# Kamla Palace v. State of U.P. & others

- **Citation:** (2001) 1 ILRA 87
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2001
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/kamla-palace-v-state-of-u-p-others-39003
- **Pages:** 7

## Text

1All] Kamla Palace V. State of U.P. & others
87
 application as the same so far has not
been withdrawn specifically or otherwise.

19. In support of their pleas
regarding
partition
of
property
and
closure of brick kiln business, the
contesting
respondents
filed
supplementary counter affidavit along
with which as many as 15 documents
have been filed as Annexures. Learned
counsel for the respondents wanted to rely
on the said documents. In the affidavit, it
has not been stated as to whether these
documents were filed before the
authorities below or they are being
produced before this Court for the first
time. In any view of the matter, this
Court, in exercise of its power under
Article 226 of the constitution of India,
cannot appraise or re-apprise the
evidence and cannot record its own
findings on the questions of fact
involved in the case.

20. It may also be noticed that the
Prescribed Authority has recorded a clear
and categorical finding on the question of
comparative hardship in favour of the
petitioner, the Appellate Authority did not
reverse the said finding in accordance
with law, Legally, without reversing the
said finding, the judgement and order
passed by the Prescribed Authority could
not be reversed, therefore, the judgement
and order passed by the Appellate
Authority is bad in law judging from the
said angle. A reference in this regard may
be made to a decision in Shyam Lal Vs.
VII Additional District Judge, Meerut and
others, 1986 ( 1) A.R.C. 34.

21. In view of the aforesaid
discussions, the judgement and order
passed by the Appellate Authority
dated 25.11.1997 is liable to be set aside
and the case is liable to be remanded to
the Appellate Authority for decision in
the light of the observations made above.

22. The writ petition succeeds and is
allowed. The judgement and order dated
25.11.1997 passed by the respondent no.1
is hereby quashed. The case is remanded
to the Appellate Authority for decision
afresh in the light of the observation made
above. The Appellate Authority shall also
take into consideration the offer made by
the petitioner to provide a suitable shop to
the contesting respondents at Lohai Road
while deciding the appeal. It is further
observed that the appeal shall be decided
expeditiously.
Petition Allowed.

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By the Court

1. The petitioner, Kamla Palace,
village, Dunda Hera, district Ghaziabad,
through its proprietor Sri Arvind Mohan
Sharma, has filed the present petition
under Article 226/227 of the Constitution
of India, seeking writ of certiorari
quashing the orders dated 14.5.1992,
16.7.1993, 22.7.1993, 13.9.1993 and
22.9.1993, contained in annexures 14, 9,
12, 13 respectively, in addition to writ of
Mandamus directing the respondents not
to compel the petitioner to pay any
amount towards the entertainment tax for
the first two years of functioning of
petitioner cinema Hall.

2. The facts of the case in brief are
that according to the petitioner, acting on
the basis of grant in aid facility provided
by
the
State
Government
vide
Government Order dated 18th July 1989,
he decided to construct a cinema hall in
village Dunda Hera of district Ghaziabad
which had a population of less than 5000.
The petitioner had made an application
under Rule 3 of the U.P. Cinematograph
Rules, 1951 (hereinafter referred to as the
Rules), on 18.11.1989, seeking approval
of the site plan and permission for
construction of permanent cinema hall
building. The District Magistrate, who is
the licensing, granted permission under
Rule 3(3) of the Rules, to the petitioner on
20.2.1992.
Thereafter,
the
petitioner
started the construction of the cinema
hall. The petitioner had applied for grant
of licence on 20.2.1993. The petitioner
was granted licence on 9.5.1993 and it
started exhibiting the cinematograph films
from 10.5.1993.

3. It may be mentioned here that
the State Government had provided
certain incentives for construction of new
cinema halls vide order dated 18.7.1989.
The said order applied to those cases
where the application for approved of the
site plan for construction of permanent
cinema building had been filed after
1.4.1989 but before 31.3.1994 coupled
with the conditions that application for
grant of licence should be made between
1.4.1990 to 31.3.1995. The grant in aid
admissible to such new cinema halls was
100% of the entertainment tax, during
first 2 years and 75% of the entertainment
tax during the third year. The petitioner
also applied for giving of grant in aid in
terms
of
Government
Order
dated
18.7.1989. However vide order dated
16.7.1993
passed
by
the
District
1All] Kamla Palace V. State of U.P. & others
89
Magistrate Ghaziabad, respondent no. 4,
the petitioner was informed that it would
be entitled to grant in aid to the extent of
75% of the entertainment tax only as the
cinema hall was running with effect from
10.5.1993. The petitioner also received an
order dated 22.7.1993 passed by the
Incharge,
Assistant
Commissioner,
Entertainment
Tax,
Ghaziabad,
respondent no. 3 calling upon it to deposit
a sum of Rs.42,603.77 being 25% amount
of entertainment tax recoverable from the
petitioner from 10.5.1993 to 14.7.1993.
The petitioner made a representation
before
the
Secretary
(Institutional
Finance) Government of U.P. Lucknow,
on 4.8.1993 stating inter alia that it had
constructed the cinema hall on the basis
of grant in aid as provided in Government
Order
dated
18.7.1989
which
was
effective from 1.4.1989. The petitioner
further stated that since it had complied
with all the conditions of the Government
Order dated 18.7.1989, it was entitled for
grant in aid to the extent of 100%
entertainment tax for the first 2 years. The
petitioner prayed for quashing the order
dated 16.7.1993 and issuance of direction
for not depositing any money towards any
entertainment tax. The Joint Secretary
(Institutional Finance) respondent no 2,
vide order dated 13.7.1993 informed the
petitioner that the Government Order
dated 18.7.1989 had been amended vide
order dated14.5.1992 and therefore, the
order dated 16.7.1993 passed by the
respondent no.3 was valid and legal. After
the Joint Secretary (Institutional Finance)
respondent no.2 had communicated the
decision upholding the legality of the
order dated 18.7.1993, the respondent
no.4
had passed another order on
22.9.1993 directing the petitioner to
deposit a sum of Rs.71,563.33 being 25%
of the entertainment tax for the period
10.5.1993 to 7.9.1993. The orders dated
14.5.1992,
16.7.1993,
22.7.1993,
13.9.1993, 22.9.1993 are under challenge
in the present petition.
4. We have heard Shri V.B. Singh,
learned counsel for the petitioner and Shri
Chandra Sehkhar Singh learned Standing
Counsel for the respondents.

5. The learned counsel for the
petitioner submitted that the Government
order dated 14.7.1992 wherein grant in
aid for first two years had been amended
from 100% to 75% of the entertainment
tax would not to be applicable in the case
of the petitioner in as much as acting on
the basis of terms/incentives as contained
in the Government Order dated 18.7.1989,
the petitioner had taken steps to construct
a new permanent cinema hall for which
necessary permission was also grated by
the respondent no. 4 vide order dated
20.3.1992. The petitioner having altered
his position by acting on the promise as
held out by the State Government and
contained in the Government order dated
18.7.1989, can not be denied the benefit
of grant in aid to the extent of 100% of
the entertainment tax for the first two
years and the Government Order dated
14.7.1992
if
at
all,
will
apply
prospectively i.e. in respect of those
persons who decided to construct new
cinema hall on or after 14.7.1992 and had
taken steps for the same thereafter. He
submitted that consequently the other
orders
dated
16.7.1993,
22.7.1993,
13.9.1993 and 22.9.1993 are also illegal
and can not be allowed to stand. In
support of aforesaid plea, the learned
counsel for the petitioner has relied upon
the decisions of the Hon'ble Supreme
Court in the case of M/s Motilal
Padampat Sugar Mills Co. Ltd. The State
of U.P. and others reported in AIR 1979
90 INDIAN LAW REPORTS ALLAHABAD SERIES [2001
S.C. 621 and Pawan Aalloys & Casting
Pvt. Ltd., Meerut Vs U.P. State Electricity
Board and others reported in (1977) 7
S.S.C. 251, and submitted that the State is
bound by the promise it had made and on
the ground of the principle of promissory
estoppel, the State of U.P. is estopped
from demanding 25.% of the amount of
entertainment tax from the petitioner in
respect of the first 2 years.

6. Shri C.S. Singh learned standing
counsel, on the other hand submitted that
even though, the petitioner had been
granted
permission
by
the
District
Magistrate, respondent no.4, under rule
3(3) of the Rules for construction of the
cinema building on 20.2.1992, yet in view
of the fact that the petitioner had
completed the construction of the cinema
building only on 20.2. 1993 and had been
granted
licence
to
exhibit
the
cinematograph films thereafter when the
Government order dated 14.7.1992 had
already come into existence, the petitioner
is not entitled for grant in aid to the extent
of 100% entertainment tax for the first 2
years as the same had been modified
substituted to 75% vide G.O. dated
14.7.1992. He further submitted that in
the facts and circumstances of the present
case, it can not be said that the petitioner
had taken effective steps for construction
of the new cinema building within a short
span of three months and has not altered
its position. He submitted that the plea of
promissory estoppel is not applicable in
the present case and law applicable at the
time of grant of licence is to be taken into
consideration. He submitted that when the
petitioner was granted licence to run
exhibit the cinematograph films in May
1993,
the
Government
Order
dated
14.7.1992 had already come into force
and, therefore, the petitioner was entitled
for grant in aid of 75% of the
entertainment tax for the first 2 years and
not 100% of the entertainment tax.

7. He further submitted that there is
no prohibition in law to review the policy
regarding grant in aid. If the State
Government has reduced the amount of
grant in aid from 100% to 75% vide order
dated 14.7.1992 no exception can be
taken to it, In support of this plea, he
relied upon the decisions of the Hon'ble
Supreme Court in the Case of M/s Pankaj
Jain Agencies Vs. Union of India & Ors,
reported in JT 1994(5) S.C. 64, Kasinka
Trading & Anr. Etc. vs Union of India
and Anr. Reported in JT 1994(7) S.C.
362, and State of Himanchal Pradesh &
Ors. Etc. vs. Ganesh Wood Products &
Etc. reported in JT 1995(6) S.C. 485.

8. Having heard the learned counsel
for the parties, we find that admittedly in
the present case, the petitioner had
applied for grant of permission for the
construction of a new cinema building on
18.11.1989 after purchasing the land on
15.11.1989 as per annexure 2 to the writ
petition.
The
licensing
authority,
respondent no. 4, had granted permission
to the petitioner approving the site plan
and for construction of cinema building
under Rule 3 (3) of the Rules on
20.2.1992. The petitioner had started
construction thereafter, which had been
completed on 20.2.1993. At the time
when the petitioner had applied for
permission under Rule 3 of the Rules i.e.
on 18.11.1989 and when the permission
under Rule 3(3) was given on 20.2.1992,
the Government order dated 18.7.1989
was already in force which provided for
grant in aid to the extent of 100% of the
amount of entertainment tax to the new
cinema halls for the period of first 2
1All] Kamla Palace V. State of U.P. & others
91
years. Thus, the petitioner had acted on
the promise/incentives announced by the
State Government as contained in the
order dated 18.7.1989 and has altered its
position by investing money in the
purchase of land and construction of the
cinema hall. The scheme of grant in aid as
given in the Government order dated
18.7.1989,
was
applicable
to
those
persons who applied for approval of the
site plan during the period 1.4.1989 to
31.3.1994 and also applied for grant of
licence between 1.4.1990 to 31.3.1995. In
the present case, both the conditions have
been fulfilled by the petitioner as he had
applied for the grant of permission to
construct cinema building and approval of
site plan before 31.3.1994 and also for
grant of licence sometimes in February
1993 which licence was granted on
9.5.1993.

9. The only question remains as to
whether the petitioner is entitled for grant
in aid to the extent of 100% of the amount
of entertainment tax for the first 2 years as
provided in the Government order dated
18.7.1989 or to the extent of 75% as
provided in the Government Order dated
14.7.1992. It may be mentioned that by
the Government Order dated 14.7.1992,
clause 2 of earlier G.O. dated 18.7.1989
has been substituted by a new clause
which provides uniform grant in aid of
75% of the amount of entertainment tax
for all the three years in place of 100% for
the first two years and 75% for the third
year.
10. Answer to the aforesaid question
would depend on the applicability of the
principles of promissory estoppel. If we
come to the conclusion that the doctrine
of promissory estoppel is attracted in the
present case then the petitioner shall be
entitled to grant in aid under the amended
G.O. dated 18.7.1989, otherwise not. The
Hon'ble Supreme Court in the case of
Pawan Alloys & Casting Pvt. Ltd. (supra)
after examining the various decision on
the issue of promissory estoppel, has held
as follows.

"10, It is now well settled by series of
decisions of this Court that the State
authorities as well as its limbs like the
Board covered by the sweep of Article 12
of the constitution of India being treated
as "State" within the meaning of the said
article, can be made subject to the
equitable doctrine of promissory estoppel
in
case
where
because
of
their
representation the party claims estoppel
has changed its position and if such an
estoppel does not fly in the face of any
statutory prohibition, absence of power
and authority of the promisor and is
otherwise not opposed to public interest,
and also when equity in favour of the
promise does not outweigh equity in
favour of the promisor entitling the latter
to legally get out of the promise."

11. Thus, the State is bound by the
promise which it had made in the event
any person acting on such promise has
changed its position. From a perusal of
the Government Order dated 18th July
1989, we find that with a view to
encourage establishing new permanent
cinema hall in areas where the population
according to 1981 census was not more
than 1,00,000 the State Government had
announced incentives in the form of grant
in aid which was equivalent to 100% of
the amount of entertainment tax for the
first 2 years and 75% of the entertainment
tax for the third year. The net resell of the
aforesaid
G.O.
was
that
persons
constructing new cinema halls who fall
within the purview of the G.O. would not
92 INDIAN LAW REPORTS ALLAHABAD SERIES [2001
be liable to pay entertainment tax at all in
the first 2 years and shall pay only 25% of
entertainment tax in the third year as they
were entitled to retain it as grant in aid.
The State Government was competent to
announce the incentives in the form of
grant in aid to attract persons to construct
new
cinema
halls
in
areas having
population of 1,00,000 or less. The
petitioner had also acted on the promise
made by the State Government as
contained in the said G.O. by purchasing
the land for constructing a new cinema
hall and had invested huge sum of money,
in the hope and belief that it will also get
the grant in aid to the extent of 100% of
the amount of entertainment tax in the
first years.

12. The respondents have not placed
any material before the Court to show that
the withdrawal of the incentives grant in
aid to the extent of 75% was grant in the
public interest. Therefore, the equity
which had arisen in favour of the
petitioner
remained
untouched
/
undisturbed by any overwhelming and
superior
equity
in
favour
of
the
respondents entitling them to withdraw in
pre-mature manner leaving the petitioner
high and dry before the requisite period of
two years. The Hon'ble Supreme court in
the case of Pawan Alloys & Casting Pvt.
Ltd. (supra) has held that where there is
no such overriding public interest, it may
be still be open the promissory State or its
delegate to resile from the promise on
giving reasonable notice which need not
be a formal notice giving the promisee a
reasonable opportunity of resuming his
position provided it is possible for the
promise to restore the status quo ante. In
paras 36 and 37 of the decision rendered
in the aforesaid case the Hon'ble Supreme
Court has held as under:

"36. As observed by this Court in
Shrijee Sales Corpn. even where there is
no such overriding public interest it might
still be open to the promisor-State or its
delegate to resile from the promise on
giving reasonable notice which need not
be a formal notice giving the promisee a
reasonable opportunity of resuming his
position, provided its is possible for the
promisee to restore the status quo ante.
Even on this aspect the respondent-Board
has no case. It has not given any
reasonable opportunity to the appellants
to resume their earlier position. Nor is it
shown by the Board that it is possible for
the appellate promisee to restore the status
quo ante. The reason is obvious. Once the
new
industries
were
lured
into
establishing their factories in the region
catered to by the Board on being assured
three-year
guaranteed
incentive
of
development rebate of 10% on their total
bills of electricity charges and acting on
the same once they had established their
industries and spent large amounts for
constructing the infrastructure and for
employing necessary labour and for
purchasing raw materials etc. It would be
almost impossible for them to restore the
status quo ante and to walk out midstream
if the development rebate incentive was
withdrawn for the un expired period out
of the three years' guaranteed period of
currency of development rebate incentive.
In fairness even it was not suggested by
learned
Senior
counsel
for
the
respondents that on such withdrawal of
development rebate the appellant would
be able to restore the status quo ante and
walk out. He simply relied upon the ratio
of the decision of this Court in the case of
Shrijee Sales Corporation for contending
that it is the power of the Board to grant
the rebate and it is equally the power of
1All] Chandra Prakash Gupta V. State of U.P. & others
93
the Board to withdraw the same in its own
discretion.

37. Consequently it must be held that
the twin aspects highlighted by this Court
in Shrijee Sales Corpn. on the basis of
which the authority promising a particular
course of conduct on its part to the
prospective promisee can resile from the
promise even prematurely are not found
established on the facts of these cases.
Consequently the ratio of the said
decision can not be of any avail to the
respondent-Board"

13. Applying the principles laid
down by the Hon'ble Supreme Court, in
the aforesaid case, we find that the
respondents have not placed any material
on record before the Court nor have
shown that by reducing the amount of
grant
in
aid
from
100%
of
the
entertainment
tax
to
75%
of
the
entertainment tax for the first 2 years, it is
possible for the petitioner to restore the
status quo ante.

14. Thus, the respondents are bound
by the incentives announced by the State
Government in the Government Order
dated 18.7.1989. The changed rates of the
grant in aid as per G.O. dated 14.7.1992
would be applicable only where a person
decides to construct new cinema building
on or after 14.7.1992 and applies for grant
of permission under Rules 3 of the Rules
on or after that date. The decisions relied
upon by the learned Standing Counsel,
have all been considered by the Hon'ble
Supreme Court in the case of Pawan
Aoooys & Casting Pvt. Ltd. (supra)and
after considering the same the Hon'ble
Supreme Court had laid down the above
principles.

15. It may be mentioned that the
decision in the case of M/s Pankaj Jain
Agencies (supra) relied upon by the
learned Standing Counsel is not at all
concerned with the issue of promissory
estoppel and has no bearing to the issues
involved in the present petition.

16. In view of the foregoing
discussions, the writ petition succeeds and
is allowed. It is held that the Government
Order dated 14.7.1992 would not be
applicable to the petitioner. The condition
mentioned in the order dated 16.7.1993
(filed as annexure 9 to the petition) in so
far as it grants the benefit of grant in aid
to the extent of 75% of the entertainment
tax in the first 2 years is quashed and we
hold that the petitioner is entitled for grant
in aid of 100% of the amount of
entertainment tax in the first 2 years. The
various which are impugned, namely
22.7.1993, and cannot be sustained and
are hereby quashed.

17. However, there shall be no order
as to cost.
Petition Allowed.

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