Holding

The appropriate interpretation of clause 23.3 depends on the department's own understanding; if subsidies were granted to other producers on total production cost, the same must apply, otherwise the subsidy is limited to processing charges.

Summary

The State of Uttar Pradesh, under its 2001 Film Policy, offers a subsidy to films made in regional languages. SK Theatre Productions produced a Hindi film and applied for a subsidy under clause 23.3, which the Department interpreted as 25% of the processing charges only, limiting the amount to Rs. 10 lakh. The petitioner claimed that other producers had received 25% of the total production cost and therefore sought the same benefit. The Allahabad High Court allowed the writ petition, prompting an appeal to the Supreme Court. The Supreme Court held that the correct interpretation of the clause depends on how the issuing department itself understood the circular, and that if other producers were granted subsidy on the total cost, the petitioner must likewise receive it; otherwise the subsidy is limited to processing costs. Consequently, the appeal was allowed, the High Court's decision set aside, and the matter remanded for fresh consideration with the relevant departmental material.

Issues considered

Whether clause 23.3 of the Uttar Pradesh Film Policy 2001 provides a subsidy of 25% of the total production cost or only 25% of the film processing charges.
What factor should be considered in interpreting an ambiguous government circular.

Legislation cited

Societies Registration Act, 1860

Subjects

subsidyfilm policyinterpretation of statutesgovernment circularregional language filmsUttar Pradeshadministrative law

Judgment

A
" STATE OF U.P. AND ORS.
V.

MIS. S.K. THEATRE PRODUCTIONS AND ORS.

FEBRUARY 9, 2007

[S.B. SINHA AND MARKANDEY KA TJU, JJ .] B

-f Taxation-Subsidy-Subsidy for promotion of production of films in
:! ~
regional languages by 'Film Policy'-Subsidy was restricted to 25% of the
processing charges only and not of the entire cost of production-Plea that
other film producers given subsidy on the entire cost of production-Held:
c
Matter remanded to High Court for deciding after considering as to how was
the relevant clause of the Film Policy understood by the Department and
what subsidies were given to other jilmmakers-Uttar Pradesh Film Policy
2001-Clause 23.3.
D
Interpretation of Statutes-Interpretation of Government Circulars-
t Held: When two interpretations of a circular are possible, the relevant factor
__cJ for its interpretation is, how the circular has been understood by the issuing
development.

In order to promote film production in regional languages of U.P., State E
Government gave various incentives including trade tax exemptions, tax
incentives, subsidy etc. Respondent herein produced a regional film after due
approval and claimed subsidy under clause 23.3 of 'Uttar Pradesh Film Policy
2001 '. The authorities restricted the subsidy to 25% of the processing
charges only and not 25% of the entire cost of producing the film. Respondent
-r filed Writ Petition challenging the order, and the same was allowed.
F

In appeal to this Court, appellant contended that subsidy payable was
only 25% of the cost involved in the processing of the film in the laboratory
(subject to a maximum of Rs. 10 lacs.)

,,, Respondent contended that other film producers had been granted 25% G
of the entire cost of production.
. ·....f
Allowing the appeal, and remanding the matter to High Court, the Court

HELD: 1. If other film producers were granted subsidy of 25% of the

-· 391 H
392. SUPREME COURT REPORTS [2007] 2 S.C.R.
,(
A cost or production of the film (subject to a maximum limit of Rs.10 lacs) then
the writ petitioners should also be given the same benefits. However, if that
was not done then the subsidy should be 25% of the cost offilm processing
in the lab (subject to a maximum of Rs.IO lacs) and not the entire cost of the
film production. (Para 101 [394-DI

B 2. A relevant factor for interpretation if there is some ambiguity in a
circular, is how the circular has been understood by the department itself
which issued it. This is particularly so when there are two interpretations
·i..
possible, as is in the present case. Matter remanded to the High Court for a .;.:.
fresh consideration after calling for the relevant material in order to
c understand how clause 23.3 of the Film Policy was understood by the
department itself and what subsidies have been given to other film producers.
(Paras 11 and 12) [394-E-F)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 653 of 2007.

From the final Judgment and Order dated 7.12.2005 of the High Court
D
of .Judicature at Allahabad, Lucknow Bench, Lucknow in Writ Petition No.
3281 (M/B) of 2004. '"
Dr. R.G. Padia, Arvind Varma, Kamlendra Mishra and Rajeev Dubey for
the: Appellants.
E
Ravindra Kumar, Javed Mahmud Rao, Shahid Ali Rao, Pavan Sharma,
Nitish Massey and B. Vijayalakshmi Menon for the Respondents.

The Judgment of the Court was delivered by

MARKANDEY KATJU, J. I. Leave granted. ~-
F
2. This appeal has been filed against the impugned judgment of the
Allahabad High Court (Lucknow Bench) dated 7.12.2005 in Writ Petition
No.3281 (MB) of2004. Heard learned counsels for the parties and perused the
record.
G
3. The facts of the case are that to promote film production in the State
ofU.P. the State Government constituted a Society named Film Sandhu in the
,,.. '.
year 200 I which was registered under the Societies' Registration Act. Various
Government orders were issued to give facilities for film production in U.P.
and a film policy was made. Various incentives were also declared to be given
H to the films made in regional languages in U.P. such as Avadhi, Bhojpuri and
~
STATE OF U.P. v. SK. THEATRE PRODUCTIONS [MARKANDEY KA TJU, J.] 393
Braj etc. These various incentives are mentioned in the booklet entitled 'Uttar A
).., Pradesh Film Policy 200 I', copy of which has been supplied to us. These
include trade tax exemptions, tax incentives, subsidy, two weeks' compulsory
exhibitions of regional films, etc.

4. The respondents claim subsidy under clause 23.3 of the Film Policy.
The said clause 23.3 states:- B

"23 .3 Subsidy : A subsidy of 25% of the cost of production,
subject to a maximum limit of Rs.IO lac, will be provided to films made
-4 in the State in any one of the above mentioned languages. This
subsidy will be paid to film processing labs for the expenditure actually
incurred in the making of the film. In the first three years this subsidy c
can be paid to laboratories situated outside Uttar Pradesh. However,
after three years regional films will be able to avail this scheme only
if the processing of their films is done by labs situated in U.P. This
provision will hopefully stimulate the growth of such lab facilities
within the State. Besides, far promotion of such Hindi films also, over D
75% shooting of which has beer. completed in the State, a proportionate
grant shall be given or the amount of grant will be acijusted with rates
l of interest of institutional finance for films."
_,/
5. The respondent (the writ petitioner) had decided to produce a Hindi
film entitled 'Pani Re Pani Tera Rang Kaisa' in U.P. For this purpose the E
petitioner submitted his application to the Film Bandhu on the prescribed
format, copy of which is Annexure-5 to the writ petition. He also submitted
copy of the script with a Bank draft of Rs.2,500/- as processing charges. It
is alleged that the script of the film was approved by the expert committee,
whose recommendations were approved by Film Bandhu vide approval letter
dated 27.5.2003, Annexure-6 to the writ petition. Thereafter, the respondent
F
-'t made various arrangements and shot the entire feature film in Lucknow.

6. The petitioner claimed the subsidy under the film policy and is
aggrieved by the order dated 29 .4.2004, Annexure 13 to the writ petition
issued by the Directorate of Information; U.P. by which the subsidy to the
G
petitioner has been restricted to 25% of the processing charges only, and not
.., 25% of the entire cost of producing the film. The petitioner prayed for
... .; quashing of the order dated 29 .4.2004 and for a mandamus directing the
" respondent to make the payment of Rs. 8, 94, 5911- being the remaining
amount claimed by him as subsidy, i.e., over and above the amount already
paid to him as 2j0/o of the processing cost in the lab .
H.
•
I

-"\

394 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 7. By the impugned judgment the writ petition was allowed and hence ,,(

this appeal.

8. Learned counsel for the appellant submitted that under clause 23 .3
of the film policy the subsidy payable was only 25% of the cost involved in
the processing of the film in the laboratory (subject to a maximum of Rs. I0
B lacs). He submitted tbat the purpose of the subsidy was that film labs were
situated outside U.P. and hence a subsidy was granted in relation to the. film
processing in the labs which were outside U.P. but this subsidy was restricted
to only three years. }..

c other 9.filmOnproducers
the other hand, learned counsel for respondent submitted that
had been granted 25% of the entire cost of production
of the film.

I0. We are of the opinion that if other film producers were granted
subsidy of 25% of the cost of production of the film (subj~ct to a maximum
limit of Rs. I0 lacs) then the writ petitioners should also be given the same
D
benefits. However, if that was not done then the subsidy should be 25% of
the cost of film processing in the lab (subject to a maximum of Rs. IO lacs) and _.
not the entire cost of the film production.

11. It is well settled that a relevant factor for interpretation if there is
E some ambiguity in a circular is how the circular has been understood by the
department itself which issued it. This· is particularly so when there are two
interpretations possible, as is in the present case.

12. In th~se circumstances, we set aside the impugned judgment and
remand the matter to the High Court for a fresh consideration after calling for
F the relevant material in order to understand how clause 23.3 of the Film Policy
was understood by the department itself and what subsidies have been given
to other film producers.

13. For the reasons given above, we allow the appeal, set aside the
impugned judgment and remand the matter to the High Court. No cost.
G
K.K.T. Appeal allowed.
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