IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 209 of 1999 For Approval and Signature: Hon'ble MR.JUSTICE B.C.PATEL and Hon'ble MR.JUSTICE P.B.MAJMUDAR ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? Yes 2. To be referred to the Reporter or not? Yes : (except bracketed) 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- SAURASHTRA CEMENT LTD. Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: Mr. P.Chidambaram & Mr. S.B.Vakil Sr.Counsel for MR BH CHHATRAPATI for Petitioners Mr.S.N.Shelath, Addl.A.G. for Respondent No. 1&2 M/S MG DOSHIT & CO for Respondent No. 3 -------------------------------------------------------------- CORAM : MR.JUSTICE B.C.PATEL and MR.JUSTICE P.B.MAJMUDAR Date of decision: 07/10/1999 ORAL JUDGEMENT(Per: Patel.J) #. The Saurashtra Cement Limited, a company incorporated under the Indian companies Act has preferred this petition inter alia requesting for issuance of directions requiring the respondents no 1 to 3 to ensure that the petitioner is afforded a treatment similar to that is given to Digvijay Cement Company Limited ('Digvijay' for short) and to direct the respondent no. 1 to 3 to give similar benefits given to Digvijay by which better concession is given to it in the matter of payment of interest while entering into an agreement by the said company with the Government. #. The facts leading to the present petition are as under: The petitioner company and Digvijay were operating in the same area. Both the companies adopted new technology. The State Government published a scheme known as Incentive Scheme. It appears that with a view to avail of the benefit of the Incentive Scheme offered by the Government of Gujarat, Digvijay decided to expand its unit. This new unit has been located on a separate piece of land though adjacent to the old unit. An application was made to the State Government for granting eligibility for incentive Scheme in respect of expansion and for granting recognition to the new process plant as a Pioneer Unit. The application for recognition of its new unit as a Pioneer Unit was not granted. It seems that repeated requests were made. However, the application was rejected on the ground that Digvijay's new unit was only an expansion and therefore, not eligible for registration as a Pioneer Unit. So far as the petitioner company is concerned, it had 3 plants for manufacturing cement prior to 1980. It seems that the petitioner decided to establish the new unit in view of the benefits declared by the Government by its Resolution dated 27.8.1980. On 5.11.1982, the petitioner company applied to the Government for sales tax benefit and grant of Pioneer Status. It transpires that the Government of Gujarat issued a certificate effective from the date of commissioning/date of diversification or expansion from 31.12.1982. It seems that under that certificate benefit of sales tax deferment was made available from 31.12.1982 to 31.12.1987. The company commenced its production in April 1985. In view of the new plant being operative, it discontinued manufacturing operation at the old plant. It seems that on 29.10.1987 the company submitted a detailed application for its new unit to the Industries Commissioner for grant of Pioneer Status. However, by letter dated 6.4.1988 said application was rejected on the ground that the petitioner company is an old unit in existence prior to 1.6.1980 and is located within 8 kms. from National High Way and that can be considered as a case of modernisation of the existing unit. It appears that since the petitioner company was not given the benefit of Pioneer Status, it had filed a writ petition in the High Court being SCA No. 398 of 1991. Similarly Digvijay also filed SCA before this High Court being SCA No. 4309 of 1990 on the same grounds as the said company was also denied Pioneer Status. Both the SCAs were heard together and by a common judgment dated 23.11.1992, the respondents were directed to reconsider the case of the petitioner as per the observations made in the judgment. However, it is interesting to note that after the matters were heard, the judgment was kept reserved and in the intervening period, the petitioner company entered into an agreement with the State Government by which the Government agreed to give certain benefit of installments in the payment of sales-tax and as per the agreement arrived at between the petitioner and the Government, the petitioner was, to withdraw the said SCA from the High Court. About entering into the said agreement there was mention in various correspondence between the petitioner and respondent-Government. However, said fact was not brought to the notice of the Court presumably because the hearing was already over and the matters were kept for judgment. We are of the opinion that it was the duty of the petitioner to point out the said fact to the Court (regarding aforesaid agreement arrived at between the petitioner and respondent State Government.) #. The Division Bench thereafter disposed of both the SCAs and our attention was drawn by the learned counsel for the petitioner to the observations made by the Division Bench of this Court on page 18 of its judgment. On page 18 of the judgment, the Division Bench of this Court has observed as under: " As stated above, the 1980 Scheme was introduced with a view to accelerate development of industries and strengthen the trend of the industries going to developing areas. The Cash Subsidy Scheme linked with Fixed Capital Investment was retained as it was, but the schemes of Sales Tax Exemption and interest free sales tax loan were found to be not sufficiently attractive and, therefore, they were replaced by the new Scheme of Sales Tax Exemption and Sales Tax Deferment. The exemption incentive was made available to all units-SSI, medium and large-except that this benefit was not to be available in respect of purchase of machinery and equipment. The exemption was also extended to sale of goods manufactured by such units to the extent specified in the scheme. It appears that as the benefit of exemption from sales tax was made available to all such types of new industrial units, the old incentive of interest free loan to a new, medium and large scale unit was discontinued. By way of an alternative to the Sales Tax Exemption, the 1980 Scheme permitted the new units to opt for the scheme of Sales Tax Deferment. In substance, such units were permitted to recover sales tax and retain the same with them for certain number of years. No interest was to be charged on amounts so deferred. All these benefits were made available to new industrial units going to backward areas. It is in this context that we shall have to inter pret and construe paragraph 7 of the 1980 Scheme." The Division Bench has further observed in pages 41 and 42 as under " Digvijay Cement Co. was refused pioneer status on the grounds that :(i) its new unit could not be considered as a new industrial unit; ,(ii) the project was by way of expansion, and (iii) the unit was situated within 8 kms from its existing unit. Saurashtra Cement Co. was denied that status on the grounds that: (i) its unit was an old unit since it has been existing before 1.6.80; (ii) it had installed new machinery in its existing unit and, therefore, it was a case of modernisation, and (iii) its unit was situated within 8 kms. from the National High Way. Thus, both the petitioners were denied the pioneer status on the ground that what they did was either expansion or modernisation and not setting up a new large industrial unit. In view of the correct interpretation of paragraph 7, as held by us, it will have to be held that the respondents were not right in treating the new industrial units set up by the petitioners as expansion or modernisation of their old units. They were wrong in interpreting paragraph 7 of the 1980 Resolution and also applying the two impugned circulars to the petitioners. As the petitioners were thus denied pioneer status on such wrong interpretation of the 1980 Resolution and the two impugned circulars, proper course to adopt would be to direct the respondents to reconsider the case of the petitioners in light of the interpretation of paragraph 7 of the 1980 Resolution and the observations made in this judgment. At pages 43 to 46 of the judgment, the Division Bench further observed as under: " Before we direct the respondents as to which facts and circumstances they should bear in mind while reconsidering the case of Saurashtra Cement Co. one more ground, on which the pioneer status was denied to it, is required to be dealt with. It was denied that status also on the ground that its unit is situated within 8 kms from the National High Way. It is an admitted position that no such conditions was laid down by the 1980 Resolution. While announcing further liberalisation of the incentives for pioneer units, the Government by its Resolution dated 13th March 1981, imposed a condition that the additional benefits declared by that Resolution would be available to the pioneer units which are located outside the corridor of 24-24 KM on both sides of the National Highway from the border of Maharashtra and Gujarat upto Ahmedabad and corridor of 8-8 KM on both sides of other National Highway passing through the State. What was done by the Government by this Resolution was to do away with the earlier limitation that special incentives were to be available to pioneer units going to backward districts and under-developed talukas. By this Resolution, liberalised incentives were made available to all pioneer units, even if they were set up in other areas also, except within the banned distance of six metropolitan cities. Another change that was made by this Resolution was that the ceiling of 10 percent or Rs. 10 lacs. whichever was less, was removed and the sales tax incentives were to be given on the amount upto 90 percent of the investment in gross fixed assets. But the pioneer units which were located within the corridor prescribed by it were to get the incentives as per the Resolution of 1980. It is now an admitted position that the unit set up by Saurashtra Cement Co. is within a distance of 8 kms from National Highway No.8-B, which originates at Porbandar and ends at Bamnbor, where it joins National Highway No.8-A. Though laying down on such a condition is challenged on the ground that it is discriminatory and arbitrary, it is not necessary to consider the said challenge as we are of the opinion that in the context of the sales tax incentive scheme and the object with which further liberalisation was made by the Resolution dated 13.3.81, the representation, which can be said to have been made to the entrepreneurs, was that the limitation of the corridor was to apply to the corridor attaching to the other portion of National Highway No.8 passing through the State. This Resolution was meant for the entrepreneurs setting up new industries within the State. It is a Resolution of the Government and not a piece of legislation. The object of the scheme and also the resolution dated 13.3.81 was to grant more incentives to pioneer units going to under-developed areas. In view of all these factors, the March 1981 Resolution will have to be interpreted reasonably and liberally. Even if we accept as true as contended by the learned Advocate General that the words "National Highway" would include not only National Highway No.8 but also National Highways nos 8-A and 8-B and that the expression "other National Highway" would mean other portion of the National Highway, what we have to consider is what an entrepreneur would have understood on reading the said Resolution. After the words "corridor of 24-24 KM on both sides of the National Highway from the border of Maharashtra and Gujarat upto Ahmedabad" the words which follow are, and corridor of 8-8 KM on both sides of other National Highway passing through the State" The Highway, which is referred to is the Highway, which comes from Maharashtra into Gujarat. Upto Ahmedabad, the corridor was to consist 24-24 KM on either side and thereafter it was to consist 8-8 KM on either side. Moreover the words, "passing through the State" also would create an impression that the National Highway, which was referred to was National Highway No.8. An entrepreneur would have understood the said Resolution only in this manner, particularly because it was well known then that industrial development was between the border of Gujarat and Ahmedabad. Beyond Ahmedabad, the industrial development was quite meagre. Even though the construction which is suggested by the learned Advocate General, appears to be the one which the Government could have had in mind and that becomes more clear from the fact that subsequently the Government removed this limitation also, what we have to consider is: How it was likely to be understood by the entrepreneurs ? It is no doubt true that Saurashtra Cement Company had started taking steps to establish their new industry at Ranavav which is within 8 kms from National Highway No.8-B, prior to the issuance of this Resolution i.e. before 13.3.81. But we cannot construe this Resolution in a different manner in respect of those entrepreneurs who had taken steps to establish new industries before 13.3.81 and those who had acted upon the representation made in the Government Resolutions dated 27.8.80 and 13.3.81. As stated in the petition, this condition of setting up a new industry beyond the corridor was waived in some case. That is the reason why imposition of this condition is also challenged by the company as discriminatory in addition to its challenge that it is also arbitrary. Therefore, while reconsidering the case of Saurashtra Cement Co., the respondents will have to bear those aspects also in mind. Further, the respondents will also have to consider that an entirely a new plant using different technology was set up on adjoining land; that the process of establishing new unit was initiated in the year 1980; that though it had initially planned to go for expansion or modernisation, it had decided to establish a new industrial unit, in view of the Resolution dated 27.8.80; that the new unit was not at all connected with the old unit; that the new unit was complete by itself and had its own independent identity; that it had spent a huge amount of Rs. 60 crores for setting up this new plant; that its new unit has been considered as a new unit for the purpose of exemption from electricity duty; it is treated as a separate factory and separate factory licence has been issued by the Government, and it was also given relaxation from the cement levy obligation on the basis that it was a new cement unit." #. Learned counsel submitted that despite the clear observations, the application which was submitted for seeking the benefit in view of the order passed by the Division Bench came to be rejected. #. Learned counsel appearing for the unit submitted that though Digvijay was on the same footing, the State has given more benefits in their favour subsequently after entering into the consent terms with the Digvijay. At a subsequent stage Digvijay had filed a petition in the High Court to which we will refer later on. Therefore, according to the petitioner, they also should be given additional benefits especially in the matter of fixation of rate of interest on par with the benefit given to Digvijay. {{ [After about an hour, when we are in the process of dictating the judgment learned advocate Mr. Chhatrapati states that he is not seeking for adjournment but he is seeking for some indulgence as another counsel is also appearing in this mater and he is arguing a matter before some other court, and the moment he is free, he will come before this court for making his submissions. Thus court should abstain from further dictation till counsel comes. It is required to be noted that this matter was adjourned at the request of the petitioner as learned counsel Mr. P. Chidambaram was to appear in this matter on behalf of the petitioner. Thus we accommodated and accordingly the matter was adjourned on the date which was convenient. We heard the matter on the adjourned date, though it was not possible for the Addl.Advocate General to appear in the matter. After the arguments of Mr. Chidambaram , learned counsel submitted before the Court that either Mr,. S.B.Vakil or his Junior Mr. Chhatrapati will appear in the matter and will remain present before the court if anything in reply is to be submitted. We heard the learned Addl.Advocate General yesterday and when we were about to dictate the judgment, Mr. Chhatrapati submitted that the matter may be adjourned. At his request we postponed the dictation to give one more opportunity. However, today Mr.. Chhatrapati never bothered to mention even at 11.00 a.m. or after the admission board was over. In view of this, there was no alternative but to proceed with the judgment. It was the duty of the learned advocate Mr. Chhatrapati to remain present if he wanted to submit in reply. At the fag end of his submission he submitted that he would make some submissions. We have permitted him to make submissions despite the fact that we were in the process of dictating the judgment. After hearing him, we have proceeded further with the dictation of the judgment.] }} #. Learned counsel appearing for the petitioner drew our attention to the Annexure-F, the consent terms entered into between the Digvijay and the State Government. He specifically invited our attention to clause 6 of the agreement and submitted that so far as Digvijay is concerned, the interest at the rate of 9 percent has been levied for the period commencing from 1.4.1998 and it is to be calculated on the outstanding amount of tax payable and installments are granted as per this consent terms. No other interest or penalty in respect of this amount of Rs. 49,40,38,106/- is levied or imposed by the Sales Tax Department. Our attention was drawn to clause 7 by which Digvijay was required to make down payment of Rs. 15 crores on or before 15.11.1998. He also drew our attention to the interest clause so far as the interest is concerned. Digvijay is permitted to make payment from 31.3.1999 to 30.9.2003. Thus the installments included the amount of tax and interest. According to the learned counsel for the petitioner, the State Government gave better and special treatment to Digvijay as compared to the petitioner by entering into the consent terms in the nature of an agreement between Digvijay and State Government. It is required to be noted that the learned counsel has fairly conceded that the compromise entered into by the State Government with the Digvijay is not challenged. The learned counsel fairly conceded that he can only request to grant some benefit so far as the interest is concerned. Learned counsel drew our attention to the decision of the Apex Court in the case of D.S.Nakara vs. Union of India reported in AIR 1983 SC 130 Learned counsel invited our attention to para 15 of the judgment of the Apex Court which reads as under: " Thus the fundamental principle is that Article 14 forbids class legislation but permits reasonable classification for the purpose of legislation which classification must satisfy the twin tests of classification being founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group and that differentia must have a rational nexus to the object sought to be achieved by the statute in question. " Learned counsel drew out attention to the latter part of para 32 of the said judgment which reds as under: "...Proceeding further, this Court observed that where all relevant considerations are the same, persons holding identical posts may not be treated differently in the matter of their pay merely because they belong to different departments. If that can't be done when they are in service, can that be done during their retirement ? Expanding this principle, one can confidently say that if pensioners form a class, their computation cannot be by different formula affording unequal treatment solely on the ground that some retired earlier and some retired later......" #. Learned counsel further submitted that considering the earlier judgment of the Division Bench and the facts and circumstances of the case, both the companies were similarly situated and the companies could not have been treated differently merely because the settlement is arrived at on different dates (irrespective of length of time). Learned counsel further submitted that in view of the earlier judgment of the Division Bench of this Court, Digvijay's subsequent application was rejected and thereafter Digvijay preferred a petition being SCA No. 3046 of 1993 in which ultimately Government entered into the consent terms, the reference of which is already made earlier and the grievance of the petitioner is to the effect that whatever benefit is given to the Digvijay is not given to the petitioner company. He further submitted that against the earlier judgment of the Division Bench, State of Gujarat preferred SLP before the Apex Court challenging the decision. Learned counsel submitted that though the State was aggrieved by the decision of the earlier Division Bench, later on the State entered into an agreement with Digvijay, the terms of which were more beneficial to Digvijay and thus the State has treated two units though similarly situated in different manner. We have indicated hereinabove that according to the petitioner considering the installments and the rate of interest, in comparison to rate of interest charged from the petitioner and the installments and the down payment demanded from the Digvijay, the benefit granted to the Digvijay is nothing but a more favourable treatment given to Digvijay as compared to the petitioner unit though similarly situated. #. It is submitted by the learned counsel for the petitioner that simply because the petitioner company has entered into an agreement with the State Government earlier in point of time, still it cannot be said that the petitioner company has waived its fundamental right as there cannot be a waiver of breach of fundamental right. He relied upon the decision of the Apex Court in the case reported in Basheshar Nath vs. Commissioner of Income-tax reported in AIR 1959 SC 149 Learned counsel submitted that merely because the company has entered into an agreement, the rights which are guaranteed under the Constitution cannot be said to have been waived by the petitioner company. According to the learned counsel the State has acted arbitrarily in so far as the petitioner unit is concerned more particularly when the both companies were similarly situated. #. Mr. Shelat, learned Additional Advocate General appearing for the State submitted that in the instant case, the Court should not exercise the powers under Article 226 of the Constitution of India for issuing a writ so as to modify an agreement. Learned Addl. Advocate General further submitted that the petitioner company voluntarily entered into a contract by way of correspondence. That was done with a view to get a better relief at the relevant point of time. Merely because later point in time, if the State has entered into an agreement with Digvijay, according to the learned Addl.Advocate General for the State, the provisions contained under Article 226 of the Constitution cannot be invoked so as to alter or amend the contract executed by