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CASE NO.: Appeal (civil)  653 of 2007

PETITIONER: State of U.P. & Ors

RESPONDENT: M/s. S.K. Theatre Productions & Ors

DATE OF JUDGMENT: 09/02/2007

BENCH: S. B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T (arising out of Special Leave Petition (CIVIL) No.5310 of 2006)

MARKANDEY KATJU, J.

       Leave granted.                  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) of 2004.  Heard learned counsels for the parties and perused  the record.         The facts of the case are that to promote film production in the State  of U.P. the State Government constituted a Society named Film Bandhu in  the year 2001 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 to the films made in regional languages in U.P. such as Avadhi,  Bhojpuri and Braj etc. These various incentives are mentioned in the booklet  entitled ’Uttar Pradesh Film Policy 2001’, copy of which has been supplied  to us.  These include trade tax exemptions, tax incentives, subsidy, two  weeks’ compulsory exhibitions of regional films, etc.         The respondents claim subsidy under clause 23.3 of the Film Policy.   The said clause 23.3 states :-        "23.3  Subsidy : A  subsidy of 25% of the cost  of production, subject to a maximum limit of Rs.10  lac, will be provided to films made 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 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 75%  shooting of which has been completed in the State,  a proportionate grant shall be given or the amount  of grant will be adjusted with rates of interest of  institutional finance for films."

       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  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,

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whose recommendations were approved by Film Bandhu vide approval letter  dated 27.5.2003, Annexure-6 to the writ petition.  Thereafter, the respondent  made various arrangements and shot the entire feature film in Lucknow.         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  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, 591/- being the remaining  amount claimed by him as subsidy, i.e., over and above the amount already  paid to him as 25% of the processing cost in the lab.         By the impugned judgment the writ petition was allowed and hence  this appeal.         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.10  lacs).  He submitted that 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.         On the other hand, learned counsel for respondent submitted that other  film producers had been granted 25% of the entire cost of production of the  film.         We are of the opinion that if other film producers were granted  subsidy of 25% of the cost of 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 of film processing in the lab (subject to a maximum of Rs.10 lacs)  and not the entire cost of the film production.             It is well settled that 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 possible, as is in the present case.          In these circumstances, we set aside the impugned judgment and  remand the matter to the High Court for a fresh consideration after calling  for 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.         For the reasons given above, we allow the appeal, set aside the  impugned judgment and remand the matter to the High Court.  No cost.