IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 2180 of 2006 (O/M). Date of Decision : August 27, 2010. M/s Grip Well Forgings and Tools, E-35, Industrial Area, Jalandhar, through Sh. Ajit S. Rana proprietor. ...... Petitioner . Versus. State of Punjab through Secretary to Government of Punjab, Department of Industries, Punjab Civil Secretariat, Chandigarh, and others ..... Respondents . CORAM: HON'BLE MR. JUSTICE AUGUSTINE GEORGE MASIH. Present:- Mr. D.S. Patwalia, Advocate, for the petitioner. Ms. Simsi Dhir Malhotra, AAG, Punjab, for respondents. AUGUSTINE GEORGE MASIH, J.. This writ petition has been filed by the petitioner for issuance of a writ of mandamus directing the respondents to release reimbursement due to the petitioner under the Freight Neutralization Scheme with effect from 01.04.2003, which claim was submitted by the petitioner, with a further prayer directing the respondents to adjust interest free loan instalment due from the petitioner to the respondents against the aforesaid reimbursement due and restraining them from seeking repayment of instalments of interest free loan on balance amount. The petitioner, which is a sole proprietorship Firm, is a registered Small Scale Industries Unit with the Department of Industries, in the State of Punjab, since 1989. It commenced production in September 1989 and is also registered with Sales Tax authorities. Petitioner-Unit is an C.W.P. No. 2180 of 2006 (O/M). -2- export oriented Small Scale Industry, exporting and manufacturing Hand Tools and Machine Tools. As Industrial Units set up in Punjab and which undertake export, were at dis-advantageous position, because of their geographical placement, they have to incur additional freight due to distance from the ports. With a purpose to offset this additional cost and to enhance competitiveness of industries, Government of Punjab under the ‘Industrial Policy Statement–2003’, formulated a scheme called the Freight Neutralization Scheme on 26.03.2003 (hereinafter referred to as ‘the Scheme’). Under the said Scheme, Industrial Manufacturing Undertaking Export Units were given freight assistance to the extent of 1% of the Free on Board (FOB) value of exports, subject to maximum of 50 lakhs per unit per annum. Light engineering including machine tools and auto parts were also held eligible for the said benefit. The Scheme was notified on 11.09.2003, according to which, budgetary allocation upto Rs. 50 crores per annum was to be made to the Industries Department by the State Government, which was to be released on quarterly basis. The Scheme was to come into force from 01.04.2003. Clause 6.4 of the Scheme provided that disbursement of amount would be made by the Directorate of Industries on quarterly basis. Since, the petitioner was exporting large quantity of its production, it applied for incentives to the respondents from time to time, as per the Scheme commencing from 01.04.2003 to 30.09.2005, the total amount of subsidy incentives came to Rs. 30,94,063/- for the said period. Despite making various written requests to the respondents to release freight subsidy, no amount was released to the petitioner, forcing it to file the present writ petition. It has been further pleaded that as a part of the Industrial Policy Statement-1978 in the State of Punjab, the petitioner was sanctioned interest C.W.P. No. 2180 of 2006 (O/M). -3- free loan for four years being 1990-91 - Rs. 2,94,000/-, 1991-92 - Rs. 4,48,000/-, 1992-93 - Rs. 4,48,300/-, and 1993-94 - Rs. 5,00,000/- respectively. This interest free loan availed of by the petitioner, was to be returned in three interest free instalments falling due on 08.12.2004, 08.12.2005, and 08.12.2006 for an amount of Rs. 5,63,434/- each. First instalment of interest free loan, which was due on 08.12.2004, was repaid on 31.03.2005. Second instalment was falling due to the petitioner, the General Manager, District Industries, Jalandhar/respondent No. 3 issued a letter reminding this fact, which was received on 23.11.2005, asking for repayment of loan amount due on 09.12.2005. Since the petitioner claimed to be entitled to release of freight subsidy as per the Scheme, it submitted a detailed representation to the respondents on 02.12.2005, stating therein that the second instalment of loan be deducted from the subsidy and balance subsidy be paid to it. Another letter dated 09.12.2005 was received by the petitioner for deposit of 2nd instalment and it was further stated therein that as no amount was received from the Government of Punjab by the Industries Department for disbursal of the freight subsidy, the same could not be paid to the petitioner nor could be adjusted against the second interest free loan instalment, which was due. It is at this stage that the petitioner approached this Court through the present writ petition, praying for the relief, as has been mentioned hereinabove. Counsel for the petitioner submits that as per the Scheme placed on record, according to which the petitioner-Unit is entitled to freight subsidy, the budgetary allocation stands made and non release of amount by the respondents is unjustified and without any basis. Unless the Scheme is withdrawn or modified, the rights accrued thereunder would continue and the petitioner would be entitled to all the benefits under the said Scheme. He C.W.P. No. 2180 of 2006 (O/M). -4- further submits that the doctrine of estoppel would come into play and the State cannot shirk its responsibility under the said Scheme. Merely, because no fund has been released by the State Government for disbursement under the said Scheme, would not be a justifiable ground for non release of amount of freight subsidy to the petitioner. In support of these contentions, counsel has relied upon the judgment of Hon’ble the Supreme Court in the case of Southern Petrochemical Industries Co. Ltd. Versus Electricity Inspector and ETIO and others, (2007) 5 Supreme Court Cases, 447. On the other hand, counsel for respondents has not disputed the Freight Neutralization Scheme, which came into force from 01.04.2003 and was framed under the ‘Industrial Policy-2003’. However, it has been stated that as per Clause-2 of the Scheme, the claims are to be entertained upto the amount provided for this purpose and in case, no amount is provided, nothing can be paid and the claims will not be carried forward to the subsequent year. During the financial year 2003-04, 2004-05, and 2005-06, no money was provided by the State Government to the Department of Industries due to financial constraints and stringency. No payment on account of freight subsidy was made to any of the Units in the State during these periods and these claims have lapsed. It has been stated by the respondents that no clause of the Scheme provide for adjustment of interest free loan instalment due from the petitioner against the freight subsidy claim of the petitioner nor does there exist any provision in the ‘Industrial Policy Statement-1978’, under which the interest free loan was disbursed to the petitioner or the agreement deeds executed by the petitioner with the State Government with regard to the interest free loan. The petitioner was, as per the agreement, required to return the interest free loan on the stipulated dates and in case of non payment of the same, penal interest of 16% per annum was to be charged. C.W.P. No. 2180 of 2006 (O/M). -5- Counsel for respondents further submits that the petitioner is not entitled to any relief, as has been claimed in the writ petition, as the provisions as contained in the Scheme are very clear and specific that the amount would be disbursed on receipt of the same from the State Government. As no amount was released by the State Government under the Scheme, no disbursement was made. As per Clause-2 of the Scheme, the amount of assistance was to be released on quarterly basis. In case, at the end of the quarter, the rightful claims made by the Units to be covered under the Scheme during that quarter comes out to be more than the quarterly budgetary allocation, the amount of assistance was to be reduced on pro rata basis and disbursement made accordingly at the end of the quarter. The unutilised funds, if any, of the preceding quarter was to be carried forward to the next quarter, but there was no carry forward of balance funds , if any, at the end of year to next financial year. No right has accrued to the petitioner under the Scheme as no fund was released because of financial constraints. The question of promissory estoppel also would not come into force in the present case. It is not case of the petitioner that the petitioner has been left out and any other Unit has been disbursed the freight assistance under the Scheme. She contends that the agreement with regard to the interest free loan is an independent contract, which is neither dependent or connected with the Scheme and, therefore, both the two cannot be co-related with each other. She accordingly prays for dismissal of the present writ petition as the same is devoid of merit. I have heard counsel for the parties and have gone through the records of the case. The Punjab Government notified ‘Industrial Policy Statement- 2003’ on 26.03.2003, under which a provision for freight neutralization to the C.W.P. No. 2180 of 2006 (O/M). -6- extent of 1% of Free on Board (FOB) value of exports, subject to maximum of Rs. 50 lakhs of freight incurred on transporting goods from place of manufacture to the place from where these were to be shipped, was made. For implementation of the provision of the Scheme, State of Punjab notified inland freight neutralization scheme on 11.09.2003. This Scheme was formulated in order to enhance competitiveness of Industrial Units Undertaking Export, which were situated in the State of Punjab as it was felt by the State of Punjab that Industrial Units in Punjab were at dis-advantageous position due to their geographical distance from the sea ports from where the manufactured goods were to be shipped. The freight assistance to the extent of 1% of Free on Board (FOB) value of exports, subject to maximum of Rs. 50 lakhs per unit per annum was proposed to be provided to the manufacturing units of Punjab Undertaking Export. The sectors were also specified, of which one was light engineering including machine tools, auto parts, cycle parts etc., petitioner-Unit falls under this sector. However, in case the actual total freight for transporting the goods from place of manufacture to the sea port was less than 1% of the Free on Board (FOB) value, the freight assistance was to be restricted to actual freight. As per Clause-2 of the Scheme, budgetary allocation upto Rs. 50 crores per annum was to be made to Industries Department by the State Government, which was to be released on quarterly basis for implementation of the Scheme. In case, at the end of the quarter, the rightful claims made by the Units to be covered under the Scheme during that quarter comes out to be more than the quarterly budgetary allocation, the amount of assistance was to be reduced on pro rata basis and disbursement made accordingly at the end of the quarter. The unutilised funds, if any, of the preceding quarter was to be carried forward to the next quarter, but there was no carry forward of balance funds , if any, at the end of C.W.P. No. 2180 of 2006 (O/M). -7- year to next financial year. Clause 6.4 deals with the disbursement of the amount, according to which disbursement of all sanctioned cases were to be made from the Directorate of Industries on quarterly basis. In case, the total sanctioned amount during the quarter was more than budgetary allocation for the quarter, the per unit sanctioned assistance amount was to be reduced accordingly on pro rata basis. According to this Clause, the disbursement of amount of the sanctioned cases under the Scheme was dependent upon the sanctioned amount for the said purpose. As per Clause-4, the Scheme shall come into force with effect from 01.04.2003 and the freight assistance shall be admissible on goods shipped on or after 01.04.2003. It is not in dispute that the petitioner-Unit is eligible for incentives under the Scheme as per Clause-5, but the disbursement is dependent on Clause-6.4 of the Scheme, according to which the Directorate of Industries was to make disbursement on quarterly basis out of the total sanctioned amount. Since, no amount was sanctioned or provided by the State Government to the Department of Industries during the Financial Year 2003- 04, 2004-05, and 2005-06, due to the financial constraints and stringency, no disbursement of freight subsidy was made to any of the claimants under the Scheme. Further as per Clause-2 of the Scheme, the claims were to be entertained upto the amount provided. For the purpose of granting incentives under the Scheme, the claims would not be carried forward to the subsequent year and the same would lapse. No industrial unit in the State of Punjab has been disbursed the incentive under the Scheme during the period in question. In the present case, as no amount was provided for, therefore, no incentives could be provided to the claimants under the Scheme. The result thereof was that the claims lapsed. In view of the above, the petitioner is not C.W.P. No. 2180 of 2006 (O/M). -8- entitled to any freight subsidy, as has been claimed by it under the Scheme. In any case, the prayer made by the petitioner for adjustment of the interest free loan instalments against the freight subsidy due to the petitioner under the Scheme, cannot otherwise also be accepted. It is an admitted position that as per the ‘Industrial Policy Statement-1978’, the petitioner was granted interest free loan of Rs. 16,90,300/-. The said interest free loan was sanctioned and disbursed as follows :- Sr. No. Year of claim Amount Sanctioned/ Disbursed on date 1. 1990-91 Rs. 2,94,000 08.12.1993 2. 1991-92 Rs. 4,48,000 19.04.1994 3. 1992-93 Rs. 4,48,000 27.04.1994 4. 1993-94 Rs. 5,00,000 15.06.1995 The petitioner executed agreement deeds with the State Government on 08.12.1993, 19.04.1994, 27.04.1994, and 15.06.1995 (Annexure-R-2 to Annexure-R-5 respectively). As per Clause-6 of the aforesaid agreements, the petitioner, who was a mortgagor, agreed that the entire amount of loan advanced under the Scheme would be repayable in three annual equal instalments, which would fall due on 11th, 12th, and 13th anniversary of the disbursement of the first instalment of loan, according to which the instalment amount came to Rs. 5,63,434/-. The first instalment was due on 08.12.2004, second on 08.12.2005, and third on 08.12.2006. The petitioner failed to repay the instalments on time, but on issuance of letter repaid first instalment on 31.03.2005. It was provided in the Clause-4 of the aforesaid agreement that in case of default, in respect of outstanding instalments of amount on the due date, the State Government shall have right to recover the entire loan with a penal interest at 16% per annum. The petitioner failed to deposit 2nd instalment of interest free loan with the C.W.P. No. 2180 of 2006 (O/M). -9- respondents, which was due on 08.12.2005 and the petitioner has violated the terms and conditions of the agreement executed by it, thus, rendering it liable to pay penal interest. It would not be out of way to mention here that in the abovementioned agreements, there is no provision to adjust interest free loan amount due from the petitioner to the respondents against freight subsidy claims due under the Freight Neutralization Scheme nor does the provisions of the Industrial Policy Statement-1978 provide for the same. Even the Freight Neutralization Scheme-2003 does not provide for any such adjustment of interest free loan, therefore, the claim as made by the petitioner in the writ petition is totally misplaced and even if the petitioner is held entitled to its claim under the Freight Neutralization Scheme, it cannot legally press for adjustment of interest free instalments for the interest free loan it has availed. The doctrine of promissory estoppel, which has been sought to be invoked in the present case, would apply only where in pursuance of and in furtherance of a promise made by a State to grant incentives under the Scheme, the claimant of such benefit had taken steps based on such assurance. In the present case, interest free loan of Rs. 16,90,300/- was disbursed to the petitioner in four yearly instalments under the Industrial Policy Statement- 1978 during the period 1990-91, 1991-92, 1992-93 and 1993-94. The petitioner executed agreement deeds with the Government on receipt of each instalment (Annexures-R-2 to R-5), which provide for return of loan on 11th, 12th, and 13th anniversary of first instalment of the loan. The last agreement deed is dated 15.06.1995 (Annexure-R-5). The Freight Neutralization Scheme came into effect from 01.04.2003. When the petitioner is claiming adjustment of interest free loan received by it against the claim of reimbursement, which has been made now under the Freight Neutralization Scheme 2003, the doctrine of promissory estoppel cannot be invoked. C.W.P. No. 2180 of 2006 (O/M). -10- In the judgment relied upon by counsel for the petitioner in the case of Southern Petrochemical Industries Co. Ltd. (supra), Hon’ble the Supreme Court in para-121, has held as follow :- “121. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. The appellants had undoubtedly been enjoying the benefit of (sic exemption from) payment of tax in respect of sale/consumption of electrical energy in relation to the cogenerating power plants.” In view of the above, the principle which is being sought to be invoked in the present case by the petitioner, is not at all applicable and, thus, it is held that the petitioner’s claim for adjustment of his interest free loan against the claim under the Freight Neutralization Scheme, 2003 is totally misplaced and without any basis. This is a classic case of greed and lust, where an effort has been made to loot the public funds. It is not the case of the petitioner that it is going through the lean phase or has financial problems in returning the interest free loan. The petitioner does not intend to return the loan, which was disbursed to it during the period 1993 to 1995, which it had utilized till December, 2004, without paying any interest. It has harvested fruits of interest free investment and the claims made by the petitioner shows that it is doing good business. The effort is, thus, not to return the loan, but to usurp the same. The State which is facing a financial crunch and is unable to fund the development schemes cannot be burdened with such unjustified claims especially when the agreements entered into between the petitioner and the C.W.P. No. 2180 of 2006 (O/M). -11- State Government at the time of disbursement of loan are very clear and specific, which the petitioner and respondent/State are bound to comply with. Despite violating the terms and conditions of the agreements, the petitioner is resorting to ways and means to avoid repayment of interest free loan. The Court cannot be a tool and means in such an unholy endeavour, which the petitioner has intended to venture through the present writ petition. I do not find any merit in the present writ petition and dismiss the same. The State should take immediate steps to recover the dues, if already not recovered, from the petitioner. (AUGUSTINE GEORGE MASIH) JUDGE August 27, 2010. sjks. Whether refer to the Reporter. : _______________