Case: State Of Bihar  Vs. Kalyanpur Cements Ltd

wrong. The third reason given is that the State-level Empowered Committee (SLEC) had not approved the rehabilitation package. This clearly is against the record which has been examined by us in the earlier part of the judgment. Not only the exemption was recommended by the competent Committees under the Industrial Policy, 1995, emphatic assurances were given that the notification will be issued within a very short period. The fourth reason with regard to the resolution passed at the Chief Ministers Conference is equally extraneous to the issue. The Company had made the application for exemption at a much prior time in 1997. No material has been placed either before the High Court or before this Court about the legal enforceability of the resolutions passed at the Chief Ministers Conference. In our opinion the decision making process which culminated in passing of the orders dated 06.01.2001 and 05.03.2001 is seriously flawed, therefore, the same have been justifiably quashed by the High Court. 74. We may now consider the submissions made in IA No.3 of 2006. On 18.11.2002, this Court passed the following order: As an interim arrangement during the pendency of this appeal, with a view to protect the interests of either side, we direct the respondent to deposit an amount equivalent to the sale tax payable by it as and when it becomes due in an interest hearing account in a nationalized bank. This amount and the amount accused during the pendency of the appeal, shall not be withdrawn by other side. The amount no kept in deposit shall become payable to the party which ultimately succeeds in this appeal. The appellants are directed to issue the exemption orders and on receipt of such order, the above said amount shall be deposited. The issuance of the exemption order is without prejudice to the case of the parties in this appeal. The I.A. in the disposed of. 75. It is not in dispute for us that pursuant to the aforesaid directions the appellant has issued the Notification No. SO-174 dated 18.10.2004 granting exemption to the company. The notification was to have effect for five years from the date of publication in the official gazette or till the disposal of special leave petition No.5181 of 2002, whichever is earlier. The notification was issued subject to the terms and conditions notice earlier in the judgment. Under the aforesaid terms and conditions, the company was to deposit the tax payable per month with an interest bearing (wrongly typed in the order as hearing) account in a nationalized bank. The company was also to provide information of the bank account to the circle where it is registered. Details regarding amount of payment made each month was also to be supplied to the appellant. 76. It is now the submission of the learned counsel for the appellant that the company has neither complied with the order passed by this Court on 18.11.2002 nor the conditions stipulated in the notification dated 16.10.2004. It is further submitted that prayers in the application were to recall the order dated 18.11.2002 and to stay the operation of a judgment under appeal dated 24.04.2002. However the application was not finally disposed of, even through the pleadings were complete. 77. During the pendency of the proceedings there have been some further development, which will now need to be taken into consideration by the Court, to do justice between the parties. 78. During the interregnum the company has been collecting the amount equivalent to the tax from the consumers. According to Dr. Rajiv Dhawan, Mr. Dwivedi during this period the company has collected more than Rs.60 crores on the sale of cement by virtue of the directions issued by this Court in the Order dated 18.11.2002. In view of the law laid down by this Court in Amrit Banaspati (supra) the company cannot be permitted to retain the amount collected from the customers. This would amount unjust enrichment. Therefore, a direction is required to be issued that the amount deposited by the company with the bank pursuant to the orders of this Court be released to the appellant State. On the other hand, Mr. Parshad has submitted that the delay in issuance of the exemption Notification by the State has crippled the Company financially. Even then the Company is trying to revive itself through financial restructuring. The survival of the Company now depends on the approval of the Financial Restructuring Package prepared by the respondent No.2. This package has been submitted to the Chief Minister of Bihar which is still on the consideration of the Government. With regard to the non- deposit of amount equivalent to the tax due, Mr. Parshad reiterated that the Company had made bona fide efforts, but was unable to deposit the amount due to its `sickness. On the one hand the revised rehabilitation package is kept under consideration, on the other the appellants seeks the vacation of the order dated 18.11.2002. The application, according to the learned senior counsel, deserves outright dismissal. 79. We have considered the submissions made by the learned counsel. It would be not possible to accept the submissions of Mr. Parshad that in view of the financial condition of the company it may be permitted to retain the amount collected under the orders of this Court. The amount was collected from the consumer to offset the tax liability. Such amount cannot be permitted to be retained by the company. In Amrit Banaspati case (supra) it has been held that exemption and refund of tax are two different legal and distinct concepts. The objective of the exemption is to grant incentive to encourage industrialization. It is to enable the industry to compete in the market. On the other hand, refund of tax is made only when it has been realized illegally or contrary to the provisions of law. Tax lawfully levied and realized cannot be refunded. In view of the settled position of the law, we decline to accept the suggestion made by Mr. Parshad.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]23. We have considered the detailed facts and relevant documents which are on the record. However, in our opinion, before we consider the submissions made on the factual situation of this case, it would be appropriate to consider the primary issue as to whether the Company could have invoked the principle of `promissory estoppel in support of its claimn that the doctrine of promissory estoppel has been recognized and enforced in the Courts in England for a considerable period of time. The principle of `promissory estoppel was stated by Denning, J in theCentral London Property Trust Ltd. v. High Trees House, Ltd. 1956) 1 All ER. In this matter the landlords had let a new block of flats in 1957 to the tenants on a9 lease at a ground rent of 2500 (Pound Sterling). However, in view of war time conditions and without consideration, as a result of discussions, an arrangement was made between the parties to reduce the ground rent to 1,250 for the years 1941, 1942, 1943 and 1944 the tenants paid the reduced rent. At the end of the war in September, 1945, the landlord, however, claimed that the original ground rent reserved under the lease had to be paid. The landlord also claimed arrears for the years when the reduced rent was paid in the sum of 7916. No payment was received. The landlord, therefore, brought an action to test the proposition of law. The Court notices the plea of the tenant as followsThe tenants said first that the reduction of 1,250 was to apply throughout the term ofe years, and that the reduced rent was payable during the whole of that time. Alternatively, they said that was payable up to Sept.24, 1945, when the increased rent would start. Upon consideration of the entire issue, it is observed by Denning, J as follows:If I consider this matter without regard to recent developments in the law there is no doubt that the whole claim must succeedAs to estoppel, this representation with reference to reducing the rent was not a representation of existing fact, which is the essence of common law estoppel; it was a representation in effect as to the futurea representation that the rent would not be enforced at the full rate but only at the reduced rate........ So at common law it seems to me there would be no answer to the whole claim.What, then, is the position in view of developments in the law in recent years? The law has not been standing still even sinceJorden v. Money (1854) (5 HL Cas.. There has been a series of decisions over the last fifty years which, although said to be cases of estoppel, are not really such. They are cases or promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have been so acted on. In such cases the Courts have said these promises must be honouredI am satisfied that the promise was understood by all parties only to apply in the conditions prevailing at the time of the flats partially let, and the promise did not extend any further than that25. The doctrine of promissory estoppel as developed in the administrative law of this country has been eloquently explained in Kasinka Trading v. Union of India (1995) 1 SCC 274  by Dr. A.S. Anand, J, in the following words:-11. The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties12. It has been settled by this Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation26. In our opinion, the aforesaid statement of law covers the submissions of Dr. Dhawan and Mr. Dwivedi that in order to invoke the aforesaid doctrine, it must be established that (a) that a party must make an unequivocal promise or representation by word or conduct to the other party (b) the representation was intended to create legal relations or affect the legal relationship, to arise in the future (c) a clear foundation has to be laid in the petition, with supporting documents (d) it has to be shown that the party invoking the doctrine has altered its position relying on the promise (e) it is possible for the Government to resile from its promise when public interest would be prejudiced if the Government were required to carry out the promise (f) the Court will not apply the doctrine in abstract. However, since the judgments have been cited, we may notice the law laid down therein27. In STO vs. Durga Oil Mills (1998) 1 SCC 572  it was held that Moreover, as it has been noted earlier that the IPR itself had not granted any exemption but had indicated that orders will be issued by various departments for granting the exemptions. The exemption order under Sales Tax could only be issued under Section 6 which could be amended or withdrawn altogether. This is expressly provided by Section 6. If the respondent acted on the basis of a notification issued under Section 6 it should have known that such notification was liable to be amended or rescinded at any point of time, if the Government felt that it was necessary to do so in public interest28. In Bakul Cashew Co. v. STO (1986) 2 SCC 365  In cases of this nature the evidence of representation should be clear and unambiguous. It must be certain to every intent. The statements that are made by ministers at such meetings, such as, let us see, we shall consider the question of granting of exemption sympathetically, we shall get the matter examined, you have a good case for exemption etc. even if true, cannot form the basis for a plea of estoppel29. In Sharma Transport v. Govt. of AP (2002) 2 SCC 188  it is observed that There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel, clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine30. In Shri Bakul Oil Industries vs. State of Gujarat, this Court held that Viewed from another perspective, it may be noticed that the State Government was under no obligation to grant exemption from sales tax. The appellants could not, therefore, have insisted on the State Government granting exemption to them from payment of sales tax. What consequently follows is that the exemption granted by the Government was only by way of concession. Once this position emerges it goes without saying that a concession can be withdrawn at any time and no time limit can be insisted upon before the concession is withdrawn. The notifications of the Government clearly manifest that the State Government had earlier granted the exemption only by way of concession and subsequently by means of revised notification issued on July 17, 1971, the concession had been withdrawn. As the State Government was under no obligation, in any manner known to law, to grant exemption it was fully within its powers to revoke the exemption by means of a subsequent notification. This is an additional factor militating against the contentions of the appellants31. In Motilal Padampat Sugar Mills Co. Ltd. vs. State of UP (1979) 2 SCC 409 , it is held that we do not think it is necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promiseBut it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Govenrment. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour itIn the same paragraph it is further observed that:-24........the Government cannot, as Shah,J., pointed out in the Indo-Afghan Agencies case, claim to be exempt from the liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency, nor can the Government claim to be the sole judge of its liability and repudiate it on an ex parte appraisement of the circumstances. If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of lawThe burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden32. It is further held that Lastly, a proper reading of the observation of the Court clearly shows that what the Court intended to say was that where the Government owes a duty to the public to act differently, promissory estoppel cannot be invoked to prevent the Government from doing so. This proposition is unexceptionable, because where the Government owes a duty to the public to act in a particular manner, and here obviously duty means a course of conduct enjoined by law, the doctrine of promissory estoppel cannot be invoked for preventing the Government from acting in discharge of its duty under the law. This doctrine of promissory estoppel cannot be applied in teeth of an obligation or liability imposed by law33. In DCM Ltd. vs. Union of India (1996) 5 SCC 468 , this Court reiterated that It is well settled that the doctrine of promissory estoppel represents a principle evolved by equity to avoid injustice and, though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. The basis of this doctrine is the inter-position of equity which has always proved to its form, stepped in to mitigate the rigour of strict law. It is equally true that the doctrine of promissory estoppel is not limited in its application only to defence but it can also find a cause of action. This doctrine is applicable against the Government in the exercise of its governmental public or executive functions and the doctrine of executive necessity or freedom of future executive action, cannot be invoked to defeat the applicability of this doctrine. It is further well established that the doctrine of promissory estoppel must yield when the equity so requires. If it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be unequitable to hold the Government or public authority to the promise or representation made by it, the court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it34. In Shrijee Sales Corpn. Vs. Union of India (1997) 3 SCC 398  it was held that It is not necessary for us to go into a historical analysis of the case - law relating to promissory estoppel against the Government. Suffice it to say that the principle of promissory estoppel is applicable against the Government but in case there is a supervening public equity, the Government would be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. However, the Court must satisfy itself that such a public interest exits35. In Pawan Alloys & Casting (P) Ltd. v. UP SEB (1997) 7 SCC 251  it is held that (31). The appellants will not be able to enforce the equity by way of promissory estoppel against the Board if it is shown by the Board that public interest required it to withdraw this incentive rebate even prior to the expiry of three years as available to the appellants concerned. It has also to be held that even if such withdrawal of development rebate prior to three years is not based on any overriding public interest, if it is shown that by such premature withdrawal the appellant-promisees would be restored to status quo ante and would be placed in the same position in which they were prior to the grant of such rebate by earlier notifications the appellants would not be entitled to succeed36. In Shreeji Sales Corpn.( supra) it is also held thatHowever, in the present case, there is a supervening public interest and hence it should not be mandatory for the Government to give a notice before withdrawing the exemption37. In Bannari Amman Sugars Ltd. vs. Commercial Tax Officer (2005) 1 SCC 625  it is observed that We find no substance in the plea that before a policy decision is taken to amend or alter the promise indicated in any particular notification, the beneficiary was to be granted an opportunity of hearing. Such a plea is clearly unsustainable. While taking policy decision, the Government is not required to hear the persons who have been granted the benefit which is sought to be withdrawn38. In Rom Industries Ltd. vs. State of J&K, this Court held thatWe are not prepared to hold that the government policy by itself could give rise to any promissory estoppel in favour of the appellants against the respondents since the policy itself made it absolutely clear that if would come into effect only on appropriate notification being issued. The notification was issued in exercise of the admitted powers of the State Government under the State General Sales Tax Act. The State Government having power and competent to grant the exemption was equally empowered to withdraw it. As we have also noticed there was nothing either in the notification or in the policy which provided that the Negative List would not be amended or altered. On the contrary clause (vii) of para 7 to GO No.10 of 1995 expressly reserved the Governments right to amend the Negative List. The right if any of the appellants was a precarious one and could not found a claim for promissory estoppel52. The Company applied to the State Government on 21.11.1997 for grant of sales tax exemption under the Industrial Policy, 1995. Even though the Company was entitled under the aforesaid Policy to exemption for 8 years, it made an application only for 5 years exemption. This request of the Company was considered by the State-level Committee on Rehabilitation in a meeting held on 07.01.1998. This was attended by the senior Officers of the State Government, representatives of the financial Institutions and the CompanyIt was observed as follows:-It was felt that the Company is potential sick unit and is fit for consideration for exemption from payment of Sales Tax for a period of 5 years from 1.1.1998The Committee recommended that as per the provision of Industrial Policy 1995 the Sales Tax exemption on finished products can be granted to M/s. Kalyanpur Cement Ltd. for a period of five years from 1.1.1998 to 31.12.2002 to improve liquidity of the Company for its rehabilitation and sound financial position and decided to put up the case in the meeting of the High Empowered Committee under the Chairmanship of the Chief Secretary for final decision53. In a meeting held on 23.01.1998 it was noticed that the Company has been provided the facility of deferment of commercial taxes on two earlier occasions. The deferred amount is being repaid even though payment of the unit is not up-to-date. It was also accepted that the benefits under the Industrial Policy, 1995 which are to be given to the new units are also to be given to sick and closed units. However, it was observed that the opinion of the Advocate General should be taken as to whether any amendment is required in the Sales Tax rules. In an another meeting held on the same date i.e. on 12th March, 1998 the reconstruction proposal of the Company was again considered in a meeting of the High Level Authorisation Committee (HLAC) held under the Chairmanship of the Chief Secretary. In this meeting, it was noticed that the Company is running in losses. The main reason for the present position of the Company is sluggishness in the cement market. The Company had, therefore, made an application for Sales Tax exemption from 01.01.1998 to 31.12.2002 under the Industrial Policy, 1995. Upon consideration and discussion, it was decided that before exempting the Company from Sales Tax, opinion of Advocate General should be taken as to whether any amendment is required in the Bihar Finance Act. Subsequently, the Advocate General opined that no amendments are required in the Bihar Finance Act, 1981 and that the exemption can be considered for a class of dealers i.e. sick units in terms of Section 7(3)(b) of that Act. 54. In an another meeting held on 12.07.1999 at IFCI Head Office, New Delhi, the representatives of the State Government clearly stated that the Government of Bihar was committed to the revival of industry in the State in general and that of ACL in particular as it was located in one of the backward districts of Bihar and provided direct employment to over 2000 persons. With regard to the Sales Tax exemption it was stated that the legal opinion of the Advocate General, Bihar had already been obtained the final decision of the Cabinet sub-Committee is expected within 2-3 months time. The Indian promoters of the Company had been invited to join the meeting and were requested to respond to the observations of the participants. It was explained on behalf of the Company that although the performance of the Company was consistently above the rated capacity, it had not been able to achieved optimum level of operations mainly due to lack of adequate working capital. Since the promoters were not to bring any further funds, most of the required amount would have to be met out of the proposed funding and expected Sales Tax exemption. In the summary record of the proceedings of the Joint Meeting, it was recorded that there was further discussion amongst the participants and there was a general consensus that a restructuring package would be necessary for ensuring the revival of KCL and accordingly, KCL be advised to submit, at the earliest, a revised restructuring proposal with a cut off date of 31.12.1999....... It was considered necessary to stipulate preconditions such as the State Government of Bihar granting the Sales Tax exemption and renewal/revalidation of the mining leases for the proposed restructuring packages, as and when sanctioned54. Thereafter, the representatives of the Company were invited to join the meeting held between the Government of Bihar and financial institutions on 29.10.1999. Reference was made, in this meeting, to the deliberations at the previous meeting held on 12.07.1999, when it was decided to undertake revised restructuring exercise in respect of the Company. Accordingly, a revised restructuring proposal was formulated by the Industrial Finance Corporation of India Ltd. (hereinafter referred to as `IFCI). In this meeting of the representative of the State Government mentioned that the legal opinion of the Advocate General Bihar has been obtained. However, decision of the Sales Tax exemption proposal had been held up due to the Election. It was now expected to be taken up in December, 1999. The financial institutions stated that they would consider granting reliefs only after grant of Sales Tax exemptions by the State Government of Bihar55. Thereafter by letter dated 02.10.1999, the State Government informed the financial institutions as under:-The State Government has since decided to notify the provisions of providing Sales Tax benefits to Sick Units and potentially viable non-BIFR sick units in the meeting of the Economic Sub-Committee held on November 30,1999. We shall forward a copy of the notification as soon as it is gazetted56. From the above it becomes apparent that the State Government had been consistently giving assurances not only to the Company but also to the financial institutions that the necessary Sales Tax exemption notification will be issued. In our opinion the Company had laid a clear, sound and a positive foundation for invoking the doctrine of `promissory estoppel. Therefore, it is not possible to accept the submissions made by Dr. Dhawan and Mr. Dwivedi that no definite promises were ever made. This, however, is not the end of the matter57. Even in the meeting held on 17.12.1999 under the Chairmanship of the Minister for Water Resources and Industry, Bihar the problems being faced by the Company were discussed. It was pointed out by the Industrial Development Commissioner that future of thousands of people is linked with the Company and, therefore, positive cooperation of financial institutions/bank is desirable for its rehabilitation. The Chairman of the Company was invited to apprise the meeting of the financial and other difficulties. It was accepted by the whole-time Director of IFCI, Mr. Ganguly that the financial institutions have always been supporting the Company and will support in the future. It was also stated by him that in the Industrial Policy, 1995 there is a provision of giving Sales Tax exemption for 8 years to a sick company. However, the Company had asked for the above facility only for 5 years. So far as the viability of the Company is concerned, it was stated to have already been established. After hearing all the concerned parties, the Minister mentioned that the Government of Bihar is very keen for rehabilitation of the Company and that all possible support will be provided for implementation of the rehabilitation package prepared by financial institutions. So far as the Sales Tax relief is concerned, it was stated that a decision will be taken in a day or two and the notification relating therewith will be issued by 2nd week of January, 2000..... With this assurance a consensus had emerged among the financial institutions and the Banks that if the Government implements the Industrial Policy, 1995 in its true spirit particularly on the issue relating to deferment/ exemption Sales Tax, the financial institutions and Banks will give their full cooperation. A number of very important decisions were taken in the aforesaid meeting. Decision No.4 was that State Government will ensure that the notification regarding Sales Tax exemption is issued by the 2nd week of January, 200058. On 25th January, 2000, the State Government informed the lead institution (IFCI) that the matter was discussed in the Cabinet Sub-Committee and draft notification was approved therein. It was further pointed out that due to ensuing Assembly Elections, it was being examined whether it was a violation of Model Code of Conduct or not. Once it is sorted out, action will be taken in this regard. Again vide letter dated 31.03.2000, the State Government informed the IFCI that the matter was delayed due to election and the necessary notification shall be issued soon. There was another meeting held on 29.05.2000 under the Chairmanship of the Minister of Industries on problems faced by the Company. The meeting recorded as follows:-After intense discussion in the meeting, the following decisions were taken:1. Under the Industrial Policy, 1995 the Commercial Tax Department shall immediately issue the matching notification to provide the facility of exemption/deferment from Sales Tax to be potentially sick and closed units2. The Forest and Environment Deptt. Will take necessary steps immediately to take out the Limestone bearing areas from the Kaimur Wild Life Sanctuary and for grant of Mining Leases to KCL so that the Limestone availability to the Company is ensured uninterruptedly and thousands of workers working are saved from unemployment (given Forest and Environment Deptt.)61. During the course of the proceedings in the writ petition, the State Government in its supplementary affidavit dated 05.12.2000 filed on behalf of respondent No.4 (i.e. Secretary-cum-Commissioner, Commercial Taxes Department) again categorically reiterated that the Honble Minister, Department of Commercial Taxes has approved the proposals along with draft notification regarding extension of Sales Tax related incentives to sick industrial units....... It had been submitted to the Chief (Finance) Minister on 18.11.2000. It shall be possible to issue necessary notification after approval of the proposal by the Chief (Finance) Minister. Having made the aforesaid statements in an affidavit before the High Court, the Government has resiled from the unequivocal representations in the decisions dated 06.01.2001 and 05.03.2001. Therefore, strong reliance was placed on clauses 22 and 24 of the 1995 Policy and the doctrine of `promissory estoppel in support of the plea that the action of the State Government in issuing orders dated 06.01.2001 and 05.03.2001 are wholly arbitrary and unjust62. In reply, it was contended that the decision dated 06.01.2001 had been taken for the four reasons stated earlier. It was further stated that the decisions taken in the meeting of the Cabinet held on 05.03.2001 was upon thoughtful and due consideration of all the relevant factors. Taking into consideration the totality of the circumstance, a policy decisions had been taken that notification relating to the Sales Tax incentive be not issued. Therefore, the Company was not entitled to any relief. It was on consideration of the entire matter that the High Court concluded as follows:-When the State Government gives an assurance and undertaking, in form of a policy then in fact it allures person/industries to enter into the individual ventures, invest money on the assurances contained in the policy, would it be justified on the part of the State Government to say later on that on a second thought they were withdrawing the policy and the benefits flowing from that policy? We are unable to agree to this argument63. We are of the opinion that the aforesaid conclusion reached by the High Court is based on due consideration of the material placed before it. We see no reason to differ with the opinion expressed by the High Court. We are unable to accept the submissions made by Dr. Dhawan and Mr. Dwivedi that no clear-cut assurances were held out to the Company. We are also unable to accept the submissions of Mr. Dwivedi that the Company has failed to place on the record sufficient material to establish that unequivocal promises and representations had been made by the appellant to the Company by word and by conduct64. In our opinion, the matter is squarely covered by the observations made by this Court in the Mangalore Chemicals (supra) There is, as set out earlier, no dispute that the appellant was entitled to the benefit of the Notification dated June 30, 1969. There is also no dispute that the refunds were eligible to be adjusted against sales tax payable for respective years. The only controversy is whether the appellant, not having actually secured the prior permission would be entitled to adjustment having regard to the words of the Notification of August 11, 1975, that until permission of renewal is granted by the Deputy Commissioner of Commercial Taxes, the new industry should not be allowed to adjust the refunds. The contention virtually means this: No doubt you were eligible and entitled to make the adjustments. There was also no impediment in law to grant you such permission. But see language of clause 5. Since we did not give you the permission you cannot be permitted to adjust. Is this the effect of the law?10. The sales tax already paid by the appellant on the raw materials procured by it is the subject matter of the refunds. The sales tax against which the refund is sought to be adjusted is the sales tax payable by appellant on the sales of goods manufactured by it. If the contention of the Revenue is correct, the position is that while the appellant is entitled to the refund it cannot, however, adjust the same against current dues of the particular year but should pay the tax working out its refunds separately. The situation may well have been such but the snag comes here. If the adjustments made by the appellant in its monthly statements are disallowed, the sales tax payable would be deemed to be in default and would attract a penalty ranging from 1 1/2 per cent to 2 1/2 per cent per month from the date it fell due. That penalty, in the facts of this case, would be very much more than the amounts of refund11. What emerges from the undisputed facts is that appellant was entitled to the benefit of these adjustments in the respective years. It had done and carried out all that was necessary for it to do and carry out in that behalf. The grant of permission remained pending on account of certain outstanding inter-departmental issues as to which of the departments – the Department of Sales Tax or the Department of Industries -- should absorb the financial impact of these concessions. Correspondence indicates that on account of these questions, internal to administration, the request for permission to adjust was not processed22......There is no dispute that appellant had satisfied these conditions. Yet the permission was withheld -- not for any valid and substantial reason but owing to certain extraneous things concerning some inter-departmental issues. Appellant had nothing to do with those issues. Appellant is now told, We are sorry. We should have given you the permission. But now that the period is over, nothing can be done. The answer to this is in the words of Lord Denning:4 Now I know that a public authority cannot be estopped from doing its public duty, but I do think it can be estopped from relying on a technicality and this is a technicality23. Francis Bennion in his Statutory Interpretation, (1984 edn.) says at page 683:Unnecessary technicality: Modern courts seek to cut down technicalities attendant upon a statutory procedure where these cannot be shown to be necessary to the fulfillment of the purposes of the legislation65. The law with regard to the applicability of the doctrine of promissory estoppel was again comprehensively considered by this Court in the case of Nestle India (supra). Ruma Pal, J. speaking for the Bench observed as follows:-24. But first a recapitulation of the law on the subject of promissory estoppel. The foundation of the doctrine was laid in the decision of Chandrasekhara Aiyar, J. in Collector of Bombay v. Municipal Corpn. of the City of Bombay..........Chandrasekhara Aiyar, J. concurred with the conclusion of Das, J. but based his reasoning on the fact that by the resolution, representations had been made to the Corporation by the Government and the accident that the grant was invalid did not wipe out the existence of the representation nor the fact that it was acted upon by the Corporation. What has since been recognised as a signal exposition of the principles of promissory estoppel, Chandrasekhara Aiyar, J. said: (AIR p. 476, paras 21 & 22)The invalidity of the grant does not lead to the obliteration of the representation. Can the Government be now allowed to go back on the representation, and, if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed. If the resolution can be read as meaning that the grant was of rent-free land, the case would come strictly within the doctrine of estoppel enunciated in Section 115 of the Evidence Act. But even otherwise, that is, if there was merely the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfil it. ... Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power25. In other words, promissory estoppel long recognised as a legitimate defence in equity was held to found a cause of action against the Government, even when, and this needs to be emphasised, the representation sought to be enforced was legally invalid in the sense that it was made in a manner which was not in conformity with the procedure prescribed by statute26. This principle was built upon in Union of India v. Anglo Afghan Agencies where it was said (SCR at p. 385): (AIR p 728, para 23) 23. Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen44. Of course, the Government cannot rely on a representation made without complying with the procedure prescribed by the relevant statute, but a citizen may and can compel the Government to do so if the factors necessary for founding a plea of promissory estoppel are established. Such a proposition would not fall foul of our constitutional scheme and public interest. On the other hand, as was observed in Motilal Padampat Sugar Mills case and approved in the subsequent decisions: (SCC p. 442, para 24)It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel46. ...........The facts in the present case are similar to those prevailing in Godfrey Philips. There too, as we have noted earlier, the statutory provisions required exemption to be granted by notification. Nevertheless, the Court having found that the essential prerequisites for the operation of promissory estoppel had been established, directed the issuance of the exemption notification66. In Petrochemical (supra), this Court has clearly reiterated the promissory estoppel would apply where a party alters his position pursuant to or in furtherance of the promise made by a State. It is also clearly held that such a policy decision can be expressed in notifications under statutory provisions or even by executive instructions. Whenever the ingredients for invoking the principle of promissory estoppel are established, it could give rise to a cause of action. Not only may it give rise to a cause of action but would also preserve a right. The relevant observations are as under:-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 plants122. Unlike an ordinary estoppel, promissory estoppel gives rise to a cause of action. It indisputably creates a right. It also acts on equity. However, its application against constitutional or statutory provisions is impermissible in law130. We, therefore, are of the opinion that doctrine of promissory estoppel also preserves a right. A right would be preserved when it is not expressly taken away but in fact has expressly been preserved67. This Court in MRF Ltd. Kottayam (supra) considered the legality of a notification withdrawing the exemption granted by an earlier notification. Relying on the representations contained in the earlier notification, MRF had altered its position. Whilst setting aside the subsequent notification withdrawing the exemptions, this Court held that the whole actions of the State including exercise of executive power has to be tested on the touchstone of Article 14 of the Constitution of India. It was held that the action of the State must be fair. In this context we may notice the observations made in paragraph 38 and 39 of the judgment:-38. The principle underlying legitimate expectation which is based on Article 14 and the rule of fairness has been restated by this Court in Bannari Amman Sugars Ltd. v. CTO21. It was observed in paras 8 and 9: (SCC pp. 633-34)8. A person may have a `legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that `legitimate expectation gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a persons legitimate expectation is not fulfilled by taking a particular decision then the decision-maker should justify the denial of such expectation by showing some overriding public interest. (See Union of India v. Hindustan Development Corpn)9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness. (emphasis supplied)39. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years........ .......The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa v. State of T.N observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of justice and fair play. The attempt to take away the said benefit of exemption with effect from 15-1-1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed68. We are also unable to accept the submission with the decisions dated 06.01.2001 and 05.03.2001 had been taken due to the change in the national policy. This was sought to be justified by Dr. Dhawan on the basis of the Conferences of Chief Ministers/Finance Ministers. It is settled law as noticed by Bhagwati, J in Motilal Padampat (supra) that the Government cannot, claim to be exempt from liability to carry out the promise, on some indefinite and undisclosed ground of necessity or expediency. The Government is required to place before the Court the entire material on account of which it claims to be exempt from liability. Thereafter, it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from liability. It is only when the Court is satisfied that the Court would decline to enforce the promise against the Government. However, the burden would be upon the Government to show that it would be inequitable to hold the Government bound by the promise. The Court would insist a highly rigorous standard of proof in the discharge of this burden. In the present case, the claim of the Government is based on a change in policy advocated in the Chief Ministers Conference. These Conferences have taken place before the affidavit is filed on 05.12.2001. Therefore, the High Court concluded that the Government has not been candid in disclosure of the reasons for passing the order dated 06.01.2001. In our opinion, the aforesaid decisions with regard to the discontinuance of the Sales Tax exemptions from 01.01.2000 could not have affected the rights of the Company under the Industrial Policy, 1995. Necessary application was made to the Government seeking exemption on 21.11.1997. For more than 3 years, the Company and the financial institutions had been assured by the Government that the notification will be issued forthwith. However, it was not issued. We are of the opinion that the action of the appellants is arbitrary and indefensible69. Learned Senior counsel for the appellants had also submitted that it was not necessary to issue the notification within one month as stipulated in clause 24 of the Industrial Policy, 1995. In order to appreciate the aforesaid submission, it would be necessary to make a reference to the relevant clauses of the Industrial Policy, 1995. Clause 22, 23 and 24 are as under:-The continuing problems of industrial sickness is a matter of great concern for the Government. Closure of units leads to unemployment and locking up of capital deployed in such ventures. The State Government is determined to take effective measures and to render all possible assistance for the amelioration of this malaise22.1. INDUSTRIAL SICKNESS IN SSI SECTIONThe State Government proposes to take the following measures for the revival of SSI units:i. there are scores of medium and small scale units which are sick but have the potential of becoming viable. For such SSI units which are outside the purview of the Bureau of Industrial and Financial Reconstruction (BIFR), the State Government proposes to form an apex body on the lines of BIFR with Director of Industries as its Head to consider their revivalii. The State level apex body for rehabilitation of sick industry would be vested with adequate powers so that it can effectively implement management and financial restructuringiii. The sick SSI units would be identified as per guidelines given by RBI/IDBI. Appropriate packages of reliefs and concessions for such units would be approved for their rehabilitationiv. Sick units undergoing rehabilitation will not have to take sickness certificate every year. The approved revival package for each sick unit would indicate the period of revivalv. The Apex Body shall monitor the progress of the revival packagevi. A sick unit being revived would be entitled to Sales Tax exemption/deferment exemption from Minimum Guarantee etc. as determined in the revival packagevii. The State level Apex body would besides representatives of Government Department/ Organisations/ financial institutions will also have its members one representative each of confederation of Indian Industries, Bihar Industries Association and Bihar Chamber of CommerceThe rehabilitation package would be implemented within a fixed time frame so that the process of revival is not delayed22.2 SICKNESS IN LARGE AND MEDIUM SECTORi. A committee with Industrial Development Commissioner as its head will be constituted to evolve suitable measures for potentially viable non-BIFR sick industrial units including PSUs in the large and medium sectorThe Committee will recommend concessions and facilities including those in this policy statement if considered necessary for revival of the Unit; These recommendations would be placed before the Government through State level Empowered Committee (SLEC) already constituted under the chairmanship of Chief Secretary for final decisionii. Concessions and facilities identified under the Scheme of rehabilitation prepared by the Board for Industrial and Financial Reconstruction (BIFR) or by Inter- Institutional Committee of IRBI, BICICO/BSFC and Bank would be placed before the Committee headed by the Industrial Development Commissioner for consideration and recommendation to Government through SLEC for approvaliii. Rehabilitation measures for sick but potentially viable industrial units may, inter alia, include reliefs and concessions or sacrifice from various government departments/ organizations and or additional facilities including allocation of power from BSEB/DVC and any other agency/statutory body/local authority22.3 Such closed and sick industrial units which have once availed of the facility of Sales Tax exemption/deferment under a rehabilitation package prepared by BIFR shall not get the same facility again if they turn sick or are closed again. This will also apply to other facilities given to such sick and closed industrial units which have once availed of such facilities in the past. However, the State Government may consider extending such facilities on case to case basis as required23. Definition(s) given in the Annexure form(s) part of the policyAll concerned departments and organizations will issue follow up notifications to give effect to the provisions of the policy within a month. This will be appropriately monitored by the Govt