STATE OF ORISSA AND ORS.versusMANGALAM TIMBER PRODUCTS LTD. ETC.

A                        ST ATE OF ORIS SA AND ORS.
                                          v.
                MAN GALAM TIMBER PRODUCTS LTD. ETC.

                              NOVEMBER 11, 2003

B                   [R.C. LAHOTI AND ASHOK BHAN, JJ.]


         Administrative Law :

          Promissory Estoppel--On representation of State Government company
C established an industry in the State as per terms contained in Industrial
    Policy-Accordingly, raw material supplied to industry at a fixed price--
    Industry selling its products at a rate based on price of raw material supplied
    to it-Later Government proposing to revise retrospectively the price of raw
    material to the detriment of Industry-Proposal struck down by High Court-
D   Government contending that as there was no contract in writing principle
    of promissory estoppel would not apply-Held, State Government having
    persuaded the company to establish an industry and the latter having acted
    on the solemn promise, purchased raw material at a fixed price and also sold
    its products by pricing the same taking into consideration the price of raw
    material, the former cannot be permitted to revise the terms for supply of raw
E   material adversely to the interest of the company and effective from back date
    and place the company in a situation which it will not be able to resolve--
    Even, prima facie, it was not a case of an error in calculation committed by
    State Government of which it was not aware-Besides, State cannot take
    advantage of its own omission.
F        Sales Tax Officer and Anr. v. Shree Durga Oil Mills and Anr., (1998) 1
    SCC 572 and Sharma Transport Rep. By D.P. Sharma v. Govt. of Andhra
    Pradesh and Ors., (2002) 2 SCC, 188, cited.

          CIVIL APPELLATE JURISDICTION : Civil Appeal No. !0664 of 1996.
G         From the Judgment and Order dated 16.5 .95 of the Orissa High Court
    in O.J.C. No. 7341of1993.
                                        WITH
          C.A. No. I 0665 of 1996
H                                        476
            STATE OF ORISSA v. MANGALAM TIMBER PRODUCTS LTD.              477
      Raj Kumar Mehta for the Appellant in C.A. No. I 0664/96.                   A
      Radha Shyam Jena (NP) for the Appellant in C.A. No. I 0065/96.

      Dushyant A. Dave, Ramesh Singh, Ms. Gauri Rasgotra and Suman J.
Khaitan for Mis. Khaitan & Co., for the Respondent in C.A. No.10664/96.
                                                                                 B
      Ramesh Singh, A.T. Patra and Nipun Malhotra for Mis. O.P. Khaitan &
Co., for the Respondent in C.A. No. I0665/96.

     The following Order of the Court was delivered :

C.A. No. 1066411996                                                              C
      A decision taken by the Government of Orissa on 27.4.1989 to revise
with effect from back date the terms for making available raw material to the
respondent has been struck down by the High Court of Orissa as violative
of the principle of promissory estoppel. The state of Orissa is in appeal by
~~~~                                                                          D
       On the representation made by the State of Orissa as contained in their
Industrial Policy of the year 1980 and 1983 the respondent was persuaded to
establish its industry in the state of Orissa. On 27 .4.1989 the State Government
proposed revision of certain terms which resulted in revision of rate of royalty
and the method of stack measurement adversely to the interest of the E
respondent. The respondent was not obviously agreeable and protested. The
representation of the respondent ultimately prevailed with a high level
committee of the State Government and on 3.10.1989 a decision was taken to
not to alter the terms for supply of raw material on which the respondent had
acted and established its industry. The industry continued to function, F
consumed the raw material and sold its finished products to the buyers in the
market. The pricing of the finished product was done by taking into account
the rate of royalty and the method of stack measurement as proposed by the
respondent and agreed upon between the parties. On 2.9.1993, the State
Government again proposed to make a revision with effect from a back date,
i.e., 1st April, 1998. This proposal was challenged by the respondent by filing G
the writ petition in the High Court which has been allowed and the
communication dated 2.9.1993 containing the impugned revision has been
struck down by the High Court.

      It is submitted on behalf of the State of Orissa that there was an error   H
    478                    SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A of calculation made by the State and that what the State proposed to do was
    only to correct the erroneous method of calculation. Then, the Government
    of India was not agreeable to re-plantation by private party like the respondent
    and so the re-plantation had to be undertaken by the State which involved
    additional cost to it. It is also submitted that striking down the proposal of
    the State Government made in the year 1993 would be inequitable for the State
B   of Orissa and therefore would not be in public interest. Reliance in placed on
    the decisions of this Court in Sales Tax Officer and Anr. v. Shree Durga Oil
    Mills and Anr. [1998) I SCC 572 and Sharma Transport Rep. By D.P. Sharma
    v. Govt. of Andhra Pradesh and Ors., [2002) 2 SCC, 188.

C       Having heard the learned counsel for the parties, we are satisfied that
  no case is made out for interference with the judgment of the High Court.
  Before the High Court, the principal plea of the respondent was that there was
  no contract in writing and therefore the applicability of the principle of
  promissory estoppel was not established. The High Court has rightly discarded
  this plea. To attract the applicability of the principle of estoppel it is not
D necessary that there must be a contract in writing entered into between the
  parties. We are not satisfied even prima facie that it was a case of an error
  committed by the State Government of which it was not aware. The State of
  Orissa should have, while holding out the representation, taken into
  consideration the fact-who will have to do re-plantation and that the
E permission of the Government of India would be needed for the purpose. The
  State cannot take advantage of its own omission. The State Government
  having persuaded the respondent to establish an industry and respondent
  having acted on the solemn promise of the state Government, purchased the
  raw material at a fixed price and also sold its products by pricing the same
  taking into consideration the price of raw material fixed by the State Government
F and supplied, the State Government cannot be permitted to revise the terms
  for supply of raw material adversely to the interest of the respondent and
  effective from a back date and place the respondent in a situation which it
  will not be able to resolve. The respondent could not have revised their price
  from a back date and recovered it from innumerable consumers to whom their
G finished products were supplied at a fixed price.
         No fault can be found with the view taken by the High Court. The
  appeal is devoid of any merit and is dismissed. The interim order dated
  17 .2.1997 passed by this Court stands vacated. The State Government shall
  implement the judgment of the High Court expeditiously and in any case
H within a period of four months from today.
            STATE OF ORISSA v. MANGALAM TIMBER PRODUCTS LTD.          479
      C.A. No. 1066511996                                                   A
      No one is present for the Appellants.

       The judgment of the High Court impugned in this appeal was rendered·
by following its own decision in Mangalam Timber Products Ltd. v. The State
ofOrissa (O.J.C. No. 7341/1993 decided on 16.5.1995). In both the matters it B
was one and the same decision of the State of Orissa which was impugned.
The State Government came in appeal by special leave against the decision
in Manga/am Timber Products Ltd. v. The State of Orissa (O.J.C. No. 7341/
1993 decided on 16.5.1995)which was registered as C.A. No. 10664/1996. By
judgment separately pronounced today in the said appeal, the appeal of the C
State Government has been dismissed and the decision of the High Court has
been upheld. Inasmuch as the judgment of the High Court under appeal
follows the decision in Mangalam Timber Products Ltd., this appeal is also
dismissed. The judgment of the High Court is maintained. The interim order
dated 17 .2.1997 passed by this Court stands vacated. The State Government
shall implement the judgment of the High Court expeditiously and in any case D
within a period of four months from today.

RP.                                                    Appeal dismissed.