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PETITIONER: D.C.M. LIMITED & ANOTHER

       Vs.

RESPONDENT: UNION OF INDIA & ANOTHER

DATE OF JUDGMENT:       13/08/1996

BENCH: VENKATASWAMI K. (J) BENCH: VENKATASWAMI K. (J) PUNCHHI, M.M.

CITATION:  JT 1996 (7)   623        1996 SCALE  (5)826

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. Venkataswami, J.      The short  point that  arises for  our consideration is whether the  Principle of Promissory Estoppel applies to the facts of this case. The facts are as under :      The appellants owned two sugar factories at Daurala and Mawana (Meerut)  and at both these factories the business of manufacturing and selling of sugar by vacuum pan process was carried on.  The Central  Government promulgated  the  Sugar (Control) Order  on 10.6.66 under which the sale of sugar by producers was  controlled. In order to mitigate the hardship caused to  the sugar  industry in  the establishment  of new sugar factories  and for effecting substantial expansions in the existing  sugar factories,  the Government  sanctioned a scheme in  November, 1975  providing incentives  to the  new sugar factories  and also  to those  sugar factories who had applied for  and completed  their expansion  projects during the period  1.11.75 to  20.10.80. The  incentives  consisted partly of  higher percentage  of levy-free  sugar quota  and partly of  concessions in  the  excise  duty.  It  was  also announced that the eligible sugar factories will be entitled for the  above-said incentives  for a  period of  five years from the date of their completion of licensed expansions. In the year  1978, there was a major change in the sugar policy i.e. the  control and  the price  distribution, release  and movement of  sugar was  lifted w.e.f.  August 16, 1978. As a result of  this decontrol,  the classification  -  levy  and levy-free sugar  - no  longer existed  and consequently  the benefits  under   the  incentive   scheme  were   no  longer required/available. While  so, the Central Government w.e.f. December 17, 1979 again modified the sugar policy to provide for partial  control with  dual pricing as was the situation prior to August 16, 1978. The Government after examining the various altered parameters for revising the scheme announced a revised  scheme to  provide incentives  to the  new  sugar factories and  expansion projects.  This revised scheme came

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into effect  from the  sugar year 1980-81. At this juncture, it must  be noted  that the  percentage of  levy-free  sugar announced in  the 1975  scheme is higher than the percentage announced in  the 1980  scheme. The  new scheme  of the year 1980 was  made applicable  even to those industries who were otherwise entitled to the benefit of the scheme announced in the year 1975. The appellants after completing the expansion projects at the two places on 6.8.80 and 13.8.80 applied for necessary eligibility  certificate for  additional free-sale sugar entitlements  as per  the ’incentives  announced.  The respondents allowed  the incentives  as per the revised 1980 scheme. However, the appellants asserted that the incentives as per  the scheme  announced in the year 1975 must be given to them. The respondents did not accede to this claim of the appellants.      Aggrieved by  that they  moved the  High Court  for the issue of  a writ  of mandamus directing the first respondent to issue  a supplementary  eligibility certificate  for 1.63 lakh quintals  of additional freesale sugar entitlement over and above the entitlement declared by the Central Government on the  basis of revised 1980 scheme for the year 1980-81 to 1982-83. In addition to that, the appellants also prayed for a writ of mandamus directing the first respondent to issue a further eligibility  certificate determining  the amount  of additional free-sale  entitlement to  the appellants’  sugar factory for the year 1983-84 and 1984-85 under the incentive scheme of the year 1975.      The High  Court rejecting  the claim  of the appellants dismissed the writ petition.      Mr. Shanti  Bhushan, learned  Senior counsel  appearing for  the   appellants  contended   that  the   Principle  of Promissory Estoppel  squarely applies  to the  facts of this case. According to him, the new scheme announced in the year 1980 cannot  be applied  to the  appellants  merely  because there was  no control for the sale of sugar by the producers for a  short  period.  It  is  further  contended  that  the appellants had  spent huge  amounts towards the expansion of sugar factories at two places on the incentives announced in the year  1975 and  therefore,  they  cannot  be  denied  on account of the decontrol of the sugar for a short period. In support of  that argument,  he placed  heavy reliance  on  a judgment of  this Court in Union of India & Ors. vs. Godfrey Philips India  Ltd. (1985  4 SCC  369). On  the other  hand, learned  counsel   appearing  for  the  respondents  placing reliance on  the decontrol  order submitted  that during the period when  there was  no control  of sale  of sugar by the producers, the  producers were enabled to sell their hundred percent of  that production  in  the  open  market  and  the benefit  flowing  from  such  decontrol  changed  the  whole complex and,  therefore, the appellants cannot be allowed to contend that the Government cannot change the scheme.      We have  considered the  rival submissions. 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 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  also found  a cause of action. This doctrine  is applicable  against the  Government in the exercise of  its governmental  public or executive functions and the doctrine of executive necessity or freedom of future executive  action,   cannot  be   invoked  to   defeat   the

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applicability  of   this  doctrine.   It  is  further  well- established that  the doctrine  of promissory  estoppel must yield when  the equity so require. 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 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  estoppel would  be displaced in such a  case because  on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it (vide 1985 4 SCC 369 (supra)).      In this  case we  have found that the Government before refusing the  incentive scheme  of the  year 1975 have taken into account various factors including the decontrol of sale of sugar for the period from 16.8.78 to 17.12.79. Further if the prayer  of the  appellants were  to be  allowed, several lakhs of  quintals of  sugar will  have to  be  released  as incentive levy-free  sugar which  otherwise meant for public distribution system. We agree with the learned Judges of the High Court  when they  observed that  the  ’petitioners  who availed of  the resulting benefit due to decontrol cannot in all fairness  lay claim  to be  restored the  benefit of the incentives in  full now  over again though the basic premise became non-existent. The benefit under the subsequent scheme in force from November 15, 1980 has already been accorded to them in full measure’. The High  Court also  noticed another  important  factor  to decline the  relief prayed  for by  the appellants,  namely, that the  appellant company  had applied  for a grant of the licence in  the year  1975, had  mentioned  in  the  licence application that  the entire  expansion would be done by the said company  at its  own expense.  The company  was granted licence in February, 1975 and that time nobody could imagine about the  incentive scheme  which was announced on December 6, 1975.  The appellants,  therefore, cannot  argue that the scheme announced  induced them to undertake the expansion of which the licence had been received by it in February, 1975. The expansion  carried out by the appellants in pursuance of the licence issued in February, 1975 was independent and had nothing to do with the incentive announced in December, 1975 as observed by the High Court.      Taking all these factors into consideration, we have no doubt that  on the  facts of  this case,  the  Principle  of Promissory Estoppel  has no application at all. The judgment relied on  by the learned Senior counsel for the appellants, namely, Godfrey  Philips  case  supports  the  case  of  the respondents on  facts. In the result the appeal fails and is accordingly dismissed. No costs.