2019 (2) TMI 2125 - HC - Indian Laws

Doctrine of merger - Withdrawal of the Sugar Industry Promotion Policy 2004 by the State Government of Uttar Pradesh and the subsequent denial of benefits to the petitioners who had acted upon the policy - breach of principle of Promissory Estoppel Natural Justice and Legitimate Expectation - benefits in the form of exemptions/reimbursements/capital subsidy as promised by the State Government under the Policy could have been suddenly withdrawn by the State Government despite the fact that the petitioners had already made large investments pursuant to the promise - rejection of application for declaration for eligibility of those petitioners who had completed their projects at either level on or before 31.03.2008 on the ground that the Policy had been withdrawn on 04.06.2007 - delay in payment to the cane farmers could be a justification for revocation of the Policy or not - revocation of incentive scheme for no valid reasons - incentives unequivocally promised and exemptions granted could have been taken back without there being any overwhelming public interest or not. HELD THAT - Most of the issues would stand answered by the judgment of this Court in the case of Bajaj Hindustan Limited Vs. State of Uttar Pradesh 2014 (10) TMI 561 - ALLAHABAD HIGH COURT . The said decision of this Court has merged with the Order dated 07.03.2018 of the Supreme Court in Civil Appeal Nos. 7121-7122 and C.A. Nos 7121-7122 2018 (8) TMI 215 - SC ORDER . The Order of the Supreme Court came to be passed in Civil Appeals after grant of leave and therefore the Judgment dated 17.09.2014 of this Court stood merged with the Order of the Supreme Court. As recently held by the Five Judge Bench of this Court in the case of Dr. Archana Mishra and others Versus State of U.P. and others 2018 (10) TMI 2048 - ALLAHABAD HIGH COURT once the decision of this Court merged in the Order of the Supreme Court it would not be legally permissible for this Court to consider the correctness or otherwise of the decision of this Court. This Court is thus bound by the Order of the Supreme Court dated 07.03.2018 which now included Order dated 17.09.2014 passed in case of Bajaj Hindustan Limited in writ petitions nos. 1853 and 1854. In the instant case the petitioners made huge investment in the State of U.P. under a bona fide belief that the State Government shall grant all the benefits promised under the Policy. There is no reason why the State Government should not be compelled to make good such promise like any other individual. As far as the issue of payment of cane dues to the farmers is concerned it is to be noted that this condition was not contained in the Policy as originally announced on 24th August 3004 but was brought in by subsequent amendment dated 17.12.2004 to the Policy whereby it was stipulated that various concessions/exemptions would be available only when the company/unit has paid the entire cane price including arrears. It is clear from the Policy documents that an application for being declared Eligible had to be accompanied with a certificate from the Cane Commissioner to the effect that the entire cane price has been paid. Without such a certificate from the Cane commissioner the application for declaring eligibility would not have been entertained. It is therefore no brainer that the Eligibility Certificate issued to some of the petitioners by the State Government would be only after the applicant had produced such a certificate. The concept of timely payment or always in compliance of timely payment of cane price payment throughout the life time of the Policy was not envisaged in the original or the amended Policy and the only requirement was that the payment of entire cane price including arrears if any be made before availing the benefits under the Policy. It is nobody s case that those petitioners who had been granted the Eligibility Certificate did not make the full payment of entire cane price even if there was some delay in making such payment to the farmers. It would be interesting to make a reference to Co-generation and Distillery Promotion Policy-2013 attached by the State Government to its affidavit dated 28.11.2017 filed in this Court which stipulated that the benefits under that policy would be available only if the company/unit has made timely payment of entire cane price. If timely payment was so critical element of the Policy State Government would have employed similar language as used in the case of Distillery Policy of 2013. The contention of the delay in timely payment of cane price is therefore clearly an afterthought on the part of the State. There is no quarrel with the legal proposition that the State is empowered to withdraw a Policy but if such Policy contained some unequivocal promise and assurance and someone has altered his position acting on such promise then such withdrawal shall have to pass the test of promissory estopple. There is also no quarrel with the proposition that promissory estopple must yield to overriding public interest except that the present case does not contain any such overriding public interest. Conclusion - The petitioners are entitled for consideration of all the benefits in the form of exemptions/ remission/reimbursements as per the Sugar Industry Promotion Policy-2004 and various Notifications issued thereunder from time to time for the entire period of the validity of the Policy. The withdrawal of the Policy was arbitrary unreasonable and in violation of the principles of promissory estoppel natural justice and legitimate expectation. Petition allowed.

Summary

The Court considered several core legal issues in this case, primarily revolving around the withdrawal of the Sugar Industry Promotion Policy, 2004 by the State Government of Uttar Pradesh and the subsequent denial of benefits to the petitioners who had acted upon the policy. The issues presented and considered include:

I) Whether the withdrawal of the Policy by the State Government and the denial of accrued benefits to the eligible petitioners violated the principles of 'Promissory Estoppel', Natural Justice, and 'Legitimate Expectation'?

II) Whether the benefits promised under the Policy could have been withdrawn by the State Government despite the petitioners having made significant investments based on the State's promises?

III) Whether applications for eligibility could be rejected on the grounds that the Policy was withdrawn before the petitioners completed their projects?

IV) Whether petitioners who were granted Eligibility Certificates under the Policy could be deprived of benefits due to delays in cane payments to farmers, and whether such delays justified the Policy's revocation?

V) Whether the State Government could nullify the Policy and previously issued notifications through an executive order?

VI) Whether the State could withdraw the exemptions and revoke the incentive scheme without valid reasons, and whether the pleas of promissory estoppel or legitimate expectation rendered the State's action unlawful?

VII) Whether the incentives and exemptions promised could be withdrawn without any overriding public interest?

The Court's detailed analysis of these issues is as follows:

The legal framework primarily involved the doctrine of promissory estoppel, which prevents a party from withdrawing a promise when the other party has relied on it to their detriment. The Court referenced several precedents, including the landmark case of Motilal Padampat Sugar Mills Co. Ltd v. State of U.P., which established that the government is bound by its promises if the promisee has acted upon them.

The Court interpreted the Policy as a clear promise by the State to provide certain benefits to investors in the sugar industry, which was aimed at revitalizing the sector and improving the rural economy. The Court found that the State's withdrawal of the Policy without any substantial justification violated the principles of promissory estoppel, as the petitioners had made significant investments based on the State's promises.

Key evidence included the Policy documents, the investments made by the petitioners, and the Eligibility Certificates granted to some petitioners. The Court noted that the State had not provided any overriding public interest to justify the Policy's withdrawal and that the reasons given were inconsistent and unsubstantiated.

The Court applied the law to the facts by determining that the petitioners had a legitimate expectation of receiving the promised benefits, as they had altered their positions based on the State's assurances. The Court also addressed the issue of cane payment delays, concluding that these were not a valid ground for revoking the Policy, as the requirement for timely payment was not part of the original or amended Policy.

The Court treated competing arguments by examining the State's claims of financial burden and public interest. However, it found these arguments unconvincing, as the State failed to provide concrete evidence of financial losses or public interest considerations that would justify the Policy's withdrawal.

The Court concluded that the withdrawal of the Policy was arbitrary, unreasonable, and in violation of the principles of promissory estoppel, natural justice, and legitimate expectation. It quashed the State's order withdrawing the Policy and held that the petitioners were entitled to the benefits promised under the Policy for its entire validity period.

Significant holdings included the reaffirmation of the doctrine of promissory estoppel, emphasizing that the State is bound by its promises when the promisee has relied on them. The Court highlighted the need for fairness and non-arbitrariness in the State's actions, particularly when altering policies that affect vested rights.

The Court's final determination was to quash the State's order withdrawing the Policy and to direct the State to consider and grant the benefits to the petitioners as per the Policy and relevant notifications. The Court ordered that the benefits be provided within two months from the date of the judgment.