production with a capacity of
46000 metric tonnes. It underwent a series of expansion in
1958, 1968 and 1980. Nowadays, the Company is operating
one-million-tonne cement plant. In view of the changes in the
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 939
LTD. [SURINDER SINGH NIJJAR, J.]
technology worl~wide, it has set up a brand new state-of-art 'dry A
process' plant in 1994 at a capital cost of Rs.250-260 crores.
This was made possible with financial assistance of World
Bank and the All India Financial Institutions. Its advisor and
financial collaborator is Holder Bank (HOLCIM) at Switzerland.
The ·Company claims to be one of the very few large scale B
surviving industrial units in the State of Bihar. It is the only large
scale industry in central part of the State. Over 2000 persons
are in the employment of the Company. The Company claims
that due to circumstances beyond its control such as recession
in the cement industry as well as Government related problems; c
delayed decision in granting Sales Tax Deferment benefit the
Company began to suffer heavy losses. This was accentuated
by the non-availability of the sanctioned working capital from
the financial institutions in the absence of the sale tax exemption
under the Industrial Policy, 1995. There was continuous loss in 0
production for a number of years. This has resulted in erosion
of Net-Worth of the Company, as the total Net-Worth of the
Company was less than its accumulated losses in December,
2002, it has registered with Board for Industrial and Financial
Reconstruction (hereinafter referred to as 'BIFR') as a sick unit. E
It has been actually declared as sick Company by BIFR on
28.05.2002. Its reference case is pending with the BIFR. The
Company in order to rehabilitate itself sought the assistance
from financial institutions for restructuring package. The
Company's proposal for financial assistance and restructuring
has been approved by'various financial institutions, in principal. F
However, the same has been made conditional on certain
preconditions being met. One of the conditions imposed by the
financial institutions was that the restructuring package would
be made available only on the Company obtaining a Sales Tax
exemption for a period of 5 years from the State Government, G
in terms of Industrial Policy, 1995. Accordingly, Company
submitted an application to the State Government on
21.11.1997 for grant of Sales Tax exemption under the Industrial
Policy, 1995 for a period of 5 years w.e.f. 01.01.1998.
Thereafter, the matter remained pending for consideration by H
940 SUPREME COURT REPORTS [2010) 1 S.C.R.
A the 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 the necessary Sales Tax exemption
B notification would be issued shortly. However, no such
notification was issued causing great hardship to the Company.
It was, therefore, constrained to file writ petition (CWJC
No.6838 of 2000) in the High Court at Patna.
2. In this writ petition, the prayer was for issuance of the
C writ in the nature of mandamus directing the State of Bihar to
issue necessary Notification under Clause 24 of the 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 the release/publication of the Policy
D in September, 1995. Voluminous record was produced before
the High Court in support of the submission that the Company
is entitled to exemption under the 1995 Policy. The State of
Bihar contested the writ petition by filing a counter affidavit.
Supplementary counter affidavit was filed on behalf of the
E Government through Secretary-cum-Commissioner,
Department of Commercial Taxes (respondent No.4 in the writ
petition) on 05.12.2000. In paragraph 5 of the aforesaid
affidavit it is stated as under:-
F "5. That the Hon'ble Minister, Department of Commercial
Taxes has approved the proposal along with draft.
notification regarding extension of Sales Tax related
incentives to sick industrial units." ·
3. In paragraph 8 of the affidavit it is averred UThat the
G deponent states that it shall be possible to issue necessary
notification after approval of the proposal of the relevant
notification by the Hon'ble Chief (Finance) Minister of the
Cabinet." It is also stated in the affidavit "That the deponent
has further requested the Secretary-cum-Commissioner,
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS94L
LTD. [SURINDER SINGH NIJJAR, J.]
Department of Finance, vide Jette; dated 28.11.2000 to take A
necessary approval earliest as the same has to inform to the
Hon'ble Court. "Thereafter. yet another supplementary counter
affidavit dated 09.01.2001 was filed by Shri Krishan Nand Roy,
Assistant Commissioner. Commercial Taxes, Bihar. In the
affidavit, it was contended that the State Government in a B
meeting under the Chairmanship of the Chief Minister held on
06.01.2001 has decided upon due deliberation not to grant any
Sa,les Tax incentives to sick industrial units. Therefore, the claim
of the Company has been rejected. The four stated reasons
justifying the aforesaid decision were as under:- c
"(1) The period of Industrial Policy 1995 was from
1.9.1995 to 31.8.2000. Therefore, this policy is not
· effeCtive to date.
(2) The question to provide facility to those sick units are D
mentioned in clause 22 of the above policy. No notification
has been issued by the Government to provide facility of
Sales Tax till now, on whose basis, there could be right of
any specialized person/unit to get the facility.
E
(3) So far as the question of applicants' Unit in petition No.
CWJC No.6838/2000 is concerned, his matter has not yet
been approved by the High Level Empowered Committee
under the Chairmanship of Chief Secretary under Clause
22(1) of Industrial Policy, 1995. It is worth mentioning here
that in absence of above mentioned, even approval cannot F
be provided.
(4) Tax reforms at All India Level, which has been
continuing last one year it has been decided at the
conference of Chief Ministers that except States of Special G
Category Sales Tax facility must be ended by rest all other
States. The States would not do this, there could be
possibility of cut down the payable Central Assistance to
those States." ~
H
942 SUPREME COURT REPORTS [2010] 1 S.C.R.
A 4. Therefore, the Company amended the writ petition and
challenged the decision dated 06.01.2001 of the State
Government. It was pleaded by the Company that the grounds
for rejection of the Company's case and non-issuance of the
Notification was not in accordance with law It appears that
B another counter affidavit was filed on 16.02.2001 by respondent
No.4. This was followed by yet another supplementary counter
affidavit filed by Virendra Kumar Singh, Joint Commissioner,
Commercial Taxes, Headquarter, Patna on 02.08.2001. In this
affidavit it was brought to the notice of the Court that the
C decision taken on 06.01.2001 was considered by the Cabinet
in its meeting held on 05.03.2001 wherein it was decided not
to issue any notification for granting any concession/facility to
sick industrial units in the State. This decision was duly
conveyed by letter dated 05.03.2001 to the IDC Bihar, Patna.
In view of the aforesaid decision the Secretary Industries
0
Department rejected the company's application and
communicated the decision to the Company on 14.05.2001.
Both the decisions were sought to be justified by the State
Government.
E 5. The High Court considered the entire issue. The
Company as well as the State made detailed reference to the
documents which were placed on the record. Ultimately, the writ
petition has been allowed. The decisions dated 06.01.2001
and 05.03.2001 have been quashed. Further directions issued
F to the State Government are as follows;
"The concerned departments and organizations are
hereby directed to issue follow up notification to give
effect to the provisions of the policy within one month from
today. After the notification is issued a Committee
G
headed by the Industrial Development Commissioner
would be constituted to evolve suitable measures for
potentially viable non BIFR sick industrial unit (the
present petitioner) and the said Committee would submit
its recommendations before the State Level Empowered
;
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 943
LTD. [SURINDER SINGH NIJJAR, J.]
Committee which in its turn shall place the said A
recommendations before the Government. After
receiving the said recommendations from the State Level
Empowered Committee, the Government shall take final
decision in the matter. The petition is thus allowed."
B .
6. This decision has been challenged by the appellant-
State.
7. At this stage it would be appropriate to notice the orders
passed by this Court during the proceedings. On 18.11,2002,
following directions were issued:- C
"Heard learned counsel for the parties.
As an interim arrangement during the pendency of
this appeal, with a view to protect the interests of either
side, we direct the respondent to deposit an amount
0
equivalent to the sale tax payable by it as and when it' ·
becomes due in an interest bearing account in a
nationalized bank. This amount and the amount accrued
during the pendency of the appeal, shall not be withdrawn
by either side. E
The amount so kept in deposit shall become payable
to the party which ultimately succeeds in this appeal.
The appellants are directed to issue the exemption F
orders and on receipt of such order, the above said amount
shall be deposited. The issuance of the exemption orders
is without prejudice to the case of the parties in this
appeal.
The IA is thus disposed of." G
8: Thereafter IA No.3 of 2006 was filed by the appellant
seeking stay of the judgment of the High Court, it has. been
stated that the application has been necessitated because of
the intervening circumstances and the conduct of the Company. H
944 SUPREME COURT REPORTS (2010] 1 S.C.R.
A It was further stated that pursuant to the direction issued by this
Court on 18.11.2002, the appellant issued Notification No.S0-
174 dated 18.10.2004 granting exemption to the Company. The
Notification was to have effect for five years from the date of
publication in the Official Gazette or till the disposal of the
B Special Leave Petition. The Notification was issued on the
following terms:-
"2. Terms and conditions-
(a) Tax payable by Mis Kalyanpur Cement Ltd. shall be
C deposited per month in an interest-bearing account in a
nationalized bank.
(b) M/s Kalyanpur Cement Ltd. shall provide information
of such bank account to the circle where he is registered.
D (c) Mis Kalyanpur Cement Ltd. shall submit the details
regarding amount of payment in the bank account as
mentioned in para (a) above along with brief abstract each
month.
E 9. Thereafter the appellant requested the company to
comply with the directions of this court. The Company, however,
informed the appellant that it was unable to comply with the
directions because of its 'sickness'. Since the Company failed
to comply with the aforesaid order, a prayer was made for
F recalling the same.
10. The Company in its reply elaborately explained the
efforts being made by the financial institutions to ensure the
survival of the Company. It reiterated that the Company had
acted honestly and in good faith on assurances/approval given
G by the appellant at various stages. The Company continued
with its operation in anticipation of receiving the appellant's
approval at some point of time. Had the appellant not given the
assurances, the Company could have suspended its operation.
The Government gave assurances and granted approval on
H 07.01.1998, 23.01.1998, 12.03.1998, 21.01.1999, 12.07.1999,
. STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 945
LTD. [SURINDER SINGH NIJJAR, J.]
29.10.1999, 02.12.1999, 17.12.1999, 25.01.2000, 31.03.2000, A
29.05.2000 and 30.06.2000. It was also pointed out that even
the officers of the Commercial Taxes Department including
Commissioner, Commercial Taxes to the effect that the
Notification was in the process of being issued. It was also
pointed out that even after the VAT regime being introduced, B
Sales Tax related incentives to industries are being given to
industries by various States. In fact under the Industrial Policy
2003 as well as the Industrial Policy, 2006, Sales Tax incentives
in some form or the other have been retained/provided. It is
further pointed out that the Notification dated 18.10.2004 was c
issued after expiry of two years from the date of the order
passed by this Court. The delayed action of the Appellant
practically crippled the Company financially and jeopardized
efforts for revival as the Sales Tax benefit is crucial for the
Company's revival and continued operations. It is reiterated that D
the Company is entitled to get the benefit under the Industrial
Policy, 1995. With regard to the non-deposit of the "amount
equivalent to the Sales Tax payable by it as and when it
becomes due~ it is stated that the Company had bona fide
opened the Bank account with a Nationalized Bank but could
not deposit the amount equivalent to the Sales Tax due because E ·
of circumstances beyond its control.
11. During the pendency of the Interim Application,
proposal for the approval of the recon~truction package of the
Company was under the active consideration of the State. F
Therefore, the proceedings were adjourned from time to ti[11e.
12. During this period an application was also filed by the
Assets Reconstruction Company (I) Ltd. for being impleaded
as a party. The aforesaid application has been allowed by this G
Court on 04.09.2006 and the applicant has been impleaded
as respondent No.2.
13. We have heard the Counsel for the parties. Dr. Rajiv
Dhawan and Mr. Dinesh Dwivedi, Senior Advocates made the
submissions on behalf of the appellant. Dr. Dhawan submits H
946 SUPREME COURT REPORTS [2010) 1 S.C.R.
A that in the aforesaid judgment the High Court has held that:
i. the petitioner had a right to be granted sales tax
exemption under 1995 Industrial Policy;
ii the decision of 6 January 2001 denying such
B exemption was arbitrary (which was challenged but
alleged not to be on record);
iii. the decision of 5 March 2001 was wrong, even
though not on record and not challenged.
c
14. According to Dr. Dhawan the High Court has wrongly
quashed the order dated 06.01.2001 on the basis that it was
an arbitrary somersault after 05.12.2000. This conclusion is
erroneous as the aforesaid order had given four cogent
reasons in support of the decisions which have been duly
D noticed by the High Court. The aforesaid reasons could not be
said to be extraneous to the decision dated 06. 01. 2001.
Thereafter, it is submitted that the relevant rule/clauses 22 and
24 were wrongly interpreted because it stated "Clause 22.2 of
the policy would come into force after a notification under
E Clause 24 is issued. "The High Court has wrongly held that the
precondition of revival under Clause 22 came into effect after
the final decision under Clause 24. According to the learned
senior counsel the High Court failed to notice that clause 22.2
was about revival of the Company and not just granting Sales
F · Tax exemptions. Furthermore, Clause 22.3 barred exemption/
deferment to be given to such sick and closed industrial units
which have once availed of such facilities in the past. This
Company has availed the deferment in the past and had not
paid the sums due. It is then emphasized that Clause 24 was
G a monitoring Clause, but the time period of one month was
simply a target. Therefore, it was neither mandatory nor
directory.
15. Learned Senior counsel then submitted that the High
H Court has wrongly base<:l its decision on Mangalore Chemical
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 947
LTD. [SURINDER SINGH NIJJAR, J.]
and Fertilizer Ltd. Vs. Deputy Commissioner of Commercial A
Taxes and others, (1992) Suppl. 1 SCC 21. According to Dr.
Dhawan, this case would be inapplicable because in fact, in
that case, prior permission had already been granted. He
further submitted that the High Court wrongly ignored the
significance of the Chief Ministers' Conference although the B
High Court notices the Conferences of the Chief Ministers, it
failed to give sufficient importance to this ,national public policy
aspect emanating from the Conferences between the Chief
Ministers of all States and the Union Government. Dr. Dhawan
further submitted that the High Court has wrongly assumed that c
there was any allurement offered to the Company. In fact the
High Court did not properly apply the doctrine of 'Promissory
Estoppel'. At best the High Court only found a case of possible
intention on the part of the State to grant exemption to the
Company during the limited period from 5th December, 2000 D
to 6th January, 2001. Yet the High Court issued a writ in the
nature of Mandamus directing the State to issue the exemption
notification.
16. In support of his submissions, learned senior counsel
has made detailed reference to the facts and the documents E
. on record. According to him, the facts in this case are not such
as to give rise to a cause of action, relying on the doctrine of
'promissory estoppel'. There is no material on the record to
show that any unequivocal promise was made to the Company
and it had acted on such a promise. All the meetings were only F
exploratory in nature. In any event, no mandamus could have
been issued after the Scheme had lapsed and no default by
the appellant-State has been established. According to the
learned senior counsel, the impugned judgement of the High
Court is wrong in law, in respect of the rules, orders of the State G
and the Scheme of the Industrial Policy. It is also wrong on
facts.
17. Learned Senior counsel relied on number of judgments
in support of the submissions Central London Property Trust,
H
948 SUPREME COURT REPORTS [2010) 1 S.C.R.
A Ltd. Vs. High Trees House, Ltd. (1956) 1 All ER 256; Kasinka
Trading vs. Union of India (19~5) 1 SCC 274; STO vs. Shree
Durga Oil Mills (1998) 1 SCC 572; Baku/ Cashew Co. vs.
STO (1986) 2 SCC 365; Sharma Transport vs. Govt. of AP
(2002) 2 SCC 188; Bannari Amma Sugars Ltd. Vs.
B Commercial Tax Officer (2005) 1 SCC 625 at 637; Shri Baku/
Oil Industries vs. State of Gujarat (1987) 1 SCC 31; Motilal
Padampat Sugar Mills Co. Ltd. Vs. State of UP (1979) 2 SCC
409; DCM Ltd. Vs. Union of India (1996) 5 SCC 468; Shrijee
Sa/es Corpn. Vs. Union of India (1997) 3 SCC 398; Pawan
C Alloys & Castings (P) Ltd. UP SEB (1997) 7 SCC 251.
18. Mr. Dinesh Dwivedi, Senior Advocate submitted that
there are two categories of cases, where incentive is given (i)
to set up or start an industry;(ii) benefits to improve the industry.
The incentive in the second category can be withdrawn as it is
D only an enabling provision. In such circumstances, the Executive
is permitted to resile. Referring to the detailed provisions of the
1995 Policy, he submitted that Clause 16(1) and 16(2) relate
to new unit. 16(3) relates to units undertaking expunction/
diversification. Clause 22.1 relates to industrial sickness in SSI
E sector. Clause 22.2 deals with sickness in large and medium
scale sector. According to him, under this Clause nothing
definite is promised. It permits the Committee to recommend
concessions and facilities for revival of the sick units to the
State-level Empowered Committee (SLEC). Therefore, any
F recommendations made by this Committee cannot be said to
be assurances capable of attracting the doctrine of 'promissory
estoppel'. According to the learned Senior Counsel the entire
matter is covered against the Company by the judgment of this·
Court in M.P. Mathur vs. OTC (2006) 13 SCC 706. Learned
G Senior Counsel also relied on Kasinka Trading (supra) in
support of his submission that clear foundation has to be laid
of the assurance that was given. It is further submitted that the
claim of the Company cannot possibly succeed by invoking the
doctrine of 'promissory estoppel' as the Company has not
H altered its position by relying on the assurances given by the
STArE OF BIHAR & ORS. v. KALYANPUR CEMENTS 949
LTD. [SURINDER SINGH NIJJAR, J.]
appellant~State. Learned counsel then submitted that the A
Company has misunderstood the meaning of exemption. They
are under the impression that they can collect tax and not pay
to the Government. That according to the learned Senior
Counsel is not correct. Exemption simply means that no tax shall
be chargeable on goods. In the affidavit filed in reply to IA No.3, 8
it is admitted by the Company that the tax collected has not
been deposited. Therefore, the Company is in contempt of the
interim orders passed by this Court. The Company is liable to
refund the amount of Rs.60 crores to the Government.
· 19_ Learned Senior counsel submitted that no relief can C
be granted to the Company as it had taken advantage of the
interim order without complying with the preconditions of the
order. In support of this, he relied upon Prestige Lights Ltd. Vs.
State Bank of India, (2007) 8 SCC 449. It is submitted that a
direction ought to be issued to the Company to refund the D
amount of tax collected. He relied on Amrit Banaspati Co. Ltd
and another vs. State of Punjab (1992) 2 SCC 411.. Mr.
Dwivedi, thereafter, submitted that the Policy of granting
exemption had lapsed on 31st August, 2000. Therefore, no
exemption notification could have been issued thereafter. He E
further submits that Industrial Policy, 1995 was only a temporary
scheme, therefore, no benefit could be given after expiry. He
relied on State of UP and another vs. Dinkar Sinha, (2007)
10 SCC 548; Mis. Velji Lakhamsi and Co. and others vs. Ml
s. Benett Coleman and Co. and others (1977) 3 SCC 160; F
District Mining Officer and others vs. Tata Iron and Steel Co.
and another (2001) 7 sec 358.
20. Mr. Ravi Shankar Prashad, Senior Advocate
appearing for the respondent No.1 submitted that the Company
is only the large scale industry left in the State of Bihar. In the G
1990s, the cement industry was in a bad state, as the
expectations of the Government of increase in demand did not
fructify. The Company is a viable unit. It has been made sick
by the ir,iaction of the Government. He further submitted that the
H
950 SUPREME COURT REPORTS [2010] 1 S.C.R.
A exemption has been duly recommended by the Committee
under Clause 22.2(i). It cannot be denied the benefit on the
basis of Clause 22(3). At the time when earlier benefits were
given the Company was not sick. It would be entitled to the
benefit in view of Clause 22(1)(vi). According to the learned
8 Senior counsel, the Company has gone into a whirlpool as the
rehabilitation package has not been given as the Government
has not issued the exemption notification under Clause 24 of
the Industrial Policy, 1995. Relying on the facts and figures on
the record, it is submitted that the Company would be able to
C clear its liability within a short period. He further submitted that
the doctrine of 'promissory estoppel' is fully applicable in the
facts of this case. The unequivocal representation is contained
in the Industrial Policy, 1995. This representation is further
reinforced in the documents which have been relied upon by
the Company. According to him, the eligibility of the Company
D for exemption is not doubted. In the proceedings before the High
Court, the appellants had filed an affidavit admitting that the draft
notification has been prepared and it is only to be gazetted.
This affidavit was filed after the expiry of the Industrial Policy,
1995. Therefore, it cannot now be submitted by the appellant
E that no exemption could be granted since the Policy had
lapsed. Learned senior counsel further submitted that for three
years the State Government had issued assurances that the
notification would be duly issued. The financial institutions had
also approved the rehabilitation package, in principal, provided
F the State Government granted the necessary Sales Tax
exemption. It is, therefore, not open to the appellant to submit
that the Government can now resile from the promise.
According to him, that the justification with regard to the
discontinuation of the Sales tax related concessions/
G exemptions consequent upon introduction of the VAT regime
is without any basis. These incentives are continuing even under
the Industrial Policy, 2003 and 2006. It was for these reasons
that the High Court set aside the decisions dated 06.01.2001
and 05.03.2001. Mr. Prasad further submits that by now it is
H settled that promissory estoppel gives a cause of action and
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 951
LTD. [SURINDER SINGH NIJJAR, J.]
also preserves a right. The action of the appellants in passing A
the impugned orders is arbitrary and whimsical. It cannot be
supported on any of the four reasons mentioned in the Order
dated 06.01.2001. In support of its submissions, the Learned
Senior counsel relied on Mangalore Fertilizer (supra), Union
of India and Others vs. Godfrey Philips India Ltd. (1985) 4 B
. SCC 369; State of Punjab vs. Nestle India Ltd. and another
(2004) 6 SCC 465; Southern Petrochemical Industries Co. Ltd.
vs. Electricity Inspector & ETIO and others (2007) 5 SCC 447;
MRF Ltd., Kottayam vs. Asstt. Commissioner (Assessment)
Sales Tax and others (2006) 8 SCC 702; Amrit Banaspati C
(supra). Relying on the aforesaid judgments, it is submitted that
the High Court has estopped the appellant State Government
from hiding behind the technicality and deny the Sales Tax
exemption to respondent No.1 under the Industrial Policy, 1995.
It is further submitted that during the pendency of appeal before 0
this Court the Company had submitted a modified package to
the State Government in October, 2006. This was rejected by
the Government vide order dated 12th March, 2007, the
proposal was rejected only on the ground that the Company has
huge liability amounting to Rs.314.12 crores. According to Mr. E
Ranjit Singh, the aforesaid figure is not a correct present figure
of the financial status of the Company making detailed figures
to certain facts and figures. He further submitted that the total
amount due from the Company is Rs.46.81 crores out of which
it is eligible to a relief of Rs.30.04 crores under notification F
No.24 dated 27.07.2006. The Company is, therefore, viable.
The modified package has been arbitrary rejected by the
appellants.
21. Mr. Ranjit Singh appearing for respondent N0.2
submits that under the SARFAESI Act, the secured creditor · G
Assets Reconstruction Company (I) Ltd.- respondent No.2 is
now the lender instead of the financial institution. Aim of
respondent No.2 is to revive the Company by reconstruction. It
was submitted that the Company is a 'sick company' registered
with the BIFR under the Sick Industrial Companies (Special H
952 SUPREME COURT REPORTS (2010) 1 S.C.R.
A Provisions) Act, 1985 and undergoing a process of
restructuring. The Company's proposal for financial assistance
and restrueturing was earlier approved by the financial
institutions, namely, IFCI IDBI, ICICI and llBI in the year 1998
subject to the condition of grant of Sales Tax exemption for a
B period of 5 years in terms of the Industrial Policy, 1995 of the
Government of State of Bihar. Respondent No.2 is a
Securitization and Reconstruction Company established under
Section 3 of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 with the
c mandate to assist the Banks and financial institutions in
reducing Non-Performing Assets (NPA) by adopting method for
recovery or reconstruction. As such it has been assigned the
loan outstandings of a number of financial institutions noted
above. Now it is a secured creditor to the extent of
approximately 94.2% of the total secured debt of the Company.
0
Therefore, respondent No.2 being an assignee of the
outstanding is committed to the rehabilitation and revival of the
Company. The Company has already filed a Scheme of
Arrangement under Section 391 of the Companies Act, 1956
for revival of the Company. The Scheme has the support of
E respondent No.2. However, the Scheme is pending approval
as it is based on certain relief and concessions to be granted
to the Company by the State Government. One such
concession is the Sales Tax exemption to be given by the State
Government. The claim made by the Company with regard to
F being one of the most modernized and efficient cement plants
is reiterated. It is further stated that the plant has a capacity of
about 10 lac tonnes per annum at Rohtas District of the State.
It is further pointed that the main reason for the sickness of the
Company has been the industry and region specific
G externalities. It is submitted that the viability studies conducted
by the specialized agencies have confirmed the Company's
viability and ability to convert its Net-Worth into positive and
repay back Government due another term loan within 8 to 10
years. It is further submitted that any change in the Sales Tax
H exemption would adversely affect the implementation of the
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 953
LTD. [SURINDER SINGH NIJJAR, J.]
proposed Scheme. However, the modified revival package A
which was given to the Government has been arbitrarily
rejected. ·
22. We have considered the submissions made by the
learned counsel for the parties. B
23. 'Ne have considered the detailed facts and relevant
documents which are on the record. However, in our opinion,
before we consider the submissions made on the factual
situation of this case, it would be appropriate to consider the
primary issue as to whether the Company could have invoked C
the principle of 'promissory estoppel' in support of its claim.
24. It is well-known that the doctrine of promissory estoppel
has been recognized and enforced in the Courts in England for
a considerable period of time. The principle of 'promissory D
estoppel' was stated by Denning, J in the oft-quoted judgment
in Central London Property Trust Ltd. v. High Trees House,
Ltd. (1956) 1 All ER 256. In this matter the landlords had let a
new block of flats in 1957 to the tenants on a 90-99 lease at a
ground rent of ?2500 (Pound Sterling). However, in view of war E
time conditions and without consideration, as a result of
discussions, an arrangement was made between the parties
to reduce the ground rent to ?1,250 for the years 1941, 1942,
1943 and 1944 the tenants paid the reduced rent. At the end
of the war in September, 1945, the landlord, however, claimed
F
that the original ground rent reserved under the lease had to
be paid. The landlord also claimed arrears for the years when
the reduced rent was paid in the sum of ?7916. No payment
was received. The landlord, therefore, brought an action to test
the proposition of law. The Court notices the plea of the tenant
as follows -"The tenants said first that the reduction of ?1,250 G
was to apply throughout the tenn of ninety-nine years, and that
the reduced rent was payable during the whole of that time.
Alternatively, they said that was payable up to Sept.24, 1945,
when the increased rent would start." Upon consideration of the
entire issue, it is observed by Denning, J as follows:- H
954 SUPREME COURT REPORTS [2010] 1 S.C.R.
A "If I consider this matter without regard to recent
developments in the law there is no doubt that the whole
claim must succeed ....... "
"As to estoppel, this representation with reference to
reducing the rent was not a representation of existing fact,
B
which is the essence of common law estoppel; it was a
representation in effect as to the future - a representation
that the rent would not be enforced at the full rate but only
at the reduced rate ........ "So at common law it seems to
me there would be no answer to the whole claim. "
c
"What, then, is the position in view of developments in the
law in recent years? The law has not been standing still
even since Jorden v. Money (1854) (5 HL Cas. 185). There
has been a series of decisions over the last fifty years
D which, although said to be cases of estoppel, are not really
such. They are cases or promises which were intended to
create legal relations and which, in the knowledge of the
person making the promise, were going to be acted on
by the party to whom the promise was made, and have
E been so acted on. In such cases the Courts have said
these promises must be honoured."
"I am satisfied that the promise was understood by all
parties only to apply in the conditions prevailing at the time
of the flats partially let, and the promise did not extend any
F further than that."
25. The doctrine of promissory estoppel as developed in
the administrative law of this country has been eloquently
explained in Kasinka Trading v. Union of/ndia (1995) 1 SCC
G 274 by Dr. A.S. Anand, J, in the following words:-
"11. The doctrine of promissory estoppel or equitable
estoppel is well established in the administrative law of the
country. To put it simply, the doctrine represents a principle
evolved by equity to avoid injustice. The basis of the
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 955
LTD. [SURINDER SINGH NIJJAR, J.]
doctrine is that where any party has by his word or conduct A
made to the other party an unequivocal promise or
representation by word or conduct, Which is intended to
create legal relations or effect a legal relationship to arise
in the future, knowing as well as intending th'Eit'-lhe
~ '
representation, assurance or the promise would be acted B
upon by the other party to whom it has been made and has
in fact been so acted upon by the other party, the promise,
assurance or representation should be binding on the
party making it and that party should not be permitted to
go back upon it, if it would be inequitable to allow him to c
do so, having regard to the dealings, which have taken
place or are intended to take place between the parties."
"12. It has been settled by this Court that the doctrine of
promissory estoppel is applicable against the Government
also particularly where it is necessary to prevent fraud or D
manifest injustice. The doctrine, however, cannot be
pressed into aid to compel the Government or the public
authority "to carry out a representation or promise which
is contrary to law or which was outside the authority or
power of the officer of the Government or of the public E
authority to make". There is preponderance of judicial
opinion that to invoke the doctrine of promissory estoppel
clear, sound and positive foundation must be laid in the
petition itself by the party invoking the doctrine and that
I
bald expressions, without any supporting material, to the F
effect that the doctrine is attracted because the party
invoking the doctrine has altered its position relying on the
assurance of the Government would not be sufficient to
press into aid the doctrine. In our opinion, the doctrine of
promissory estoppel cannot be invoked in the abstract and G
the courts are bound to consider all aspects including the
results sought to be achieved and the public good at large,
because while considering the applicability of the doctrine,
the courts have to do equity and the fundamental principles
of equity must for ever be present to the mind of the court, H
956 SUPREME COURT REPORTS [2010] 1 S.C.R.
A while considering the applicability of the doctrine. The
doctrine must yield when the equity so demands if it can
be shown having regard to the facts and circumstances of
the case that it would be inequitable to hold the
Government or the public authority to its promise,
B assurance or representation."
26. In our opinion, the aforesaid statement of law covers
the submissions of Dr. Dhawan and Mr. Dwivedi that in order
to invoke the aforesaid doctrine, it must be established that (a)
that a party must make an unequivocal promise or
C representation by word or conduct to the other party (b) the
representation was intended to create legal relations or affect
the legal relationship, to arise in the future (c) a clear foundation
has to be laid in the petition, with supporting documents (d) it
has to be shown that the party invoking the doctrine has altered
D its position relying on the promise (e) it is possible for the
Government to resile from its promise when public interest
would be prejudiced if the Government were required to carry
out the promise (f) the Court will not apply the doctrine in
abstract. However, since the judgments have been cited, we
E may notice the law laid down therein.
27. In STO vs. Durga Oil Mills (1998) 1 SCC 572 it was
held that "Moreover, as it has been noted earlier that the IPR
itself had not granted any exemption but had indicated that
F orders will be issued by various departments for granting the
exemptions. The exemption order under Sales Tax could only
be issued under Section 6 which could be amended or
withdrawn altogether. This is expressly provided by Section 6.
If the respondent acted on the basis of a notification issued
G under Section 6 it should have known that such notification was
liable to be amended or rescinded at any point of time, if the
Government felt that it was necessary to do so in public
interest."
28. In Baku/ Cashew Co. v. STO (1986) 2 SCC 365 "In
H cases of this nature the evidence of representation should be
STATE OF BIHAR & ORS. v. !<ALYANPUR CEMENTS 957
LTD. [SURINDER SINGH NIJJAR, J.)
clear and unambiguous. It "must be certain to every intent". The A
statements that are made by ministers at such meetings, such
as, "let us see'', "we shall consider the question of granting of
exemption sympathetically", "we shall get the matter examined,"
"you have a good case for exemption" etc. even if true, cannot
form the basis for a plea of estoppel." B
29. In Sharma Transport v. Govt. of AP (2002) 2 SCC 188
it is observed that 'There is preponderance of judicial opinion
that to invoke the doctrine of promissory estoppel, clear, sound
and positive foundation must be laid in the petition itself by the C
party invoking the doctrine and that bald expressions, without
any supporting material, to the effect that the doctrine is
attracted because the party invoking the doctrine has altered
its position relying on the assurance of the Government would
not be sufficient to press into aid the doctrine."
D
30. In Shri Baku/ Oil Industries vs. State of Gujarat, this
Court held that "Viewed from another perspective, it may be
noticed that the State Government was under no obligation to
grant exemption from sales tax. The appellants could not,
therefore, have insisted on the State Government granting E
exemption to them from payment of sales tax. What
consequently follows is that the exemption granted by the ·
Government was only by way of concession. Once this position
emerges it goes without saying that a concession can be
withdrawn at any time and no time limit can be insisted upon F
before the concession is withdrawn. The notifications of the
Government clearly manifest that the State Government had
earlier granted the exemption only by way of concession and
subsequently by means of revised notification issued on July
17, 1971, the concession had been withdrawn. As the State G
Government was under no obligation, in any manner known to
law, to grant exemption it was fully within its powers to revoke
the exemption by means of a subsequent notification. This is
an additional factor militating against the contentions of the
appellants."
H
958 SUPREME COURT REPORTS [2010] 1 S.C.R.
A 31. In Motilal Padampat Sugar Mills Co. Ltd. vs. State of
UP (1979) 2 SCC 409, it is held that "we do not think it is
necessary, in order to attract the applicability of the doctrine of
promissory estoppel, that the promisee, acting in reliance on
the promise, should suffer any detriment. What is necessary is
B only that the promisee should have altered his position in
reliance on the promise ... "
"But it is necessary to point out that since the doctrine of
promissory estoppal is an equitable doctrine, it must yield when
C the equity so requi.res. 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 an equity in favour of the promisee
and enforce the promise against the Govenrment. The doctrine
of promissory estoppel would be displaced in such a case
0
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 since the making of the promise, public
interest would be prejudiced if the Government were required
E 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 alter
his position and the public interest likely to suffer if the promise
were required to be carried out by the Government and
F 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."
G
In the same paragraph it is further observed that:-
"24 ........ the Government cannot, as Shah,J., pointed out
in the lndo-Afghan Agencies case, claim to be exempt
from the liability to carry out the promise "on some
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 959
LTD. [SURINDER SINGH NIJJAR, J.]
indefinite and undisclosed ground of necessity or A
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 B
which the Government claims to be exempt from the liability
and 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 C
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 o
proper 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 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 E
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
F
Court would insist on a highly rigorous standard of proof
in the discharge of this burden"
32. It is further held that "Lastly, a proper reading of the
observation of the Court clearly shows that what the Court G
intended to say was that where the Government owes a duty
to the public to act differently, promissory estoppel cannot be
invoked to prevent the Government from doing so. This
proposition is unexceptionable, because where the Government
owes a duty to the public to act in a particular manner, and here H
960 SUPREME COURT REPORTS [2010] 1 S.C.R.
A obviously duty means a course of conduct enjoined by law, the
doctrine of promissory estoppel cannot be invoked for
preventing the Government from acting in discharge of its duty
under the law. This doctrine of promissory estoppel cannot be
applied in teeth of an obligation or liability imposed by law."
B
33. In DCM Ltd. vs. Union of India (1996) 5 SCC 468,
this Court reiterated that "It is well settled that the doctrine of
promissory estoppel represents a principle evolved by equity
to avoid injustice and, though commonly named promissory
estoppel, it is neither in the realm of contract nor in the realm
C of estoppel. The basis of this doctrine is the inter-position of
equity which has always proved to its form, stepped in to
mitigate the rigour of strict law. It is equally true that the doctrine
of promissory estoppel is not limited in its application only to
defence but it can a~o find a cause of action. This doctrine is
D applicable against the Government in the exercise of its
governmental public or executive functions and the doctrine bf
executive necessity or freedom of future executive action,
cannot be invoked to defeat the applicability of this doctrine. It
is further well established that the doctrine of promissory
E estoppel must yield when the equity so requires. If it can be
shown by the Government or public authority that having regard
to the facts as they have transpired, it would be unequitable to
hold the Government or public authority to the promise or
representation made by it, the court would not raise an equity
F in favour of the person to whom the promise or representation
is made and enforce the promise or representation against the
Government or public authority. The doctrine of promissory
estoppal would be displaced in such a case because on the
facts, equity would not require that the Government or public
G authority should be held bound by the promise or representation
made by it."
34. In Shrijee Sa/es Corpn. Vs. Union of India (1997) 3
sec 398 it was held that "It is not necessary for us to go into
a historical analysis of the case - law relating to promissory
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 961
LTD. [SURINDER SINGH NIJJAR, J.]
estoppel against the Government. Suffice it to say that the A
principle of promissory estoppel is applicable against the
Government but in case there is a supervening public equity,
the Government would be allowed to change its stand; it would
then be able to withdraw from representation made by it which
induced persons to take certain steps which may have gone B
adverse to the interest of such persons on account of such
withdrawal. However, the Court must satisfy itself that such a
public interest exits."
35. In Pawan Alloys & Casting (P) Ltd. v. UP SEB (1997) C
7 SCC 251 it is held that "(31). The appellants will not be able
to enforce the equity by way of promissory estoppel against the ·
Board if it is shown by the Board that public interest required it
to withdraw this incentive rebate even prior to the expiry of three
years as available to the appellants concerned. It has also to
be held that even if such withdrawal of development rebate D
. prior to three years is not based on any overriding public
interest, if it is shown that by such premature withdrawal the
appellant-promisees would be restored to status quo ante and
would be placed in the same position in which they were prior
to the grant of such rebate by earlier notifications the appellants E
would not be entitled to succeed."
36. In Shreeji Sales Corpn. (supra) it is also held that
"However, in the present case, there is a supervening public
interest and hence it should not be mandatory for the F
Government to give a notice before withdrawing the
exemption."
37. In Bannari Amman Sugars Ltd. vs. Commercial Tax
Officer (2005) 1 sec 625 it is observed that "We find no
substance in the plea that before a policy decision is taken to G
amend or alter the promise indicated in any particular
notification, the beneficiary was to be granted an opportunity
of hearing. Such a plea is clearly unsustainable. While taking
policy decision, the Government is not required to hear the
H
962 SUPREME COURT REPORTS (2010] 1 S.C.R.
A persons who have been granted the benefit which is sought to
be withdrawn."
38. In Rom Industries Ltd. vs. State of J&K, (2005) 7 SCC
348 this Court held that "We are not prepared to hold that the
government policy by itself could give rise to any promissory
8
estoppel in favour of the appellants against the respondents
since the policy itself made it absolutely clear that if would come
into effect only on appropriate notification being issued. The
notification was issued in exercise of the admitted powers of
the State Government under the State General Sales Tax Act.
c The State Government having power and competent to grant
the exemption was equally empowered to withdraw it. As we
have also noticed there was nothing either in the notification
or in the policy which provided that the Negative List would not
be amended or altered. On the contrary clause (vii) of para 7
D to GO No.10of1995 expressly reserved the Government's right
to amend the Negative List. The right if any of the appellants
was a precarious one and could not found a claim for
promissory estoppal."
E 39. Both the learned Senior counsel had also emphasized
that there is a distinction between cases (a) where a policy
automatically applies subject to eligibility [e.g. Pawan alloys
(supra)] (b) where the idea was to allure people and all persons
who set up industries were entitled to an exemption; and (c)
F where the exemption would apply only after a considered
decision is taken to consider eligibility and worthiness [e.g.
Rom Industries (supra)].
40. According to the learned Senior counsel there is also
a distinction between cases where (a) an exemption is granted
G but taken away prematurely (e.g. Pawan Alloys (supra)]; (b) an
exemption is to be given after due consideration. Thus, in the
present appeal, the promise would be considered to be made
only when a decision is actually made by the empowered
authority after being satisfied that the revival of the Company
H was possible.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 963
LTD. [SURINDER SINGH NIJJAR, J.)
41. The learned Senior counsel also placed reliance on A
Sharma Transport (supra) wherein it was held that "It is equally
settled law that the promissory estoppel cannot be used to
compel the Government or public authority to carry out a
representation or promise which is prohibited by law or which
was devoid of the authority or power of the officer of the B
Government or the public authority to make."
42. Learned Senior counsel also relied on the decision in
State of Jharkhand vs. Ambay Cements (2005) 1 SCC 368,
in support of his submission where promissory estoppel applies . C
only where a person is eligible consistent with the purpose for
which the policy was made. In that case, it was held that "In our
view, the conditions prescribed by the authorities for grant of
exemption are mandatory for availing the exemption and the
High Court exercising jurisdiction under Article 226 of the
Constitution cannot direct the grant of exemption in favour of D
the respondent overlooking the statutory conditions prescribed
for such grant and that too in the absence of any challenge to
the validity of such conditions."
43. In addition Mr. Dwivedi, learned Senior counsel relied E
on a number of other decisions which we may notice.
44. lri M.P. Mathur (supra), wherein this Court reiterated
that in order to invoke the doctrine of promissory estoppel clear,
sound and positive foundation must be made in the petition
itself by the party invoking the doctrine and bald expressions F
without any supporting material would not be sufficient.
45. In Excise Commissioner vs. Ram Kumar (1976) 3
SCC 540 this Court reiterated that "it is now well settled by a
catena of decisions that there can be no question of estoppel G
against the Government in the exercise of its legislative,
sovereign or executive powers."
46. With respect to the submissions made by the learned
Senior counsel on IA No.3 reliance is placed on Prestige Lights H
964 SUPREME COURT REPORTS (2010] 1 S.C.R.
A (supra), wherein this Court reiterated the principle that the Court
may refuse to hear the parties on merits who has violated the
directions issued by the Court. Since not hearing a party on
merits is a "drastic step" it should not be taken except in grave
and extraordinary situations, "but sometimes such an action
B is needed in the larger interest of justice when a party
obtaining interim relief intentionally and deliberately flouts
such order by nor abiding by the terms and conditions on
which a relief is granted by the court in his favour."
47. In Amrit Banaspati (supra), it is observed that "But
C promissory estoppel being an extension of principle of equity,
the basic purpose of which is to promote justice founded on
fairness and relieve a promisee of any injustice perpetrated due
to promiser's going back on its promise, is incapable of being
enforced in a court of law if the promise which furnishes the
D cause of action nor the agreement, express or implied, giving
rise to binding contract is statutorily prohibited or is against
public policy."
"11. Exemption from tax to encourage
E industrialization should not be confused with refund of tax.
They are two different legal and distinct concepts. An
exemption is a concession allowed to a class or individual
from general burden for valid and justifiable reason."
"12. But refund of tax is made in consequence of
F excess payment of it or its realization illegally or contrary
to the provisions of law. A provision or agreement to
refund tax due to realize in accordance with law cannot be
comprehended. No law can be made to refund tax to a
manufacturer realized under a statute. It would be invalid
G and ultra vires."
48. In the case of Dinakar Sinha (supra), this Court
observed that "31. The 1973 Rules was a temporary statute. It
died its natural death on expiry thereof. The 1980 Rules does
H not contain any repeal and saving clause. The provisions of the
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 965
LTD. [SURINDER SINGH NIJJAR, J.)
relevant provisions of the General Clauses Act will, thus, have A
no application. Once a statute expires by efflux of time, the
question of giving effect to a right arising thereunder may nor
arise .... "
49. In Mis. Bennett Coleman (supra), this Court held that B
"This pivotal point canvassed by the learned Counsel for the
appellants though it looks attractive at first sight cannot stand
a close scrutiny. It is true that the offences committed against
a temporary statute have, as a general rule, to be prosecuted
and punished before the statute expires and in the absence of
a special provision to the contrary, the criminal proceedings C
which are being taken against a person under the temporary
statute will ipso facto terminate as soon as the statute expires.
But the analogy of criminal proceedings or physical constraint
cannot, in our opinion, be extended to rights and liabilities of
the kind with which we are concerned here for it is equally well D
settled that transactions which are concluded and completed
under the temporary statute while the same was in force often
endure and continue in being despite the expiry of the statute
and so do the rights or obligations acquired or incurred
thereunder depending upon the provisions of the statute and E
nature and character of the rights and liabilities."
50. In District Mining Officer (supra), this Court observed
that "A statute can be said to be either perpetual or temporary.
It is perpetual when no time is fixed for its duration and such a F
statute remains in force until its repeal, which may be express
or implied. But a statute is temporary when its duration is only
for a specified time and such a statute expires on the expiry of
the specified time, unless it is repealed earlier. The relevant
provisions of the different State laws relating to cesses or taxes G
on minerals having been deemed to have been enacted by
Parliament and having been deemed to have been enacted by
. Parliament and having been deemed to have remained in force
up to the 4th day of April, 1991 under the Validation Act, those
laws relating to cesses or taxes on minerals must be held to
H
966 SUPREME COURT REPORTS [2010] 1 S.C.R.
A be temporary statutes in the eye of law. Necessarily, therefore,
its life expired and it would be difficult to conceive that
notwithstanding the expiry of the law itself, the collecting
machinery under the law could be operated upon for making
the collection of the cess or tax collectable upto 4.4.1991.
B Admittedly, to a temporary statute, the provisions of Section 6
of the General Clauses Act, 1897 will have no application."
51. Let us now examine the factual situation in the light of
the observations made by this Court in various judgments relied
upon by the learned counsel for the parties.
c
52. 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 the
aforesaid Policy to exemption for 8 years, it made an
D 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.
E It was observed as follows:-
"lt was felt that the Company is potential sick unit and is fit
for consideration for exemption from payment of Sales Tax
for a period of 5 years from 1.1.1998.
F The Committee recommended that as per the
provision of Industrial Policy 1995 the Sales Tax exemption
on finished products can be granted to Mis. Kalyanpur
Cement Ltd. for a period of five years from 1.1.1998 to
31.12.2002 to improve liquidity of the Company for its
G rehabilitation and sound financial position and decided to
put up the case in the meeting of the High Empowered
Committee under the Chainnanship of the Chief Secretary
for final decision."
53. In a meeting held on 23.01.1998 it was noticed that
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 967
LTD. [SURINDER SINGH NIJJAR, J.]
the Company has been provided the facility of deferment of A
commercial taxes on two earlier occasions. The deferred
amount is being repaid even though payment of the unit is not
up-to-date. It was also accepted that the benefits under the
Industrial Policy, 1995 which are to be given to the new units
are also to be given to sick and closed units. However, it was B
observed that the opinion of the Advocate General should be
taken as to whether any amendment is required in the Sales
Tax rules. In an another meeting held on the same date i.e. on
12th March, 1998 the reconstruction proposal of the Company
was again considered in a meeting of the High Level c
Authorisation Committee (HLAC) held under the Chairmanship
of the Chief Secretary. In this meeting, it was noticed that the
Company is running in losses. The main reason for the present
position of the Company is sluggishness in the cement market.
The Company had, therefore, made an application for Sales D
Tax exemption from 01.01.1998 to 31.12.2002 under the
Industrial Policy, 1995. Upon consideration and discussion, it
was decided that before exempting the Company from Sales
Tax, opinion of Advocate General should be taken as to
whether any amendment is required in the Bihar Finance Act. E
Subsequently, the Advocate General opined that no
amendments are required in the Bihar Finance Act, 1981 and
that the exemption can be considered for a class of dealers
i.e. sick units in terms of Section 7(3)(b) of that Act.
54. In an another meeting held on 12.07.1999 at IFCI Head F
Office, New Delhi, the representatives of the State Government
clearly stated that the Government of Bihar was committed to
the revival of industry in the State in general and that of ACL in
particular as it was located in one of the backward districts of
Bihar and provided direct employment to over 2000 persons. G
With regard to the Sales Tax exemption it was stated that the
legal opinion of the Advocate General, Bihar had already been
obtained and the final decision of the Cabinet sub-Committee
is expected within 2-3 months' time. The Indian promoters of
the Company had been invited to join the meeting and were H
968 SUPREME :".QURT REPORTS [2010] 1 S.C.R.
A requested to respond to the observations of the participants. It
was explained on behalf of the Company that although the
performance of the Company was consistently above the rated
capacity, it had not been able to achieve optimum level of
operations mainly due to lack of adequate working capital.
B Since the promoters were not to bring any further funds, most
of the required amount would have to be met out of the
proposed funding and expected Sales Tax exemption. In the
summary record of the proceedings of the Joint Meeting, it was
recorded that "there was further discussion amongst the
c participants and there was a general consensus that a
restructuring package would be necessary for ensuring the
revival of KCL and accordingly, KCL be advised to submit, at
the earliest, a revised restructuring proposal with a cut off date
of 31.12.1999 ...... ". "It was considered necessary to stipulate
preconditions such as the State Government of Bihar granting
0
the Sales Tax exemption and renewal/revalidation of the mining
leases for the proposed restructuring packages, as and when
sanctioned."
54. Thereafter, the representatives of the Company were
E 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.
F Accordingly, a revised restructuring proposal was formulated
by the Industrial Finance Corporation of India Ltd. (hereinafter
referred to as 'IFCI'). In this meeting of the representative of
the State Government mentioned that the legal opinion of the
Advocate General Bihar has been obtained. However, decision
G of the Sales Tax exemption proposal had been held up due to
the Election. It was now expected to be taken up in December,
1999. The financial institutions stated that they would consider
granting reliefs only after grant of Sales Tax exemptions by the
State Government of Bihar.
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 969
LTD. [SURINDER SINGH NIJJAR, J.]
55. Thereafter by letter dated 02.10.1999, the State A
Government informed the financial institutions as under:-
'The State Government has since decided to notify the
provisions of providing Sales Tax benefits to "Sick Units"
and potentially viable non-BIFR sick units in the meeting 8
of the Economic Sub-Committee held on November
30, 1999. We shall forward a copy of the notification as
soon as it is gazetted .... "
56. From the above it becomes apparent that the State
Government had been consistently giving assurances not only C
to the Company but also to the financial institutions that the
necessary Sales Tax exemption notification will be issued. In
our opinion the Company had laid a clear, sound and a positive
foundation for invoking the doctrine of 'promissory estoppel'.
Therefore, it is not possible to accept the submissions made D
by Dr. Dhawan and Mr. Dwivedi that no definite promises were
ever made. This, however, is not the end of the matter.
57. Even in the meeting held on 17.12.1999 under the
Chairmanship of the Minister for Water Resources and Industry, E
Bihar the problems being faced by the Company were
discussed. It was pointed out by the Industrial Development
Commissioner that future of thousands of people is linked with
the Company and, therefore, positive cooperation of financial
institutions/bank is desirable for its rehabilitation. The Chairman
F
of the Company was invited to apprise the meeting of the
financial and other difficulties. It was accepted by the whole-
time Director of IFCI, Mr. Ganguly that the financial institutions
have always been supporting the Company and will support in
the future. It was also stated by him that in the Industrial Policy,
1995 there is a provision of giving Sales Tax exemption for 8 G
years to a sick company. However, the Company had asked
for the above facility only for 5 years. So far as the viability of
the Company is concerned, it was stated to have already been
established. After hearing all the concerned parties, the Minister
mentioned that the Government of Bihar is very keen for H
970 SUPREME COURT REPORTS [2010] 1 S.C.R.
A rehabilitation of the Company and that all possible support will
be provided for implementation of the rehabilitation package
prepared by financial institutions. So far as the Sales Tax relief
is concerned, it was stated that "a decision will be taken in a
day or two and the notification relating therewith will be issued
B by 2nd week of January, 2000 .... ". With this assurance a
consensus had emerged among the financial institutions and
the Banks that if the Government implements the Industrial
Policy, 1995 in its true spirit particularly on the issue relating
to deferment/ exemption Sales Tax, the financial institutions and
c Banks will give their full cooperation. A number of very important
decisions were taken in the aforesaid meeting. Decision No.4
was that "State Government will ensure that the notification
regarding Sales Tax exemption is issued by the 2nd week of
January, 2000".
D 58. On 25th January, 2000, the State Government informed
the lead institution (IFCI) that the matter was discussed in the
Cabinet Sub-Committee and draft notification was approved
therein. It was further pointed out that due to ensuing Assembly
Elections, it was being examined whether it was a violation of
E Model Code of Conduct or not. Once it is sorted out, action will
be taken in this regard. Again vide letter dated 31.03.2000, the
State Government informed the IFCI that the matter was
delayed due to election and the necessary notification shall be
issued soon. There was another meeting held on 29.05.2000
F under the Chairmanship of the Minister of Industries on
problems faced by the Company. The meeting recorded as
follows:-
"After intense discussion in the meeting, the following
decisions were taken:
G
1. Under the Industrial Policy, 1995 the Commercial
Tax Department shall immediately issue the
matching notification to provide the facility of
exemption/deferment from Sales Tax to- be
H potentially sick and closed units.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 971
LTD. [SURINDER SINGH NIJJAR, J.]
2. The Forest and Environment Deptt. Will take A
necessary steps immediately to take out the
Limestone bearing areas from the Kaimur Wild Life
Sanctuary and for grant of Mining Leases to KCL
so that the Limestone availability to the Company
is ensured uninterruptedly and thousands of 8
workers working are saved from unemployment
(given Forest and Environment Deptt.)"
59. All the aforesaid material would be leading to a
conclusion that the Company as well as the financial institutions
were entitled to rely upon the repeated assurances given by the C
State Government. However, since the promised notification
was not forthcoming, the Company was constrained to file the
writ petition.
60. Before the High Court the Company had claimed that D
it was eligible to avail Sales Tax incentive for a period of 8 years
under clause 22(ii) of the 1995 Policy. This incentive was
necessary for the revival of the Unit. It has been found to be
eligible for exemption at the highest level of the Government.
The State Government had held out clear and unequivocal E
assurances and promises to the Company as also the financial
institutions with the necessary Notification under Clause 24 of
the Industrial Policy, 1995 would be issued. The assurances/
promises are contained in official documents. It was, therefore, /
submitted that the Government cannot be permitted to resile
F
from the representations.
61. During the course of the proceedings in the writ
petition, the State Government in its supplementary affidavit
dated 05.12.2000 filed on behalf of respondent No.4 (i.e.
Secretary-cum-Commissioner, Commercial Taxes Department) · G
again categorically reiterated that "the Hon'ble Minister,
Department of Commercial Taxes has approved the proposals
along with draft notification regarding extension of Sales Tax
related incentives to sick industrial units ...... ". It had been
submitted to the Chief (Finance) Minister on 18.11.2000. It shall H
972 SUPREME COURT REPORTS [2010) 1 S.C.R.
A be possible to issue necessary notification after approval of the
proposal by the Chief (Finance) Minister. Having made the
aforesaid statements in an affidavit before the High Court, the
Government has resiled from the unequivocal representations
in the decisions dated 06.01.2001 and 05.03.2001. Therefore,
8 strong reliance was placed on clauses 22 and 24 of the 1995
Policy and the doctrine of 'promissory estoppel' in support of
the plea that the action of the State Government in issuing
orders dated 06.01.2001 and 05.03.2001 are wholly arbitrary
and unjust.
c 62. In reply, it was contended that the decision dated
06.01.2001 had been taken for the four reasons stated earlier.
It was further stated that the decisions taken in the meeting of
the Cabinet held on 05.03.2001 was upon thoughtful and due
consideration of all the relevant factors. Taking into
D consideration the totality of the circumstance, a policy decisions
had been taken that notification relating to the Sales Tax
incentive be not issued. Therefore, the Company was not
entitled to any relief. It was on consideration of the entire matter
that the High Court concluded as follows:-
E
"When the State Government gives an assurance and
undertaking, in form of a policy then in fact it allures person/
industries to enter into the individual ventures, invest money
on the assurances contained in the policy, would it be
justified on the part of the State Government to say later
F
on that on a second thought they were withdrawing the
policy and the benefits flowing from that policy? We are
unable to agree to this argument."
63. We are of the opinion that the aforesaid conclusion
G reached by the High Court is based on due consideration of
the material placed before it. We see no reason to differ with
the opinion expressed by the High Court. We are unable to
accept the submissions made by Dr. Dhawan and Mr. Dwivedi
that no clear-cut assurances were held out to the Company. We
H are also unable to accept the submissions of Mr. Dwivedi that
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 973
LTD. [SURINDER SINGH NIJJAR, J.]
the Company has failed to place on the record sufficient A
material to establish that unequivocal promises and
representations had been made by the appellant to the
Company by word and by conduct. ·
64. In our opinion, the matter is squarely covered by the 8
observations made by this Court in the Mangalore Chemicals
(supra) "There is, as set out earlier, no dispute that the appellant
was entitled to the benefit of the Notification dated June 30,
1969. There is also no dispute that the refunds were eligible
to be adjusted against sales tax payable for respective years.
The only controversy is whether the appellant, not having actually C
secured the "prior permission" would be entitled to adjustment
having regard to the words of the Notification of August 11,
1975, that "until permission of renewal is granted by the Deputy
Commissioner of Commercial Taxes, the new industry should
not be allowed to adjust the refunds". The contention virtually D
means this: "No doubt you were eligible and entitled to make
the adjustments. There was also no impediment in law to grant
you such permission. But see language of clause 5. Since we
did not give you the permission you cannot be permitted to
adjust." Is this the effect of the law? E
"10. The sales tax already paid by the appellant on the raw
materials procured by it is the subject matter of the refunds.
The sales tax agains~ which the refund is sought to be
adjusted is the sales tax payable by appellant on the sales F
of goods manufactured by it. If the contention of the
Revenue is correct, the position is that while the appellant
is entitled to the refund it cannot, however, adjust the same
against current dues of the particular year but should pay
the tax working out its refunds separately. The situation G
may well have been such but the snag comes here. If the
adjustments made by the appellant in its monthly
statements are disallowed, the sales tax payable would be
deemed to be in default and would attract a penalty ranging
from 1 1/2 per cent to 2 1/2 per cent per month from the H
974 SUPREME COURT REPORTS [2010) 1 S.C.R.
A date it fell due. That penalty, in the facts of this case, would
be very much more than the amounts of refund."
"11. What emerges from the undisputed facts is that
appellant was entitled to the benefit of these adjustments
in the respective years. It had done and carried out all that
B
was necessary for it to do and carry out in that behalf. The
grant of permission remained pending on account of
certain outstanding inter-departmental issues as to which
of the departments - the Department of Sales Tax or the
Department of Industries - should absorb the financial
c impact of these concessions. Correspondence indicates
that on account of these questions, internal to
administration, the request for permission to adjust was
not processed."
D "22 ...... There is no dispute that appellant had satisfied
these conditions. Yet the permission was withheld - not
for any valid and substantial reason but owing to certain
extraneous things concerning some inter-departmental
issues. Appellant had nothing to do with those issues.
E Appellant is now told, "We are sorry. We should have
given you the permission. But now that the period is over,
nothing can be done". The answer to this is in the words
of Lord Denning:~ "Now I know that a public authority
cannot be estopped from doing its public duty, but I do think
F it can be estopped from relying on a technicality and this
is a technicality".
23. Francis Bennion in his Statutory Interpretation, (1984
edn.) says at page 683:
G "Unnecessary technicality: Modern courts seek to cut down
technicalities attendant upon a statutory procedure where these
cannot be shown to be necessary to the fulfillment of the
purposes of the legislation."
65. The law with regard to the applicability of the doctrine
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 975
LTD. [SURINDER SINGH NIJJAR, J.)
of promissory estoppel was again comprehensively considered A
by this Court in the case of Nestle India (supra). Ruma Pal, J.
speaking for the Bench observed as follows:-
"24. But first a recapitulation of the law on the subject
of promissory estoppel. The foundation of the doctrine was B
laid in the decision of Chandrasekhara Aiyar, J. in Collector
of Bombay v. Municipal Corpn. of the City of
Bombay ............. " " .......... Chandrasekhara Aiyar, J.
concurred with the conclusion of Das, J. but based his
reasoning on the fact that by the resolution, repres~ntations C
had been made to the Corporation by the Government and
the accident that the grant was invalid did not wipe out the
existence of the representation nor the fact that it was
acted upon by the Corporation. What has since been
recognised as a signal exposition of the principles of
promissory estoppel, Chandrasekhara Aiyar, J. said: (AIR D
p. 476, paras 21 & 22)
"The invalidity of the grant does not lead to the
obliteration of the representation.
E
Can the Government be now allowed to go back on
the representation, and, if we do so, would it not amount
to our countenancing the perpetration of what can be
compendiously described as legal fraud which a court of
equity must prevent being committed. If the resolution can F
be read as meaning that the grant was of rent-free land,
the case would come strictly within the doctrine of estoppel
· enunciated in Section 115 of the Evidence Act. But even
otherwise, that is, if there was merely the holding out of a
promise that no rent will be charged in the future, the
Government must be deemed in the circumstances of this G
case to have bound themselves to fulfil it. ... Courts must
do justice by the promotion of honesty and good faith, as
far as it lies in their power."
"25. In other words, promissory estoppel long H
t
976 SUPREME COURT RE!=>ORTS (2010] 1 S.C.R.
A recognised as a legitimate defence in equity was held to
found a cause of action against the Government, even
when, and this needs to be emphasised, the representation
sought to be enforced was legally invalid in the sense that
it was made in a manner which was not in conformity with
B the procedure prescribed by statute."
"26. This principle was built upon in Union of India
v. Anglo Afghan Agencies where it was said (SCR at
p. 385): (AIR p 728, para 23)
C "23. Under our jurisprudence the Government is not
exempt from liability to carry out the representation made
by it as to .its future conduct and it cannot on some
undefined and undisclosed ground of necessity or
expediency fail to carry out the promise solemnly made by
D it, nor claim to be the judge of its own obligation to the
citizen on an ex parte appraisement of the circumstances
in which the obligation has arisen."
xxxx xxxx xxxx xxxx
E "44. Of course, the Government cannot rely on a-
representation made without complying with the procedure.
prescribed by the relevant statute, but a citizen may and•
can compel the Government to do so if the factors•
necessary for founding a plea of promissory estoppel arei
F established. Such a proposition would not "fall foul of ouri
constitutional scheme and public interest". On the othen
hand, as was observed in Motilal Padampat Sugar Millsi
case and approved in the subsequent decisions: (SCC
p. 442; para 24)
G
"It is indeed the pride of constitutional democracy anc
rule of law that the Government stands on the same footin~
as a private individual so far as the obligation of the la11
is concerned: the former is equally bound as the latter. 11
is indeed difficult to see on what principle can
t H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 977
LTD. [SURINDER SINGH NIJJAR, J.]
Government, committed to the rule of law, claim immunity A
from the doctrine of promissory estoppel." ·
"46 ............ The facts in the present case are similar
to those prevailing in Godfrey Philips. There too, as we
have noted earlier, the statutory provisions required B
exemption to be granted by notification. Nevertheless, the
Court having found that the essential prerequisites for the
operation of promissory estoppel had been established,
directed the issuance of the exemption notification."
66. In Petrochemical (supra), this Court has clearly C
reiterated the promissory estoppel would apply where a p;:irty
alters his position pursuant to or in furtherance of the promise
made by a State. It is also clearly held that such a policy
decision can be expressed in notifications under statutory
provisions or even by executive instructions. Whenever the D
ingredients for invoking the principle of promissory estoppal are
established, it could give rise to a cause of action. Not only may
it give rise to a cause of action but would also preserve a right.
The relevant observations are as under:-
E
"121. The doctrine of promissory estoppel would
undoubtedly be applicable where an entrepreneur alters his
position pursuant to or in furtherance of the promise made
by a State to grant inter alia exemption from payment of
taxes or charges on the basis of the current tariff. Such a F
policy decision on the part of the State shall not only be
expressed by reason of notifications issued under the
statutory provisions but also under the executive
instructions. The appellants had undoubtedly been enjoying
the benefit of (sic exemption from) payment of tax in respect
of sale/consumption of electrical energy in relation to the G
cogenerating power plants."
"122. Unlike an ordinary estoppel, promissory
estoppel gives rise to a cause of action. It indisputably
creates a right. It also acts on equity. However, its H
-'
978 SUPREME COURT REPORTS [2010] 1 S.C.R.
A application against constitutional or statutory provisions is
impermissible in law."
"130. We, therefore, are of the opinion that doctrine
of promissory estoppal also preserves a right. A right
would be preserved when it is not expressly taken away
B
but in fact has expressly been preserved."
67. This Court in MRF Ltd. Kottayam (supra) considered
the legality of a notification withdrawing the exemption granted
by an earlier notification. Relying on the representations
C contained in the earlier notification, MRF had altered its
position. Whilst setting aside the subsequent notification
withdrawing the exemptions, this Court held that the whole
actions of the State including exercise of executive power has
to be tested on the touchstone of Article 14 of the Constitution
D of India. It was held that the action of the State must be fair. In
this context we may notice the observations made in paragraph
38 and 39 of the judgment:-
"38. The principle underlying legitimate expectation
which is based on Article 14 and the rule of fairness has
E
been restated by this Court in Bannari Amman Sugars
Ltd. v. CT02 1 • It was observed in paras 8 and 9: (SCC pp.
633-34)
"8. A person may have a 'legitimate expectation' of
F being treated in a certain way by an administrative authority
even though he has no legal right in private law to receive
such treatment. The expectation may arise either from a
representation or promise made by the authority, including
an implied representation, or from consistent past practice.
G The doctrine of legitimate expectation has an important
place in the developing law of judicial review. It is, however,
not necessary to explore the doctrine in this case, it is
enough merely to note that a legitimate expectation can
provide a sufficient interest to enable one who cannot point
H to the existence of a substantive right to obtain the leave
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 979
LTD. [SURINDER SINGH NIJJAR, J.]
of the court to apply for judicial review. It is generally A
agreed that 'legitimate expectation' gives the applicant
sufficient locus standi for judicial review and that the
doctrine of legitimate expectation to be confined mostly to
right of a fair hearing before a decision which results in
negativing a promise or withdrawing an undertaking is B
· taken. The doctrine does not give scope to claim relief
straightaway from the administrative authorities as no
crystallised right as such is involved. The protection of such
legitimate expectation does not require the fulfilment of the
expectation where an overriding public interest requires c
otherwise. In other words, where a person's legitimate
expectation is not fulfilled by taking a particular decision
then the decision-maker should justify the denial of such
expectation by showing some overriding public interest.
(See Union of India v. Hindustan Development Corpn)
D
9. While the discretion to change the policy in
exercise of the executive power, when not trammelled by
any statute or rule is wide enough, what is imperative and
implicit in terms of Article 14 is that a change in policy must
be made fairly and should not give the impression that it E
was so done arbitrarily or by any ulterior criteria. The wide
sweep of Article 14 and the requirement of every State
action qualifying for its validity on this touchstone
irrespective of the field of activity of the State is an
accepted tenet. The basic requirement of Article 14 is F
fairness in action by the State, and non-arbitrariness in
essence and substance is the heartbeat of fair play.
Actions are amenable, in the panorama of judicial review
only to the extent that the State must act validly for
discernible reasons, not whimsically for any ulterior G
purpose. The meaning and true import and concept of
arbitrariness is more easily visualised than precisely
defined. A question whether the impugned action is
arbitrary or not is to be ultimately answered on the facts
and circumstances of a given case. A basic and obvious H
980 SUPREME COURT REPORTS [2010] 1 S.C.R.
A test to apply in such cases is to see whether there is any
discernible principle emerging from the impugned action
and if so, does it really satisfy the test of reasonableness."
(emphasis supplied)"
"39. MRF made a huge investment in the State of Kerala
B
under a promise held to it that it would be granted
exemption from payment of sales tax for a period of seven
years........ " ....... The action of the State
cannot be permitted to operate if it is arbitrary or
unreasonable. This Court in E.P. Royappa v. State of T.N
c observed that where an act is arbitrary, it is implicit in it
that it is unequal both according to political logic and
constitutional law and is therefore violative of Article 14.
Equity that arises in favour of a party as a result of a
representation made by the State is founded on the basic
D concept of "justice and fair play". The attempt to take away
the said benefit of exemption with effect from 15-1-1998
and thereby deprive MRF of the benefit of exemption for
more than 5 years out of a total period of 7 years, in our
opinion, is highly arbitrary, unjust and unreasonable and
E deserves to be quashed."
68. We are also unable to accept the submission with the
decisions dated 06.01.2001 and 05.03.2001 had been taken
due to the change in the national policy. This was sought to be
F justified by Dr. Dhawan on the basis of the Conferences of Chief
Ministers/Finance Ministers. It is settled law as noticed by
Bhagwati, J in Motila/ Padampat (supra) that the 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
G 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
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 981
LTD. [SURINDER SINGH NIJJAR, J.]
sufficient to exonerate the Government from liability. It is only A
when the Court is satisfied that the Court would decline to
enforce the promise against the Government. However, the
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 B
the discharge of this burden. In the present case, the claim of
the Government is based on a change in policy advocated in
the Chief Ministers' Conference. These Conferences .have
taken place before the affidavit is filed on 05.12.2001.
Therefore, the High Court concluded that the Government has c
not been candid in disclosure of the reasons for passing the
order dated 06.01.2001. In our opinion, the aforesaid decisions
with regard to ttie 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
0
application was made to the Government seeking exemption
on 21.11.1997. For more than 3 years, the Company and the
financial institutions had been assured by the Government that
the notification will be issued forthwith. However, it was not
issued. We are of the opinion that the action of the appellants E
is arbitrary and indefensible.
69. Learned Senior counsel for the appellants had also
submitted that it was not necessary to issue the notification
within one month as stipulated in clause 24 of the Industrial
Policy, 1995. In order to appreciate the aforesaid submission, F
it would be necessary to make a reference to the relevant
clauses of the Industrial Policy, 1995. Clause 22, 23 and 24
are as under:- ·
"REVIVAL OF SICK UNITS. G
The continuing problems of industrial sickness is a
matter of great concern for the Government. Closure of
units leads to unemployment and locking up of capital ·
deployed in such ventures. The State Government is
determined to take effective measures and to render all H
982 SUPREME COURT REPORTS [2010] 1 S.C.R.
A possible assistance for the amelioration of this malaise.
22.1. INDUSTRIAL SICKNESS IN SS/ SECTION
The State Government proposes to take the
following measures for the revival of SSI units:
B
i. there are scores of medium and small scale units
which are sick but have the potential of becoming
viable. For such SSI units which are outside the
purview of the Bureau of Industrial and Financial
c Reconstruction (BIFR), the State Government ·
proposes to form an apex body on the lines of BIFR
with Director of Industries as its Head to consider
their revival.
ii. The State level apex body for rehabilitation of sick
D industry would be vested with adequate powers so that it
can effectively implement management and financial
restructuring.
iii. The sick SSI units would be identified as per guidelines
E given by RBI/IDBI. Appropriate packages of reliefs and
concessions for such units would be approved for their
rehabilitation.
iv. Sick units undergoing rehabilitation will not have to take
sickness certificate every year. The approved revival
F
package for each sick unit would indicate the period of
revival.
v. The Apex Body shall monitor the progress of the revival
package.
G
vi. A sick unit being revived would be entitled to Sales Tax
exemption/deferment exemption from Minimum Guarantee
etc. as determined in the revival package. ·
vii. The State level Apex body would besides
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 983
LTD. [SURINDER SINGH NIJJAR, J.]
representatives of Government Department/ A
Organisations/ financial institutions will also have its
members one representative each of confederation of
Indian Industries, Bihar Industries Association and Bihar
Chamber of Commerce.
B
The rehabilitation package would be implemented
within a fixed time frame so that the process of revival is
not delayed.
22.2 SICKNESS IN LARGE AND MEDIUM SECTOR
c
i. A committee with Industrial Development Commissioner
as its head will be constituted to evolve suitable measures
for potentially viable non-BIFR sick industrial units including
PSUs in the large and medium sector.
The Committee will recommend concessions and D
facilities including those in this policy statement if
considered necessary for revival of the Unit; These
recommendations would be placed before the Government
through State level Empowered Committee (SLEC)
already constituted under the chairmanship of Chief E
Secretary for final decision.
ii. Concessions and facilities identified under the Scheme
of rehabilitation prepared by the Board for Industrial and
Financial Reconstruction (BIFR) or by Inter-Institutional F
Committee of IRBI, BICICO/BSFC and Bank would be
placed before the Committee headed by the Industrial
Development Commissioner for consideration and
recommendation to Government through SLEC for
approval. G
iii. Rehabilitation measures for sick but potentially viable
industrial units may, inter alia, include reliefs ·and
concessions or sacrifice from various government
departments/ organizations and or additional facilities
H
984 SUPREME COURT REPORTS [2010] 1 S.C.R.
A including allocation of power from BSEB/DVC and any
other agency/statutory body/local authority."
22.3. Such closed and sick industrial units which have
once availed of the facility of Sales Tax exemption/
deferment under a rehabilitation package prepared by
B
BIFR shall not get the same facility again if they turn sick
or are closed again. This will also apply to other facilities
given to such sick and closed industrial units which have
once availed of such facilities in the past. However, the
State Government may consider extending such facilities
c on case to case basis as required. ·
23. Definition(s) given in the Annexure form(s) part of the
policy.
D 24. MONITORING AND REVIEW
All concerned departments and organizations will
issue follow up notifications to give effect to the provisions
of the policy within a month. This will be appropriately
monitored by the Govt.
E
The State Government may carry out Mid Term
Review of this Policy."
70. A perusal of the aforesaid policy clearly shows that the
F Government was determined to take effective measures to
render all possible assistance for amelioration of the continuing
problem of industrial sickness in the State. It was viewed as a
matter of great concern for the Government. Under Clause
22(1), the State Government was to constitute an apex body
on the lines of BIFR with Director of Industries to consider the
G revival of sick Medium and Small Scale Units. Clause 22(2)
deals with sickness in large and medium sector. Under clause
22(2)(i), a Committee headed by the Industrial Development
Commissioner was to evolve suitable measures for potentially
viable non-BIFR sick industrial units. Under Clause 22(2)(ii) the
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 985
LTD. [SURINDER SINGH NIJJAR, J.]
Committee was to recommend concessions and facilities which A
were considered necessary for revival of the unit. The Company
was, therefore, eligible under the aforesaid Clause 22(2}(ii).
The Industrial Policy, 1995 did not envisage sickness in its strict
terms as defined under the Sick Industrial Companies (Special
Provisions) Act, 1985. The policy was of a wider application B
and included industrial sickness not only qua BIFR companies
but also in relation to non-BIFR potentially viable sick
companies. The Clause 6 of the Annexure attached to the Policy
defines a sick unit as under:-
"Sick Unit:
c
Sick unit means an industrial unit declared sick by the
Board of Industrial and Financial Reconstruction under the
Sick Industrial Companies (Special Provision) Act, 1985
or by the Apex Body headed by the Director of Industries D
for SSI or the High Level Empowered Committee headed
by the Chief Secretary for large and medium sector."
71. The aforesaid definition makes it abundantly clear that
the sickness of the Company could also be decided by the E
SLEC headed by the Chief Secretary. The exemption claim of
the Company was duly considered by the Committee
constituted under Clause 22.2(i). Its recommendations were
duly placed before the SLEC under Clause 22.2(ii). The
recommendations were not implemented only because the
Government failed to issue a notification under Clause 24 of F
the Industrial Policy, 1995 within the stipulated period of one
month. Even if we are to accept the submissions of Dr. Dhawan
and Mr. Dwivedi that the provisions contained in Clause 24 was
mandatory the time of one month for issuing the notification
could only have been extended for a reasonable period. It is G
inconceivable that it could have taken the Government 3 years
to issue the follow up notification. We are of the considered
opinion that failure of the appellants to issue the necessary
notification within a reasonable period of the enforcement of
the Industrial Policy, 1995 has rendered the decisions dated H
986 •
SUPREME COURT REPORTS [2010) 1· S.C.R.
A 06.01.2001 and 05.03.2001 wholly arbitrary. The appellant
cannot be permitted to rely on its own lapses in implementing
its policy to defeat the just and valid claim of the Company.
72. For the same reason we are unable to accept the
submissions of the learned senior counsel for the appellant that
8
no relief can be granted to the Company as the Policy has
lapsed on 31.08.2000. Accepting such a submission would be
to put a premium and accord a justification to the wholly
arbitrary action of the appellant, in not issuing the notification
in accordance with the provisions contained in Clause 24 of
C the Industrial Policy, 1995. The entire sequence of meetings
adverted to above would clearly indicate that rehabilitation
package for the Company was considered by the financial
institutions keeping in view the provisions contained in the
Industrial Policy, 1995. The two Committees constituted under
D the aforesaid policy had duly recommended granting of
exemptions. This was much before the policy lapsed on
31.08.2000.
73. The assurances given in various meetings were
E reiterated before the High Court in the Affidavit dated
05.12.2000. It was clearly stated that the draft notification was
being prepared and being approved. It was thus obvious that
the notification merely had to be published in the Official .
Gazette. After making the aforesaid statements in the affidavit,
F order dated 06.01.2001 was issued. The four reasons given
in support of the decision are 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 the Company as no
G notification had been issued under Clause 24 cannot be
accepted as the appellant-State cannot be permitted to take
advantage of its own wrong. The third reason given is that the
State-level Empowered Committee (SLEC) had not approved
· the rehabilitation package. This clearly is against the record
H which has been examined by us in the earlier part of the .
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 987
LTD. [SURINDER SINGH NIJJAR, J.]
judgment. Not only the exemption was recommended by the A
competent Committees under the Industrial Policy,· 1995,
emphatic assurances were given that the notification will be
issued within a very short period. The fourth reason with regard
to the resolution passed at the Chief Ministers' Conference is
equally extraneous to the issue. The Company had made the B
application for exemption at a much prior time in 1997. No
material has been placed either before the High Court or before
this Court about the legal enforceability of the resolutions
passed at the Chief Ministers' Conference. In our opinion the
decision making process which culminated in passing of the c
orders dated 06.01.2001 and 05.03.2001 is seriously flawed,
therefore, the same have been ju::tifiably quashed by the High
Court.
74. We may now consider the submissions made in IA
No.3 of 2006. On 18.11.2002, this Court passed the following D
order:
"As an interim arrangement during the pendency of
this appeal, with a view to protect the interests of either
side, we direct the respondent to deposit an amount E
equivalent to the sale tax payable by it as and when it
becomes due in an interest hearing account in a
nationalized bank. This amount and the amount accused
during the pendency of the appeal, shall not be withdrawn
by other side. F
The amount so kept in deposit shall become payable
to the party which ultimately succeeds in this appeal.
The appellants are directed to issue the exemption
orders and on receipt of such order, the above said amount G
shall be deposited. The issuance of the exemption order
is without prejudice to the case of the parties in this
appeal..
The I.A. in the disposed of."
H
988 SUPREME COURT REPORTS [2010] 1 S.C.R.
A 75. It is not in dispute for us that pursuant to the aforesaid
directions the appellant has issued the Notification No. S0-174
dated 18.10.2004 granting exemption to the company. The
notification was to have effect for five years from the date of
publication in the official gazette or till the disposal of special
B leave petition No.5181 of 2002, whichever is earlier. The
notification was issued subject to the terms and conditions
notice earlier in the judgment. Under the aforesaid terms and
conditions, the company was to deposit the tax payable per
month with an interest bearing (wrongly typed in the order as
c hearing) account in a nationalized bank. The company was also
to provide information of the bank account to the circle where
it is registered. Details regarding amount of payment made
each month was also to be supplied to the appellant.
76. It is now the submission of the learned counsel for the
D appellant that the company has neither complied with the order
passed by this Court on 18.11.2002 nor the conditions
stipulated in the notification dated 16.10.2004. It is further
submitted that prayers in the application were to recall the order
dated 18.11.2002 and to stay the operation of a judgment
E under appeal dated 24.04.2002. However the application was
not finally disposed of, even though the pleadings were
complete.
77. During the pendency of the proceedings there have
F been some further development, which will now need to be
taken into consideration by the Court, to do justice between the
parties.
78. During the interregnum the company has been
collecting the amount equivalent to the tax from the consumers.
G According to Dr. Rajiv Dhawan, Mr. Dwivedi during this period
the company has collected more than Rs.60 crores on the sale
of cement by virtue of the directions issued by this Court in the
Order dated 18.11.2002. In view of the law laid down by this
Court in Amrit Banaspati (supra) the company cannot be
H permitted to retain the amount collected from the customers.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 989
LTD. [SURINDER SINGH NIJJAR, J.]
This would amount unjust enrichment. Therefore, a direction is A
required to be issued that the amount deposited by the
company with the bank pursuant to the orders of this Court be
released to the appellant State. On the other hand, Mr. Parshad
has submitted that the delay in issuance of the exemption
Notification by the State has crippled the Company financially. B
Even then the Company is trying to revive itself through financial
restructuring. The survival of the Company now depends on the
approval of the Financial Restructuring Package prepared by
the respondent No.2. This package has been submitted to the
Chief Minister of Bihar which is still on the consideration of the c
Government. With regard to the non-deposit of amount
equivalent to the tax due, Mr. Parshad reiterated that the
Company had made bona fide efforts, but was unable to
deposit the amount due to its 'sickness'. On the one hand the
revised rehabilitation package is kept under consideration, on 0
the other the appellants seeks the vacation of the order dated
18.11.2002. The application, according to the learned senior
counsel, deserves outright dismissal.
79. We have considered the submissions made by the
learned counsel. It would be not possible to accept the E
submissions of Mr. Parshad that in view of the financial
condition of the company it may be permitted to retain the
amount collected under the orders of this Court. The amount
was collected from the consumer to offset the tax liability. Such
amount cannot be permitted to be retained by the company. In F
Amrit Banaspati case (supra) it has been held that exemption
and refund of tax are two different legal and distinct concepts.
The obj~ctive of the exemption is to grant incentive to
encourage industrialization. It is to enable the industry to
compete in the market. On the other hand, refund of tax is made G
only when it has been realized illegally or 'contrary to the
provisions of law. Tax lawfully levied and realized cannot be
refunded. In view of the settled 'position of the law, we decline
to accept the suggestion made by Mr. Parshad.
H
990 SUPREME COURT REPORTS [2010] 1 S.C.R.
A 80. Direction is, therefore, issued that the amount
deposited by the company in the designated account opened
and operated pursuant to the order of this Court dated
18.11.2002 together with accrued interest shall be released to
the appellant State, forthwith.
8
81. I.A. No.3 is therefore allowed in the aforesaid terms.
82. In view of the above, the appeal filed by the State
challenging the judgment and order dated 24.4.2002 is
dismissed, however, I.A. No.3 is allowed to the extent indicated
C above.
K.K.T. Appeal dismissed and Application allowed.
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