SCA/24233/2007 1 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 24233 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= ESSAR OIL LTD & 1 - Petitioner(s) Versus STATE OF GUJARAT THRO' SECRETARY & 3 - Respondent(s) ================================================= Appearance : MR KS NANAVATI, SR. ADVOCATE with MR KEYUR GANDHI for NANAVATI ASSOCIATES for Petitioner(s) : 1 - 2. MR KAMAL TRIVEDI, ADVOCATE GENERAL with MS SANGEETA VISHEN, AGP for Respondent(s) : 1, 4, DS AFF.NOT FILED (N) for Respondent(s) : 1, NOTICE SERVED BY DS for Respondent(s) : 2 - 3. ================================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 22/04//2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) This petition under Article 226 of the Constitution is directed against denial of sales-tax incentive benefit to the first petitioner Company–Essar Oil Ltd. (hereinafter referred to as the SCA/24233/2007 2 JUDGMENT “petitioner” or the “petitioner Company”) under the Government of Gujarat Capital Investment Incentive Premier Prestigious Scheme, 1995–2000 (hereinafter referred to as “the said Scheme”). 2. The facts leading to filing of this petition may be set out in three parts – the first part relating to initial setting up of the project and the scheme floated by the State Government for granting incentives to the industries coming up in the backward areas; the second part narrating the events which prevented the petitioner Company from completing the project within the time limit and the consequent impact by denial of the benefits of the sales-tax incentives and the third part indicating how the petitioner Company could complete the project after the Hon'ble Supreme Court removed the cloud. 3.0 The Project and the Sales Tax Incentive Scheme 3.1 The petitioner Company came forward to set up a major venture in Vadinar in Jamnagar District, Gujarat State as a 100% export oriented unit for refining of petroleum products with a capacity of 9 million tones per annum at an estimated project cost of Rs.1900 crores. The State Government, therefore, requested the Central Government in the year 1990 to clear the petitioner Company's proposal for setting up the oil refinery. The clearance for setting up the oil refinery was granted by the Government of India. 3.2 On 10.11.1994, the petitioner filed an application for right of way for laying Submarine Crude Oil Pipeline, Cooling Water/Return Water Pipeline and Product Jetty for establishment of its Refinery Project at Vadinar, District Jamnagar, to the Conservator of Forests, Marine National Park, Jamnagar. On 13.02.1995, the State Government requested the Chief Conservator of Forests, Regional Office, Western Region, Bhopal, to move the SCA/24233/2007 3 JUDGMENT Government of India to issue suitable orders to allow the first petitioner to make geophysical survey in Marine National Park/Sanctuary area. The proposal was forwarded by the Chief Conservator of Forests, Bhopal to the Government of India on 15.05.1995. On 08.09.1995, the State Government in its Forests and Environment Department informed the Government of India in the Ministry of Environment and Forests, inter alia, that the approval in principle was granted to the petitioner Company to install Single Buoy Mooring / Crude Oil Terminal / Jetty and connecting pipeline in the National Marine Park and Sanctuary area in Vadinar, District Jamnagar on the terms and conditions to be decided in due course by the State Government. 3.3 The State Government in the Industries and Mines Department vide Resolution dated 11.09.1995 introduced a scheme called “Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000”. The operative period of the Scheme was stated to be with effect from 16.08.1995 upto 15.08.2000. It is not necessary to refer to all the clauses of the Scheme. Suffice it to state that the petitioner fell in the category of premier unit i.e. new industrial unit having a project cost of more than Rs.1,000/- crores and employing 100 workers on a regular basis and following the employment policy of the State Government. Clause (v) of the Scheme defined premier unit in the following terms :- “(v) PREMIER UNIT A new industrial unit or industrial complex fulfilling the following criteria will be considered for granting status of “Premier Unit”. (a) The industrial unit shall have a project cost of Rs.500 crores or more. Such units having project cost of Rs.1,000 crores and above shall be entitled for extended period to avail incentive as provided under para 6 B. SCA/24233/2007 4 JUDGMENT (b) Only one unit per taluka will be eligible for the Premier Unit status. In banned area no unit is permitted. (c) The unit shall employ at least 100 workers on a regular basis and shall follow the employment policy of the State Government.” Part–II of the said Scheme provided that the rate of incentive would depend on the location, investment and status of the project. The incentives offered were sales-tax exemption or sales-tax deferment or composite scheme. There is no dispute about the fact that the petitioner opted for sales-tax deferment scheme. As per clause 6(i)(B), the rate of incentive applicable to the petitioner company was the rate available for the most backward area. The extent of exemption was 125% of eligible fixed capital investment. 3.4 Since the petitioner company's investment was going to be more than Rs.1,000 crores, the duration of incentive of sales-tax deferment was to be for a period of 17 years from the date of commercial production. Clause 6(v) of the said Scheme provided for effective steps for extending date of commercial production in the following terms :- “(v) Effective steps for extending date of commercial production : The unit which cannot go into commercial production before expiry of the scheme will be allowed to go into commercial production beyond the last date of the scheme provided it has taken the following effective steps : (1) The industrial unit should have obtained provisional registration as a Prestigious/Premier unit before 15th August 2000. (2) 25% of project cost should have been incurred before 15 th August 2000 . The unit which has taken above effective steps will be allowed to go into SCA/24233/2007 5 JUDGMENT commercial production as shown below : (a) The unit with project cost above Rs.100 crores but below Rs.300 crores should go into commercial production on or before 15th August 2002. (b) The unit with project cost more than Rs.300 crores should go into commercial production on or before 15 th February 2003. Such units shall have to apply to industries Commissioner for extending date of commercial production by 31st August 2000.” [emphasis supplied] 3.5 It is the petitioner's case that the petitioner had obtained provisional registration as a Premier Unit by Industries Commissioner letter dated 25.06.1999 (Annexure – I) that more than 25% of the project cost was incurred before 15.08.2000 and that as per the above clause of the Scheme, the petitioner unit with project cost of more than Rs.300/- crores was required to go into commercial production on or before 15.02.2003. The time limit was subsequently extended upto 15.08.2003 vide Government Resolution dated 12.04.2001 (Page-313 – Annexure-P). This extension was also granted subject to the condition that the unit ought to have incurred at least 25% of the original project cost upto 15.08.2000. 4.0 Injunction granted by High Court Against Petitioner Company and Adverse Consequences. However, before the petitioner Company could go into commercial production, the following events took place preventing the petitioner Company from implementing the project :- 4.1 While the petitioner was already granted by the State Government in the Forests and Environment Department permission on 16.10.1997 for using 8.79 hectares of forest land SCA/24233/2007 6 JUDGMENT falling under Marine National Park / Marine Sanctuary for various purposes subject to certain terms and conditions including obtaining permission of the Central Government under the Forest Conservation Act, 1980 and also getting clearance under the CRZ Regulations and the petitioner Company was granted the Central Government permission under the Forests Conservation Act on 08.12.1999 and the CRZ clearance was granted on 03.11.2000, before the petitioner Company could act on the basis of the aforesaid permission and clearance, by judgment dated 13, 18, 20, 27th July 2000 and 03rd August 2000 in Public Interest Litigation being Special Civil Application Nos.1778, 5476 and 5928 of 2000, a Division Bench of this Court (to which one of us was a party – Ravi R. Tripathi, J.) restrained the State Government from granting any more authorization and permission for laying down any pipeline in any part of the sanctuary of the National Park and in case any applications are pending, the same shall be decided keeping in view the interpretation placed by the Division Bench on Section 29 of the Wild Life (Protection) Act, 1972 in light of the observations made in the judgment. 4.2 The aforesaid Public Interest Litigation was commenced for making grievance against consideration of the application of Bharat Oman Refineries Ltd. for laying a pipeline in the Marine Park / Sanctuary area. The present petitioner Company was not a party to any of the above petitions. During the course of hearing, the Court had put a query to the learned counsel for the State Government as to whether any more applications of this nature (applications for laying pipeline through the National Marine Park / Sanctuary area) were pending before the State Government and whether the State Government was inclined to grant any more authorizations and permissions for laying such pipelines. In response to the query, the learned Government counsel had placed a copy of the letter dated 25.07.2000 sent to him by the Under SCA/24233/2007 7 JUDGMENT Secretary to the Government along with a copy of the letter dated 08.09.1995, which was sent to the Secretary of Ministry of Environment and Forests, Government of India, by the Under Secretary, Forests and Environment Department, Government of Gujarat. The Court noted that there were two more proposals pending with the State Government – one from Essar Oil Ltd. i.e. the present petitioner Company and the other from Gujarat Poshitra Port Ltd. The Court noted the fact that four pipelines were already in existence and the fifth one was the pipeline to be laid down by Bharat Oman Refineries Ltd. for which the authorization was granted in February 2000 and which was the subject matter of challenge in those three petitions. The Court thereupon observed that “enough is enough”, and then restrained the State Government from giving any more authorization and permission for laying down any pipeline in any part of the Sanctuary or the National Marine Park. 4.3 Aggrieved by the above directions which were given by the Court without giving the petitioner company an opportunity of being heard, the petitioner Company filed review applications which came to be disposed of by order dated 23.02.2001 on the ground that the grievance was beyond the scope of review. 4.4 The petitioner Company, therefore, moved the Hon'ble Supreme Court by filing Special Leave Petition (Civil) No.3654 of 2001. On 11.05.2001, the Apex Court granted stay of the High Court judgment in so far as the petitioner was concerned. It appears that in view of the above stay order granted by the Hon'ble Supreme Court, the petitioner Company moved the State Government for permitting the petitioner Company to proceed with the construction of jetty and laying the pipeline. By letter dated 29.10.2001, the State Government in the Forests and Environment Department specifically called upon the petitioner Company to ensure that no construction activities were commenced before SCA/24233/2007 8 JUDGMENT obtaining all necessary clearances from different Government departments, agencies and the conditions stipulated by the Ministry of Environment and Forests, Government of India as well as the Forests and Environment Department of the State Government were strictly complied with. In view of absence of any permission from the Chief Wild Life Warden, Gujarat State under Section 29 of the Wild Life (Protection) Act, 1972, the petitioner could not commence the construction of jetty or laying down the pipeline in the National Marine Park / Sanctuary area and, therefore, could not commence commercial production. 4.5 The petitioner had already applied for registration before 15.08.2000 and had incurred more than 25% cost before 15.08.2000. On 18.07.2001, the petitioner was accordingly granted the “pipeline registration” valid upto 15.08.2003 within which the petitioner Company was required to start commercial production. The petitioner again made a representation to the Industries Commissioner on 07.05.2002 requesting him to grant the extension for a further period of three years i.e. upto August 2006 to commence commercial production for the purpose of availing the incentive benefit under the Scheme and pointed out that the delay in completing the project and consequent delay in starting commercial production was due to the factors beyond the control of the petitioner. By letter dated 28.05.2002, the Industries Commissioner rejected the request. The petitioner, therefore, submitted a representation dated 19.06.2002 to the Chief Minister pointing out the circumstances which had delayed the completion of the project. Similar representations were thereafter made on 14.03.2003, 02.12.2003 and 26.12.2003. It appears that the said representations were not responded to. SCA/24233/2007 9 JUDGMENT 5.0 Apex Court Judgment, Grant of Permission and Commencement of Production 5.1 Ultimately on 19.01.2004, the Hon'ble Supreme Court quashed and set aside the judgment dated 03.08.2000 of this Court and directed the State Government to issue the authorization in the requisite format under Sections 29 and 35 of the Wild Life (Protection) Act within a fortnight after disapproving the interpretation placed by the High Court on the provisions of the Wild Life (Protection) Act, 1972. The Hon'ble Supreme Court has taken the view in the judgment dated 19.01.2004 that the permission granted by the State Government on 19.10.2007 was the permission contemplated by Section 29 of the Wild Life (Protection) Act. The Apex Court concluded the judgment reported in 2004 (2) SCC 392 in terms of the following directions :- “64. As far as the appellant (Essar Oil Ltd.) is concerned, however, the way is now clear to proceed with the project in accordance with the permissions granted to it under the WPA, FCA and EPA. The State Government will issue the authorization in the requisite format under Sections 29 and 35 within a fortnight. We, therefore, allow the appeals to the extent stated with no order as to costs.” 5.2 In compliance with the above judgment, by letter dated 12.02.2004, the State Government authorized the Chief Wild Life Warden, Gujarat State under Sections 29 and 35 (6) of the Wild Life (Protection) Act to permit the petitioner Company for laying oil pipeline in the National Marine Park / Sanctuary area. The Chief Wild Life Warden issued the requisite permission on 27.02.2004. 5.3 In view of the above permission granted by the Chief Wild Life Warden under Sections 29 and 35 of the Wild Life (Protection) Act, the petitioner Company again sent representations dated 06.04.2004, 12.07.2004 and 27.07.2004 to the Government requesting for extending the time limit for commencement of SCA/24233/2007 10 JUDGMENT commercial production for the purpose of sales tax deferment incentive scheme. It appears that in view of the above representations, the State Government in the Industries and Mines Department vide Resolution dated 10.05.2006 (Annexure-Y) constituted a Committee comprising of the Advisor to the Chief Minister, the then Additional Chief Secretary, Finance Department and the then Principal Secretary, Industries and Mines department. The Committee was constituted to consider various such representations of the petitioner Company and other Companies. It appears that no progress was made and the petitioner's representations remained undecided. 5.4 On 26.11.2006, the petitioner Company commenced production and started paying sales-tax on the products being sold by it. Ultimately, the present petition came to be filed on 18.09.2007 contending that for no fault of it, the petitioner Company was prevented from completing the project and that it was on account of the petitioner being so prevented for almost five years that the petitioner could not commence the commercial production within the time limit of 15.08.2003 which was the extended time limit stipulated by the Government generally, for the units which had applied before 15.08.2000 and which had incurred 25% of the project cost before 15.08.2000. 6.0 Submissions on behalf of the Petitioner Company At the hearing of this petition, Mr KS Nanavati, learned counsel for the petitioner Company has referred to the aforesaid events and has taken us through the judgment of the Division Bench of this Court rendered on 13th July/3rd August, 2000 and the decision of the Apex Court dated 19.01.2004 and has made the submissions :- SCA/24233/2007 11 JUDGMENT 6.1 Only on account of the injunction granted by this Court on 13th July/3rd August, 2000 which was ultimately set aside by the Hon'ble Supreme Court on 19.01.2004, the State Government had not granted any permission or authorization for proceeding with construction of the jetty and laying the pipeline. Even after interim stay of the High Court judgment was granted by the Hon'ble Supreme Court on 11.05.2001, the State Government did not direct the Chief Wild Life Warden to grant the permission. The permission by the Chief Wild Life Warden was granted only on 27.02.2004 and therefore, the entire period from 13.07.2000 upto 27.02.2004 ought to be excluded while considering the question whether the petitioner Company had commenced commercial production within the time limit stipulated by the concerned Government Resolutions. It is submitted that if the above period is excluded or in other words, if three years and 230 days are added, it would extend the time limit for commencing commercial production upto 2nd April, 2007. Since the petitioner had already commenced the production on 26.11.2006, the petitioner had complied with the terms and conditions of the incentive scheme and therefore, the petitioner cannot be denied the benefits of the incentive scheme on the ground of delay in commencing the commercial production which delay was only on account of the injunction which was granted by this Court in Public Interest Litigation to which the petitioner Company was not even joined as a party. 6.2 While in the memo of the petition some allegations/submissions have been made attributing the delay to the Forests and Conservation Department of State Government, but the petitioner Company is not interested in pursuing those allegations and in fact would like to withdraw those allegations and the petitioner would like to invoke the following maxims of equity :- SCA/24233/2007 12 JUDGMENT (i) “An act of the Court shall prejudice no man”, and (ii) “The law does not compel a man to do that which he cannot possibly perform”. 6.3 In view of the permission granted by the State Government on 16.10.1997, the petitioner had commenced the construction work of laying of water intake jetty and product jetty in the Marine National Park and in the Marine Sanctuary area. The petitioners were not only prevented from doing so, but the Forest Department launched prosecution against the petitioners under various provisions of the Wild Life (Protection) Act and Environment Protection Act against the contractor doing the work on behalf of the Company and therefore, the petitioners had no other alternative but to stop the work and could not commence the work even after the Central Government granted its formal approval under the provisions of the Forests Conservation Act on 08.12.1999 and the CRZ permission was granted on 03.11.2000 and even thereafter, when the judgment dated 13th July/3rd August, 2000 of this Court was stayed by the Hon'ble Supreme Court on 11.05.2001, no permission was granted by the Chief Wild Life Warden and in fact by letter dated 29.10.2001, the State Government informed the petitioner Company not to do any work without obtaining the requisite permissions and clearances under various statutes. The petitioner had done all that was required to be done by the petitioner for obtaining such permissions and clearances, but if the authorities did not grant such permissions for no fault of the petitioner, the petitioner could not be blamed nor could the petitioner be held to be ineligible for availing of the incentive under the Scheme for which project, the petitioners had already incurred expenditure of Rs. 5388 crores as recorded in the judgment of the Apex Court. In fact the petitioners have already incurred capital expenditure of approximately Rs. 6000 crores by the end of 2006 and have commenced production in November SCA/24233/2007 13 JUDGMENT 2006. Apart from the fact that the petitioner had obtained the provisional premier registration under the 1995-2000 Scheme by Industries Commissionerate letter dated 25.06.1999 (Annexure-I), the petitioner Company had also incurred capital expenditure of more than 25% of the project cost before 15.08.2000 and therefore, the petitioners' case was registered as a pipeline case so as to get the benefit of extended period to go into commercial production period initially stipulated in the Scheme as 15.02.2003 [clause v(2) (b)] was extended upto 15.08.2003. While the petitioners were physically prevented from carrying on any activity between 19.03.1999 and 27.02.2004, even without referring to the said five year period, even confining the period to the two termini between 13.07.2000 (when this Court restrained the State Government from granting any authorization to the present petitioner from laying any pipeline in the Marine Park / Sanctuary area) and 27.02.2004 (when pursuant to the Hon'ble Supreme Court decision the Chief Warden granted the permission), the petitioners are entitled to get the benefit of exclusion of the said period of three years and 230 days. 6.4 The Courts have held that no act of the Court shall prejudice any party nor does the law compel any party to do that which cannot possibly be performed. Strong reliance is placed on the decision of the Apex Court in South Eastern Coalfields Ltd. Vs. State of M.P., (2003) 8 SCC 648 and more particularly on the observations made in Para 28 thereof. 6.5 Reliance is also placed on the decision of the Hon'ble Supreme Court in Raj Kumar Dey Vs. Tarapada Dey, (1987) 4 SCC 398 particularly the observations made in Para 6 thereof. Reliance is also placed on the decision in Bareilly Development Authority Vs. Methodist Church of India, (1988) Supp. SCC 174 for the purpose of contending that in such matters, the period during which the work of construction has been stopped, has to be excluded while SCA/24233/2007 14 JUDGMENT determining whether there was any breach of condition stipulated in the contract. 7. Submissions on behalf of the State Government On the other hand, Mr Kamal Trivedi, learned Advocate General assisted by Ms Sangeeta Vishen, learned AGP has opposed the petition and made the following submissions :- 7.1 The petition suffers from delay, laches and acquiescence. The petitioners were already informed by the Industries Commissioner as far back as on 28.05.2002 that it was not possible to accord any extension of the time limit for commencing commercial production as per the prevailing policy. Since no petition was filed at the relevant time, the present petition filed in September 2007 was delayed by more than five years. 7.2 The petitioner has not made reference to the earlier round of litigation, wherein another Division Bench of this Court had passed order dated 20.04.1999 directing the petitioner herein not to carry on any construction activity in Marine National Park / Marine Sanctuary area against the statutory provisions including the provisions contained in the Wild Life (Protection) Act, 1972. The petitioner had not challenged the said order before the higher forum. 7.3 Vide Government Resolution dated 10.05.2006, the State Government has formed a Committee to examine various issues pertaining to the petitioner's group and to recommend to the Government how the issues can be