1975 (7) TMI 162 - HC - Indian Laws

Summary

Issues Involved:

1. Can equity or promissory estoppel bar the Government from changing a scheme or policy before the expiry of its period, and if so, under what circumstances?
2. Was the justification for withdrawing the scheme based on the rise in foreign prices in the year 1972-73 valid?
3. Was the scheme divisible into two independent parts, and if so, was the withdrawal of the incentive cash assistance invalid?

Detailed Analysis:

Issue 1: Can equity or promissory estoppel bar the Government from changing a scheme or policy before the expiry of its period, and if so, under what circumstances?

The petitioners argued that the Government's representation on 2nd February 1973, that the scheme would operate for three years, bound the Government by promissory estoppel and equity. They claimed that they relied on this representation to their detriment by investing in their trade and entering into contracts. However, the Government contended that the scheme was based on the assumption that cash assistance was required to offset losses for three years. Due to a spurt in international prices for walnuts in 1973, the Government felt the scheme was no longer justified and withdrew it. The court held that the petitioners did not change their position to their detriment and that the principle of promissory estoppel or analogous equity did not apply. The court also noted that the Government's policy decisions are subject to changing circumstances and cannot be fettered by representations or contracts, especially when they concern the welfare of the state. The court cited cases such as Rederiaktiebolaget Amphitrite v. The King and Indian Aluminium Company v. State of Kerala to support this view. The court concluded that the Government was entitled to withdraw the scheme when the implied condition of offsetting losses ceased to exist.

Issue 2: Was the justification for withdrawing the scheme based on the rise in foreign prices in the year 1972-73 valid?

The petitioners argued that the justification for withdrawing the scheme based on the rise in foreign prices in 1972-73 was not valid for the subsequent years. The Government countered that the petitioners did not provide any material regarding the prices for 1973-74 and 1974-75 to support their claim. The court found that the petitioners failed to prove any adverse change of circumstances for the subsequent years. The court also noted that the Government had provided specific figures showing a significant increase in the prices of walnuts, which was not denied by the petitioners. The court held that the Government was justified in withdrawing the scheme based on the increased prices and the resultant profits for the exporters.

Issue 3: Was the scheme divisible into two independent parts, and if so, was the withdrawal of the incentive cash assistance invalid?

The petitioners contended that the scheme was divisible into two independent parts: normal cash assistance of 5% and incentive cash assistance for increasing exports. They argued that the reason for withdrawing the normal cash assistance did not apply to the incentive cash assistance. The Government maintained that the scheme was indivisible and that the incentive cash assistance was connected to the normal cash assistance. The court agreed with the Government, stating that the incentive to increase exports was necessary when the exports were languishing. The court found that the increase in world prices led to both increased unit realisation and volume of exports, justifying the withdrawal of both the normal and incentive cash assistance. The court concluded that the scheme was not divisible, and the withdrawal of the incentive cash assistance was valid.

Additional Observations:

The court noted that the petitioners could make a representation to the Government for ex gratia compensation, as was the practice in other cases where export subsidy schemes were withdrawn before their full period. The court dismissed the writ petitions without any order as to costs.

Conclusion:

The court dismissed the writ petitions, holding that the Government was justified in withdrawing the cash assistance scheme based on the change in circumstances, specifically the rise in world prices for walnuts. The court found that the principles of promissory estoppel and equity did not apply, and the scheme was not divisible into independent parts. The petitioners were advised to seek ex gratia compensation from the Government.