NON REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 4986-4987 OF 2010 (Arising out of Special Leave Petition (Civil) Nos. 17068-17069 of 2005)

Ras Resorts & Apart Hotels Limited & Anr.                              ….Appellants  

Versus

Union of India and Ors.                ….Respondents

J U D G M E N T

AFTAB ALAM, J

1. Leave granted.  

2. Heard learned counsel for the parties.  

3. Appellant  no.1  is  a  public  limited  company  incorporated  and  

registered under the Companies Act and appellant no.2 is one of its share  

holders and Managing Director. The appellants went to the Bombay High  

Court seeking a direction to the respondents to grant the company interest  

subsidy and to pay to the financial institutions/banks 5% of the amount of

interest  charged  by  them  on  the  loans  taken  by  the  appellants  for  

construction of their hotel at Silvassa. In support of the claim, the appellants  

tried  to  invoke  the  plea  of  promissory  estoppel  relying  upon  the  Draft  

Seventh Five Year Plan 1985-90 and certain communications received by  

the company from the officers in the Department of Tourism, Dadra and  

Nagar Haveli, UT. The Bombay High Court rejected the appellants’ claim  

and dismissed the writ petition (No.2705 of 1990) by judgment and order  

dated November 4, 2004. The appellants then filed a review petition (bearing  

No.19 of 2005). This too was dismissed summarily by the High Court by  

judgment and order dated March 17, 2005. This appeal is brought to this  

court against these two orders.

4. The brief facts relevant for the purpose of these appeals may be stated  

thus.  Another  public  limited  company,  (described  as  a  sister  concern  of  

appellant no.1) made an application before the respondents on May 28, 1984  

for grant of lease of a piece of land. It was given 1.35 hectares of land in  

Silvassa, Dadra and Nagar Haveli on lease on June 12, 1984. The lease was  

for construction of a three-star hotel over the leased out land. Appellant no.1  

took another piece of land measuring 1.39 hectares, adjoining the piece of  

land earlier allotted to its sister concern, on lease on February 6, 1985 but it  

was not for any specific purpose. Since no construction was made on the  

2

leased out land within the stipulated period of one year, the appellant no.1  

was given a show cause notice dated May 9, 1985 why the allotted plot  

should not be forfeited to the government without any notice? The company  

gave its reply on May 11, 1985 explaining the circumstances leading to the  

delay in the construction of the hotel.  On October 14, 1985, appellant no.1  

got the piece of land given on lease to its  sister concern conveyed in its  

favour.  And  finally  on  September  2,  1986  the  appellants  began  the  

construction of the hotel building after performing Bhoomi Puja.

5. It is stated by the appellants that the Union Territory of Dadra and  

Nagar Haveli being a backward area failed to draw any significant tourist  

inflow. Hence, with a view to attract investments in the area, which in turn  

would  help  in  the  promotion  of  tourism industry  the  government  of  the  

Union Territory offered a number of incentives to the hoteliers. One such  

offer, according to the appellants, was to subsidise interest on loan by 5%.  

One of the materials on which the appellants strongly rely in support of their  

case is the draft seventh five year plan 1985-90 and Annual plan 1985-86.  

In the plan document it was provided as follows:  

“…It is proposed to subsidise interest on loan by 5%. Besides,  Administration  offers  25%  subsidy  on  fixed  assets  as  the  territory  has  been  declared  as  "No  Industry  District  by  Government of India"…”

3

6. There is no dispute that the appellants have received 25% subsidy on  

fixed assets and the present proceeding relates to their claim for 5% interest  

subsidy.

7. We completely fail to see how the draft seventh five year plan or the  

annual plan for the year 1985-86 can support the appellants’ claim based on  

the plea of promissory estoppel. The annual plan for the year 1985-86, as  

part of the seventh five year plan was prepared by the Administration of  

Dadra and Nagar Haveli in or about January 1985. The first piece of land  

was given on lease to the sister concern of appellant no.1 on June 12, 1984,  

on the basis of an application made on May 28, 1984. The lease was for the  

express purpose of constructing a three-star hotel over the leased out land. It  

is, thus, evident that the land was taken at a point of time when there was not  

even  a  scent  of  any  interest  subsidy.  Though,  the  land  was  formally  

conveyed in favour of appellant no.1 by its ‘sister concern’ on October 14,  

1985, it appears that the allotment in favour of the so called sister concern  

was  benami in  nature,  for  the  show cause  notice  for  not  completing  the  

construction in terms of the lease was given (before the formal conveyance  

of the land in its favour) to appellant no.1 and it was appellant no.1 that had  

given reply to the show cause notice. Appellant no.1 was, thus, fully aware  

that the only purpose for which the land could be used was construction of a  

4

hotel and further that the condition to construct a hotel over it was attached  

to the lease from before the proposal for interest subsidy was mooted. After  

formally acquiring it, they amalgamated with it the other piece of land taken  

on lease by them, thus bringing for all intent and purpose the second piece of  

land too under the same condition that was attached to the first one. In the  

aforesaid facts and circumstances, we fail to see, how it can be contended by  

the appellants that they made huge investments and altered their position on  

the basis of any representation made by the respondents.

8. More  importantly,  there  was  no  firm  offer  or  representation.  The  

seventh five year plan was in the draft form and the subsidy on interest was  

merely a proposal. According to the respondents, the proposal for interest  

subsidy was only mooted  in the  seventh five year  plan pertaining to  the  

period  1985-90  and  the  proposal  for  grant  of  5%  interest  subsidy  was  

included  for  consideration  as  part  of  overall  comprehensive  plan  for  

development of tourism in the Union Territory. This plan was to be included  

in the annual plans for subsequent years subject to the approval and sanction  

by the Planning Commission and the Government of India. But the Planning  

Commission declined sanction to the proposal. Hence, no specific scheme  

was  formulated  to  grant  interest  subsidy  and  the  terms  and  conditions  

subject to which payment of 5% interest subsidy would be made was also  

5

not spelled out.  The necessary details  in this  regard are furnished by the  

respondents in their counter affidavits filed before the High Court and this  

Court. In paragraphs 5 and 6 of their counter affidavit filed in this Court the  

respondents have even reproduced the relevant extracts from the minutes of  

the meetings held at the Planning Commission on February 28, 1985 and  

March 6, 1986 from which it is clear that the proposal mooted out in the  

draft  five  year  plan  1985-90  failed  to  get  the  Planning  Commission’s  

approval.  For  want  of  the  sanction  from  the  Planning  Commission  the  

proposal did not get finalised and the scheme of interest subsidy never came  

into being for enforcement. It is contended by the respondents, and in our  

view rightly, that a mere proposal in the plan that was yet to be finalised  

cannot be taken as an offer or a representation to the appellants.

9. The next material on which the appellants rely heavily is an exchange  

of correspondence with respondent no.4, the Deputy Conservator Forests &  

Tourism In-charge. On August 6, 1985 the appellants wrote a letter to him  

seeking  confirmation that  5% interest  subsidy was available.  Respondent  

no.4 gave his reply by letter dated August 29, 1985 stating:

“….I am to inform that we have proposed to provide for  adequate incentive to hotel industry….It is  proposed to  subsidise interest on loan by 5% besides 25% subsidy on  fixed asset under the VIIth Five Year Plan”  

6

10. The appellants  once  again  wrote  to  respondent  no.4  on  March 24,  

1986  asking  him  to  confirm  about  the  interest  subsidy.  This  time  the  

appellants got the desired reply. Respondent no.4 without the loss of a single  

day wrote back on March 25, 1986 stating:

“….I am to inform that  Hotel  is  entitled  for 5%  interest  subsidy  besides  25%  subsidy  on  fixed  asset…”

11. There is nothing in the government records to sanction or justify the  

assurance given by respondent and the alacrity with which the appellants  

were able to get the desired assurance does not leave the communication  

with  much  credibility.  As a  matter  of  fact  the  respondents  maintain  that  

respondent no.4 was not competent or authorised to give any such assurance  

to  the  appellants.  In  regard to  the  letter  dated March 25,  1986 given  by  

respondent no.4 to the appellants it is stated by the respondents in paragraph  

16 of their counter affidavit as follows:  

“16. With reference to paragraph 10 of the petition,  it is submitted that on 25.3.1986, when Ext. E was  written  there  was  no  sanctioned  proposal  or  scheme pertaining to any assistance muchless the  alleged  5%  interest  subsidy  in  favour  of  the  petitioners or other hoteliers.   The letter,  Ext.  E.  was,  therefore,  patently  irrelevant  and is  without  any basis.  Significantly, the letter dated 25.3.1986  is in reply to the petitioner’s letter dated 24.3.1986.  The very fast action of the employees concerned  shows  that  it  was  issued  without  application  of  

7

mind even to the facts from record.  The writer of  the  letter  did  not  obviously  bother  to  find  out  whether the Planning Commission or the Govt. of  India or  even the administration under whom he  worked  had  in  fact  introduced  or  brought  into  existence a scheme of giving 5% interest subsidy  to the petitioners.  No alleged assurance or promise  or  representation  could  have  been  made  firstly,  because  there  was  no  such  sanctioned  plan  proposal or sanctioned scheme, and secondly, the  officer had no authority to make any assurance or  promise  or  representation  so  as  to  bind  the  respondents.”                             

12. From the other materials on record it becomes clear that the appellants  

were having serious difficulties in getting loan for their project. The Gujarat  

State Financial Corporation whom the appellants had approached for loan  

did  not  seem  to  consider  their  request  favourably.  The  appellants  were  

anxious to secure the loan for their project.  In those circumstances,  even  

before  writing  the  second  letter  to  respondent  no.4  the  appellants  had  

addressed a letter to the Lt. Governor, Goa, Daman and Diu plainly asking  

him to canvass for the grant of  their  loan by the Gujarat  State Financial  

Corporation  and  in  particular  “to  impress  upon  two  of  the  important  

members on the board of Gujarat State Financial Corporation (viz. Shri R.  

D.  Shah,  Chairman,  GSFC  &  Shri  H.K.  Khan,  Addl.  Chief  Secretary,  

Government of Gujarat) to reconsider their decision and grant a term loan of  

Rs.60/- lakhs”. (We are surprised that not only such a letter was written to  

8

the Lt. Governor but quite unabashedly it has also been brought on record  

before this court!) Arguing its case for grant of the term loan of rupees sixty  

lakhs it was stated in paragraph 9 of the letter:

“9.The Administration saw an opportunity to help  improve  the  Union  Territory’s  economy  by  supporting this hotel and hence has made provision  in its Seventh 5-Year Plan for giving a 5% interest  subsidy  on  term  loans  and  25%  capital  subsidy  limited to Rs.25/- lakhs.  The purpose of both these  subsidies  is  to  provide  a  cushion in  case  of  any  setback  due  to  lack  of  marketability  of  hotel  rooms.  This is an important aspect and must be  considered hotel for all hotels setup in Backward  Area.”                               

13. Having thus based their case for grant of loan inter alia on the basis  

that interest on the loan would be subsidised by 5% it was essential for them  

to  secure  the  assurance.  And  that  is  how  the  appellants  seem  to  have  

obtained the assurance from respondent no.4.                                      

14. It thus appears that even though the proposal for interest subsidy was  

actually  aborted  for  want  of  sanction  and  approval  by  the  Planning  

Commission, the appellants were using it for their own ends.

15. In support of the plea of promissory estoppel the appellants also rely  

upon a communication from the Central Government in reply to the request  

of approval made to it. It appears that some officer in the Union Territory  

wrote to the Central Government requesting the approval of the payment of  

9

interest subsidy and asking for the necessary procedure to be followed. The  

Central Government gave its reply by letter dated February 24, 1989 stating:

As the scheme of 5% interest subsidy is operated  by the Union Territory of Dadra and Nagar Havel  and the payment involved is to be made from their  own  funds,  the  Central  Department  of  Tourism  does  not  come  into  the  picture  for  giving  No  Objection for the disbursement of the subsidy.”

16. This  letter  too  is  of  no  help  to  the  appellants.  Firstly,  it  was  a  

government to government communication and not a representation to the  

appellants. Secondly, the reply of the Central Government cannot be read to  

hold that in fact there was in existence a scheme of interest subsidy of the  

Administration of the Union Territory. All that the Central Government said  

was that it had no concern with the matter.

17.  Mr.  Anand Grover,  learned counsel  for the  appellants  strenuously  

argued  that  the  company  was  granted  loan  by  financial  institutions  and  

banks  and  the  repayment  of  the  loans  were  scheduled  on  the  basis  that  

interest on the loans would be subsidised by the respondents by 5%. Mr.  

Grover  submitted  that  non-payment  of  the  interest  subsidy  by  the  

respondents caused acute financial stringency to the appellants. Further, in  

April 1986 the appellants had issued a prospectus for public issue clearly  

10

stating that subsidy was available both on capital assets and interest and on  

that basis had received a large amount of public investments.

18. We are quite unimpressed by the submissions.  The loan repayment  

schedule  was drawn up by the  banks  on the  representation  made by the  

appellants  themselves for which apparently there was no basis.  Similarly,  

they tried to attract public investments in the company by saying something  

in the prospectus for which there was no sanction. We, thus, again see the  

same picture emerging. Rather than making huge investments and, acting on  

the  basis  of  any  representation  made  by  the  respondents,  altering  their  

position adversely, the appellants tried to use the issue of interest subsidy to  

their  advantage  even  though  it  was  only  a  proposal  that  in  fact  never  

materialised into a scheme.     

19. Mr. Grover lastly took us through the letters sent by the appellants and  

their creditors to the respondents making demand for disbursement of the  

5% interest subsidy. Learned counsel submitted that in reply to these letters  

the respondents never squarely denied the appellants entitlement to interest  

subsidy but they only tried to hedge the issue.

20. In our considered view the letters referred to by the Counsel too are of  

no help to the appellants.

11

21. On  a  careful  consideration  of  the  materials  on  record  and  the  

submissions made on behalf of the appellants we find ourselves in complete  

agreement with the view taken by the Bombay High Court.

22. In the end we find no merit in these appeals, which are, accordingly  

dismissed. No order for costs.

        ….……………………………..J (AFTAB ALAM )

       ………………………………..J            (SWATANTER  KUMAR)

New Delhi, July 7, 2010

12