# STATE OF BIHAR & ORS v. KALYANPUR CEMENTS LTD

- **Citation:** [2010] 1 S.C.R. 928
- **Court:** Supreme Court of India
- **Decided:** 2010
- **Case number:** Civil Appeal No. 5181 of 2002
- **Bench:** Tarun Chatterjee, Surinder Singh Nijjar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-bihar-ors-v-kalyanpur-cements-ltd-26561
- **Pages:** 63

## Headnote

Industrial Policy, 1995 - Clauses 22(2)(i) and 24 - Sales
C tax exemption - Sick company .:... Assistance to the company
for restructuring agreed by financial institutions, on the
condition that it obtained sales tax exemption from State
Government - Repeated assurance by State Government to
issue sales tax exemption Notification - Writ petition seeking
D direction to issue the Notification - State first informed the
High court that it would issue Notification after approval of
proposal of Notification - Later informed the Court that State
has decided not to grant sales tax incentives to sick
companies - High Court quashed the decision of the State
E
and directed it to issue the Notification - On appeal, Supreme
Court by interim order directing the company to deposit an
amount equivalent to sales tax payable by it in a Bank - The
amount to be payable to the party which ultimately succeeded
- State issuing the Notification - Failure of company to
F
deposit the amount taking the plea that it was sick - Held:
Denial of sales tax exemption is arbitrary - The State initially
having given repeated assurances, was estopped from
denying the grant of exemption at later stage - Company
rightly invoked the doctrine of promissory estoppel - State
G cannot take advantage of its own lapses in implementing the
Industrial Policy for denying the claim of the company - The
decision making process culminating into orders denying
grant of exemption is seriously flawed - However, the
company, in view of its financial condition, cannot be permitted
H
928
.
.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 929
LTD_
to retain the amount collected from the customer on sale of A
its product -
This would amount to unjust enrichment -
Direction to release the amount deposited by the company
pursuant to interim order of Supreme Court, to the State -
Doctrine of Promissory estoppel - Unjust Enrichment.
Administrative Law - Doctrine of promissory estoppel -
lnvokabi/ity of - Discussed.
Taxation - exemption of tax and refund of tax - Difference
between.
Words and Phrases - 'Sick unit' - Meaning of, in the
context of Industrial Policy, 1995.
Respondent-Company was declared as a sick unit,
B
c
by the Board for Industrial and Financial Reconstruction.
0
The company, in order to rehabilitate itself sought
assistance from financial institutions for restructuring
package. The proposal for financial assistance and
restructuring was approved by various financial
institutions subject to the condition that the company
obtained a sales tax exemption for a period of 5 years
E
from the State Government, in terms of Industrial Policy,
1995. The company applied for grant of sales tax
exemption. Thereafter the matter remained pending for
consideration by the State Government and financial
institutions. In various meetings of the State, the
F
Company and the financial institutions, categoric
assurances were given by the State that necessary sales
tax exemption Notification would be issued. However, no
such Notification was issued.
The company filed a writ petition seeking direction
to the State to issue necessary Notification. The State
stated that it would be possible to issue the Notification
after approval of proposal of Notification by the Chief
G
H
930
SUPREME COURT REPORTS
[2010] 1 S.C.R.
A (Finance) Minister. Thereafter the State informed the Court
that the State by order dated 6.1.2001 had decided not to
grant any sales tax incentives to sick industrial units, and
therefore the claim of the company was rejected. The
company, therefore, amended the petition, challenging
B the decision dated 6.1.2001. The State in its further
affidavit stated that the decision of the State was later
considered by the Cabinet on 5.3.2001 and it was decided
not to issue any Notification. High Court allowed the writ
petition quashing the decisions dated 6.1.2001 and
c 5.3.2001. The Court directed the State to issue follow up
Notification to give effect to the provisions of the Policy.
Hence t

## Text

_Characters 0–39,903 of 123,298. This is a partial read: ask again with offset=39903 for what follows._

A
B
[2010] 1 S.C.R. 928
STATE OF BIHAR & ORS.
v.
KALYANPUR CEMENTS LTD.
(Civil Appeal No. 5181 of 2002)
JANUARY 8, 201.0
[TARUN CHATTERJEE AND SURINDER SINGH
NIJJAR JJ.]
Industrial Policy, 1995 - Clauses 22(2)(i) and 24 - Sales
C tax exemption - Sick company .:... Assistance to the company
for restructuring agreed by financial institutions, on the
condition that it obtained sales tax exemption from State
Government - Repeated assurance by State Government to
issue sales tax exemption Notification - Writ petition seeking
D direction to issue the Notification - State first informed the
High court that it would issue Notification after approval of
proposal of Notification - Later informed the Court that State
has decided not to grant sales tax incentives to sick
companies - High Court quashed the decision of the State
E
and directed it to issue the Notification - On appeal, Supreme
Court by interim order directing the company to deposit an
amount equivalent to sales tax payable by it in a Bank - The
amount to be payable to the party which ultimately succeeded
- State issuing the Notification - Failure of company to
F
deposit the amount taking the plea that it was sick - Held:
Denial of sales tax exemption is arbitrary - The State initially
having given repeated assurances, was estopped from
denying the grant of exemption at later stage - Company
rightly invoked the doctrine of promissory estoppel - State
G cannot take advantage of its own lapses in implementing the
Industrial Policy for denying the claim of the company - The
decision making process culminating into orders denying
grant of exemption is seriously flawed - However, the
company, in view of its financial condition, cannot be permitted
H
928
.
.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 929
LTD_
to retain the amount collected from the customer on sale of A
its product -
This would amount to unjust enrichment -
Direction to release the amount deposited by the company
pursuant to interim order of Supreme Court, to the State -
Doctrine of Promissory estoppel - Unjust Enrichment.
Administrative Law - Doctrine of promissory estoppel -
lnvokabi/ity of - Discussed.
Taxation - exemption of tax and refund of tax - Difference
between.
Words and Phrases - 'Sick unit' - Meaning of, in the
context of Industrial Policy, 1995.
Respondent-Company was declared as a sick unit,
B
c
by the Board for Industrial and Financial Reconstruction.
0
The company, in order to rehabilitate itself sought
assistance from financial institutions for restructuring
package. The proposal for financial assistance and
restructuring was approved by various financial
institutions subject to the condition that the company
obtained a sales tax exemption for a period of 5 years
E
from the State Government, in terms of Industrial Policy,
1995. The company applied for grant of sales tax
exemption. Thereafter the matter remained pending for
consideration by the State Government and financial
institutions. In various meetings of the State, the
F
Company and the financial institutions, categoric
assurances were given by the State that necessary sales
tax exemption Notification would be issued. However, no
such Notification was issued.
The company filed a writ petition seeking direction
to the State to issue necessary Notification. The State
stated that it would be possible to issue the Notification
after approval of proposal of Notification by the Chief
G
H
930
SUPREME COURT REPORTS
[2010] 1 S.C.R.
A (Finance) Minister. Thereafter the State informed the Court
that the State by order dated 6.1.2001 had decided not to
grant any sales tax incentives to sick industrial units, and
therefore the claim of the company was rejected. The
company, therefore, amended the petition, challenging
B the decision dated 6.1.2001. The State in its further
affidavit stated that the decision of the State was later
considered by the Cabinet on 5.3.2001 and it was decided
not to issue any Notification. High Court allowed the writ
petition quashing the decisions dated 6.1.2001 and
c 5.3.2001. The Court directed the State to issue follow up
Notification to give effect to the provisions of the Policy.
Hence the present appeal.
Supreme Court by an interim order dated 18.11.2002
directed the respondent-company to deposit an amount
D equivalent to the sales tax payable by it as and when it
became due, in an interest bearing account of a Bank;
and that the amount so kept would be payable to the
party which ultimately succeeded.
£
The State filed IA No. 3 of 2006, seeking stay of the
judgment of High Court. It was stated in the application
that the State issued the Notification in pursuance of
order dated 18.11.2002, granting exemption for five years
or till disposal of SLP. The respondent-company,
F however, informed the State that it was unable to comply
with the directions because of its sickness. As the
company failed to comply with the directions, prayer was
made to recall the same.
Dismissing the appeal, and allowing the application,
G the Court
H
HELD: 1.1. In order to invoke the doctrine of
promissory estoppel, it must be established that (a) a
party must make an unequivocal promise or
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 931
LTD.
representation by word or conduct to the other party (b)
A
the representation was intended to create legal relations
or affect the legal rel~tionship, 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
B
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 [Para 26) [956-B-E]
c
1.2. From the facts of the case, it is 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. The company had
D
laid a clear, sound and a positive foundation for invoking
the doctrine of 'promissory estoppel'. The company as
well as the financial institutions were entitled to rely upon
the repeated assurances given by the State Gov.ernment.
[Paras 56 and 59) [969-C-D; 971-C]
E
1.3. Having made the statement before the High
Court that it would be possible to issue necessary
Notification after approval of the proposal by the Chief
(Finance) Minister, the Government has resiled from the
F
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 Industrial Policy, 1995
and the doctrine of 'promissory estoppel' in support of
the plea that the action of the State Government in issuing
G
orders· dated 06.01.2001 and 05.03.2001 are wholly
arbitrary and unjust. [Para 61) [972-A-B]
1.4. The conclusion reached by the High Court that
when the State Government gives an assurance and
H
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SUPREME COURT REPORTS
[2010] 1 S.C.R.
A 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, it would not be
justified on the part of the State Government to say later on
that on a second thought they were withdrawing the policy and
B the benefits flowing from that policy, is based on due
consideration of the material placed before it. There is no
reason to differ with the opinion expressed by the High
Court. [Paras 62 and 63] [972-D-F; G)
Mangalore Chemical and Fertilizer Ltd. vs. Deputy
C Commissioner of Commercial Taxes and Ors. (1992) Suppl.
1 SCC 21; State of Punjab vs. Nestle India Ltd. and Anr.
(2004) 6 SCC 465; Southern Petrochemical Industries Co.
Ltd. vs. Electricity Inspector and ETIO and Ors. (2007) 5 SCC
447; MRF Ltd. Kottayam vs. Asstt.Commissioner
D (Assessment) Sa/es Tax and Ors. (2006) 8 SCC 702; Motilal
Padampat Sugar Mills Co. Ltd. vs. State of UP (1979) 2 SCC
409, relied on.
Kasinka Trading vs. Union of India (1995) 1 SCC 274;
E STO vs. Shree Durga Oil Mills (1998) 1 SCC 572; Baku/
Cashew Co. vs. STO (1986) 2 SCC 365; Sharma Transport
VS. Govt. of A.P. (2002) 2 sec 188; Shri Baku/ Oil Industries
vs. State of Gujarat (1987) 1 SCC; Motilal Padampat Sugar
Mills Co. Ltd. vs. State of UP (1979) 2 SCC 409; DCM Ltd.
F vs. Union of India (1996) 5 SCC 468; Shrijee Sa/es Corpn.
vs. Union of India (1997) 3 SCC 398; Pf!wan Alloys and
Castings (P) Ltd. UPSEB (1997) 7 SCC 251; Bannari Amma
Sugars Ltd. VS. Commercial Tax Officer (2005) 1 sec 625;
Rom Industries Ltd. vs. State of J & K (2005) 7 SCC 348;
G State of Jharkhand VS. Ambay Cements (2005) 1 sec 368;
M.P. Mathur vs. OTC (2006) 13 SCC 706; Excise
Commissioner vs. Ram Kumar (1976) 3 SCC 540, referred
to.
Central London Property Trust, Ltd. vs. High Trees
H House, Ltd. (1956) 1 All ER 256, referred to.
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 933
LTD.
'Statutory Interpretation' by Francis Bennion 1984 edn.
A
683, referred to.
2.1. h1 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,
8
the High Court concluded that the Government has not
been candid in disclosure of the reasons for passing the
order dated 06.01.2001. The aforesaid decisions with
regard to the discontinuance of the sales tax exemptions C
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 h3d been assured
by the Government that the Notification will be issued
D
forthwith. However, it was not issued. The action of the ·
appellants is arbitrary and indefensible. [Para 68) [981-AE]
2.2. A perusal of the aforesaid policy clearly shows
E
that the Government was determined to take effective
measures to render all possible assistance for
amelioration of the continuing problem of industrial
sickness in the State. It was viewed as a matter of great
concern for the Government. Clause 22(2) deals with
F
sickness in large and medium sectors. Under clause
22(2)(i) of Industrial Policy, 1995 a Committee headed by
the Industrial Development Commissioner, was to
recommend concessions and facilities which were
considered necessary for revival of the-potentially viable
G
non-BIFR sick industrial units. The Company was,
therefore, eligible under Clause 22(2)(ii). The Industrial
Policy, 1995 did not envisage sickness in its strict terms
as defined under the Sick Industrial Companies (Special
Provisions) Act, 1985. The policy was of a wider
application and included industrial sickness not only qua
H
.-
934
SUPREME COURT REPORTS
[2010) 1 S.C.R.
A BIFR companies but also in relation to non-BIFR
potentially viable sick companies. [Para 70) (984-F-H; 985A-B]
2.3. The definition of 'sick unit' in Clause 6 of
8 annexure to the Policy, makes it abundantly clear that the
sickness of the company (SLEC) could also be decided
by the State Level empowered Committee headed by the
Chief Secretary. The exemption claim of the company
was duly considered by the Committee constituted under
C Clause 22(2)(i). Its recommendations were duly placed
before the SLEC under Clause 22(2)(ii). The
recommendations were not implemented only because
the Government failed to issue a Notification under
Clause 24 of the Industrial Policy, 1995 within the
stipulated period of one month. Even if it is accepted that
D the provisions contained in Clause 24 was mandatory,
the time of one month for issuing the Notification could
only have been extended for a reasonable period. It is
inconceivable that it could have taken the Government 3
years to issue the follow up Notification. The failure of the
E appellants to issue the necessary Notification within a
reasonable period of the enforcement of the Industrial
Policy, 1995 has rendered the decisions dated 06.01.2001
and 05.03.2001 wholly arbitrary. The appellant cannot be
permitted to rely on its own lapses in implementing its
F policy to defeat the just and valid claim of the company.
[Para 71) (985-E-H; 986-A)
2.4. It is not correct to say that no relief can be
granted to the Company as the Policy has lapsed on
G 31.08.2000. Accepting such a plea would be to put a
premium and accord a justification to the wholly arbitrary
action of the appellant, in not issuing the Notification in
accordance with the provisions contained in Clause 24
of the Industrial Policy, 1995. [Para 72) [986-8-C]
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 935
LTD.
2.5. The assurances given in various meetings were
A
reiterated before the High Court in the Affidavit dated
05.12.2000. It was clearly stated that the draft Notification
was being prepared and being approved. It was thus
obvious that the Notification merely had to be published
B
in the Official Gazette. After making the aforesaid
statements in the affidavit, order dated 06.01.2001 was
issued. It was no longer open to the appellant not to
issue the Notification on the ground that the Policy had
lapsed on 31.08.2000. The second reason that the
exemption could not be granted to the company as no c
Notification had been issued under Clause 24 cannot be
accepted as the appellant-State'cannot be permitted to
take advantage of its own wrong. The third reason given
is that the State-Level Empowered Committee (SLEC) had
not approved the rehabilitation package. This clearly is 0
against the record. 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
E
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.
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. [Para 73) [986-EH; 987-A-C]
State of UP and Anr. vs. Dinakar Sinha (2007) 10 SCC
548; Mis. Ve/ji Lakhamsi and Co. and Ors. vs. Mis. Benett
Coleman and Co. and Ors. (1977) 3 SCC 160; District Mining
F
G
H
936
. SUPREME. COURT REPORTS
[2010) 1 S.C.R.
A Officer and Ors. vs. Tata Iron and Steel Co. and Anr. (2001)
7 sec 358, referred to.
3.1. It would not be possible to accept the plea of the
company that in view of the financial condition of the
8 company, it may be permitted to retain the amount
collected under the orders of Supreme Court. The
amount was collected from the consumer to offset the tax
liability. Such amount cannot be permitted to be retained
by the company. Exemption and refund of tax are two
different legal and distinct concepts. The objective of the
C 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
D be refunded. [Para 79] [989-E-G]
3.2. The company has collected more than Rs.60
crores on the sale of cement by virtue of the directions
issued by Supreme Court in the Order dated 18.11.2002.
E 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
F to the appellant-State. Even if the delay in issuance of the
exemption Notification by the State has crippled the
company financially, ~hen 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 respondent No.2.
G This package has been submitted to the Chief Minister
of Bihar which is still on the consideration of the
Government. [Para 78] [988-G-H; 989-A-D]
3.3. Direction is, therefore, issued that the amount
H deposited by the company in the designated account
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 937
LTD.
opened and operated pursuant to the order of this Court
A
dated 18.11.2002 together with accrued interest shall be
released to the appellant-State, forthwith. (Para 80) (989H; 990-A)
Prestige Lights Ltd. vs. StateBank of India (2007) 8 SCC
449; Amrit Banaspati Co. Ltd and Anr. vs. State of Punjab
B
(1992) 2 sec 411, referred to.
Case Law Reference:
(1956) 1 All ER 256
Referred to.
Para 24
c
(1995) 1 sec 214
Referred to.
Para 25
(1998) 1 sec 572
Referred to.
Para 27
(1986) 2 sec 365_
Referred to.
Para 28
(2002) 2 sec 188
Referred to.
Para 29
D
(1987) 1 sec 31
Referred to.
Para 30
(1996).5 sec 468
Referred to.
Para 33
(1997) 3 sec 398
Referred to.
Para 36
E
(1997) 1 sec 251
Referred to.
Para 35
(~005) 1 sec 625
Referred to.
Para 37
(2005) 1 sec 348
Referred to.
Para 38
F
(2005) 1 sec 368
Referred to.
Para 42
2006) 13 sec 706
Referred to.
Para 44
(1976) 3 sec 540
Referred to.
Para 45
(2001) 8 sec 449
Referred to.
Para 46
G
(1992) 2 sec 411
Referred to.
Para 47
(2001) 1 o sec 548
Referred to.
Para 48
(1977) 3 sec 160
Referred to.
Para 49
H
A
B
c
938
SUPREME COURT REPORTS
(2010] 1 S.C.R.
(2001) 1 sec 358
Referred to.
Para 50
(1992) Suppl. 1 sec 21
Relied on.
Para 64
(2004) 6 sec 465
Relied on.
Para 64
(2007) 5 sec 447
Relied on.
Para 66
(2006) 8 sec 102
Relied on.
Para 67
(1979) 2 sec 409
Relied on.
Para 68
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5181 of 2002.
From the Judgment & Order .dated 24.4.2002 of the High
Court of Judicature at Patna in C.W.J.C. No. 6838 of 2000.
Dr. Rajiv Dhawan, Dii:iesh Dwivedi, Mohit Kumar Shah,
D Gopal Singh, Ravi Bhushan, Pallavi Mohan for the Appellants.
E
Ravi Shankar Prasad, Ranjit Kumar (for Suresh A. Shroof
& Co.), Suprarna, Srivastava, Rajiv Ranjan, Sudershini Ray,
Ram Swarup Sharma for the Respondent.
The Judgment of the Court was delivered by
SURINDER SINGH NIJJAR, J. 1. This appeal has been
filed by the State of Bihar challenging the judgment and order
dated 24.04.2002 of the High Court of Judicature at Patna in
F CWJC No.6838 of 2000, whereby, the High Court has allowed
the writ petition filed by the respondent herein. The respondent
- M/s. Kalyanpur Cement Ltd. (hereinafter referred to as 'the
Company'), is a public sector company incorporated in the year
1937 as a Lime-producing Company. It is engaged in the
G business of cement manufacturing and marketing operations
since 1946. It had commenced production with a capacity of
46000 metric tonnes. It underwent a series of expansion in
1958, 1968 and 1980. Nowadays, the Company is operating
one-million-tonne cement plant. In view of the changes in the
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 939
LTD. [SURINDER SINGH NIJJAR, J.]
technology worl~wide, it has set up a brand new state-of-art 'dry
A
process' plant in 1994 at a capital cost of Rs.250-260 crores.
This was made possible with financial assistance of World
Bank and the All India Financial Institutions. Its advisor and
financial collaborator is Holder Bank (HOLCIM) at Switzerland.
The ·Company claims to be one of the very few large scale
B
surviving industrial units in the State of Bihar. It is the only large
scale industry in central part of the State. Over 2000 persons
are in the employment of the Company. The Company claims
that due to circumstances beyond its control such as recession
in the cement industry as well as Government related problems; c
delayed decision in granting Sales Tax Deferment benefit the
Company began to suffer heavy losses. This was accentuated
by the non-availability of the sanctioned working capital from
the financial institutions in the absence of the sale tax exemption
under the Industrial Policy, 1995. There was continuous loss in
0
production for a number of years. This has resulted in erosion
of Net-Worth of the Company, as the total Net-Worth of the
Company was less than its accumulated losses in December,
2002, it has registered with Board for Industrial and Financial
Reconstruction (hereinafter referred to as 'BIFR') as a sick unit.
E
It has been actually declared as sick Company by BIFR on
28.05.2002. Its reference case is pending with the BIFR. The
Company in order to rehabilitate itself sought the assistance
from financial institutions for restructuring package. The
Company's proposal for financial assistance and restructuring
has been approved by'various financial institutions, in principal.
F
However, the same has been made conditional on certain
preconditions being met. One of the conditions imposed by the
financial institutions was that the restructuring package would
be made available only on the Company obtaining a Sales Tax
exemption for a period of 5 years from the State Government,
G
in terms of Industrial Policy, 1995. Accordingly, Company
submitted an application to the State Government on
21.11.1997 for grant of Sales Tax exemption under the Industrial
Policy, 1995 for a period of 5 years w.e.f. 01.01.1998.
Thereafter, the matter remained pending for consideration by
H
940
SUPREME COURT REPORTS
[2010) 1 S.C.R.
A the State Government and the financial institutions. There were
a series of joint meetings of the Government, Financial
Institutions and the Company, over the next three years. In all
these meetings, as well as correspondence categoric
assurances were given that the necessary Sales Tax exemption
B notification would be issued shortly. However, no such
notification was issued causing great hardship to the Company.
It was, therefore, constrained to file writ petition (CWJC
No.6838 of 2000) in the High Court at Patna.
2. In this writ petition, the prayer was for issuance of the
C writ in the nature of mandamus directing the State of Bihar to
issue necessary Notification under Clause 24 of the 1995
Policy. The claim of the Company was that Notification under
Clause 24 of the Industrial Policy, 1995 ought to have been
issued within one month of the release/publication of the Policy
D in September, 1995. Voluminous record was produced before
the High Court in support of the submission that the Company
is entitled to exemption under the 1995 Policy. The State of
Bihar contested the writ petition by filing a counter affidavit.
Supplementary counter affidavit was filed on behalf of the
E Government through
Secretary-cum-Commissioner,
Department of Commercial Taxes (respondent No.4 in the writ
petition) on 05.12.2000. In paragraph 5 of the aforesaid
affidavit it is stated as under:-
F
"5. That the Hon'ble Minister, Department of Commercial
Taxes has approved the proposal along with draft.
notification regarding extension of Sales Tax related
incentives to sick industrial units."
·
3. In paragraph 8 of the affidavit it is averred UThat the
G deponent states that it shall be possible to issue necessary
notification after approval of the proposal of the relevant
notification by the Hon'ble Chief (Finance) Minister of the
Cabinet." It is also stated in the affidavit "That the deponent
has further requested the Secretary-cum-Commissioner,
H
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS94L
LTD. [SURINDER SINGH NIJJAR, J.]
Department of Finance, vide Jette; dated 28.11.2000 to take A
necessary approval earliest as the same has to inform to the
Hon'ble Court. "Thereafter. yet another supplementary counter
affidavit dated 09.01.2001 was filed by Shri Krishan Nand Roy,
Assistant Commissioner. Commercial Taxes, Bihar. In the
affidavit, it was contended that the State Government in a B
meeting under the Chairmanship of the Chief Minister held on
06.01.2001 has decided upon due deliberation not to grant any
Sa,les Tax incentives to sick industrial units. Therefore, the claim
of the Company has been rejected. The four stated reasons
justifying the aforesaid decision were as under:-
c
"(1) The period of Industrial Policy 1995 was from
1.9.1995 to 31.8.2000. Therefore, this policy is not
· effeCtive to date.
(2)
The question to provide facility to those sick units are D
mentioned in clause 22 of the above policy. No notification
has been issued by the Government to provide facility of
Sales Tax till now, on whose basis, there could be right of
any specialized person/unit to get the facility.
E
(3) So far as the question of applicants' Unit in petition No.
CWJC No.6838/2000 is concerned, his matter has not yet
been approved by the High Level Empowered Committee
under the Chairmanship of Chief Secretary under Clause
22(1) of Industrial Policy, 1995. It is worth mentioning here
that in absence of above mentioned, even approval cannot F
be provided.
(4) Tax reforms at All India Level, which has been
continuing last one year it has been decided at the
conference of Chief Ministers that except States of Special G
Category Sales Tax facility must be ended by rest all other
States. The States would not do this, there could be
possibility of cut down the payable Central Assistance to
those States."
~
H
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SUPREME COURT REPORTS
[2010] 1 S.C.R.
A
4. Therefore, the Company amended the writ petition and
challenged the decision dated 06.01.2001 of the State
Government. It was pleaded by the Company that the grounds
for rejection of the Company's case and non-issuance of the
Notification was not in accordance with law It appears that
B
another counter affidavit was filed on 16.02.2001 by respondent
No.4. This was followed by yet another supplementary counter
affidavit filed by Virendra Kumar Singh, Joint Commissioner,
Commercial Taxes, Headquarter, Patna on 02.08.2001. In this
affidavit it was brought to the notice of the Court that the
C decision taken on 06.01.2001 was considered by the Cabinet
in its meeting held on 05.03.2001 wherein it was decided not
to issue any notification for granting any concession/facility to
sick industrial units in the State. This decision was duly
conveyed by letter dated 05.03.2001 to the IDC Bihar, Patna.
0
In view of the aforesaid decision the Secretary Industries
Department rejected the company's application and
communicated the decision to the Company on 14.05.2001.
Both the decisions were sought to be justified by the State
Government.
E
5. The High Court considered the entire issue. The
Company as well as the State made detailed reference to the
documents which were placed on the record. Ultimately, the writ
petition has been allowed. The decisions dated 06.01.2001
and 05.03.2001 have been quashed. Further directions issued
F
to the State Government are as follows;
G
;
"The concerned departments and organizations are
hereby directed to issue follow up notification to give
effect to the provisions of the policy within one month from
today. After the notification is issued a Committee
headed by the Industrial Development Commissioner
would be constituted to evolve suitable measures for
potentially viable non BIFR sick industrial unit (the
present petitioner) and the said Committee would submit
its recommendations before the State Level Empowered
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 943
LTD. [SURINDER SINGH NIJJAR, J.]
Committee which in its turn shall place the said A
recommendations before the Government. After
receiving the said recommendations from the State Level
Empowered Committee, the Government shall take final
decision in the matter. The petition is thus allowed."
B .
6. This decision has been challenged by the appellantState.
7. At this stage it would be appropriate to notice the orders
passed by this Court during the proceedings. On 18.11,2002,
following directions were issued:-
C
"Heard learned counsel for the parties.
As an interim arrangement during the pendency of
this appeal, with a view to protect the interests of either 0
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 bearing account in a
nationalized bank. This amount and the amount accrued
during the pendency of the appeal, shall not be withdrawn
by either side.
E
The amount so kept in deposit shall become payable
to the party which ultimately succeeds in this appeal.
The appellants are directed to issue the exemption
F
orders and on receipt of such order, the above said amount
shall be deposited. The issuance of the exemption orders
is without prejudice to the case of the parties in this
appeal.
The IA is thus disposed of."
G
8: Thereafter IA No.3 of 2006 was filed by the appellant
seeking stay of the judgment of the High Court, it has. been
stated that the application has been necessitated because of
the intervening circumstances and the conduct of the Company.
H
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SUPREME COURT REPORTS
(2010] 1 S.C.R.
A
It was further stated that pursuant to the direction issued by this
Court on 18.11.2002, the appellant issued Notification No.S017 4 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 the
B Special Leave Petition. The Notification was issued on the
following terms:-
"2. Terms and conditions-
(a) Tax payable by Mis Kalyanpur Cement Ltd. shall be
C
deposited per month in an interest-bearing account in a
nationalized bank.
D
(b) M/s Kalyanpur Cement Ltd. shall provide information
of such bank account to the circle where he is registered.
(c) Mis Kalyanpur Cement Ltd. shall submit the details
regarding amount of payment in the bank account as
mentioned in para (a) above along with brief abstract each
month.
E
9. Thereafter the appellant requested the company to
comply with the directions of this court. The Company, however,
informed the appellant that it was unable to comply with the
directions because of its 'sickness'. Since the Company failed
to comply with the aforesaid order, a prayer was made for
F
recalling the same.
10. The Company in its reply elaborately explained the
efforts being made by the financial institutions to ensure the
survival of the Company. It reiterated that the Company had
acted honestly and in good faith on assurances/approval given
G by the appellant at various stages. The Company continued
with its operation in anticipation of receiving the appellant's
approval at some point of time. Had the appellant not given the
assurances, the Company could have suspended its operation.
The Government gave assurances and granted approval on
H 07.01.1998, 23.01.1998, 12.03.1998, 21.01.1999, 12.07.1999,
. STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 945
LTD. [SURINDER SINGH NIJJAR, J.]
29.10.1999, 02.12.1999, 17.12.1999, 25.01.2000, 31.03.2000,
A
29.05.2000 and 30.06.2000. It was also pointed out that even
the officers of the Commercial Taxes Department including
Commissioner, Commercial Taxes to the effect that the
Notification was in the process of being issued. It was also
pointed out that even after the VAT regime being introduced,
B
Sales Tax related incentives to industries are being given to
industries by various States. In fact under the Industrial Policy
2003 as well as the Industrial Policy, 2006, Sales Tax incentives
in some form or the other have been retained/provided. It is
further pointed out that the Notification dated 18.10.2004 was c
issued after expiry of two years from the date of the order
passed by this Court. The delayed action of the Appellant
practically crippled the Company financially and jeopardized
efforts for revival as the Sales Tax benefit is crucial for the
Company's revival and continued operations. It is reiterated that
D
the Company is entitled to get the benefit under the Industrial
Policy, 1995. With regard to the non-deposit of the "amount
equivalent to the Sales Tax payable by it as and when it
becomes due~ it is stated that the Company had bona fide
opened the Bank account with a Nationalized Bank but could
not deposit the amount equivalent to the Sales Tax due because
E ·
of circumstances beyond its control.
11. During the pendency of the Interim Application,
proposal for the approval of the recon~truction package of the
Company was under the active consideration of the State.
F
Therefore, the proceedings were adjourned from time to ti[11e.
12. During this period an application was also filed by the
Assets Reconstruction Company (I) Ltd. for being impleaded
as a party. The aforesaid application has been allowed by this
G
Court on 04.09.2006 and the applicant has been impleaded
as respondent No.2.
13. We have heard the Counsel for the parties. Dr. Rajiv
Dhawan and Mr. Dinesh Dwivedi, Senior Advocates made the
submissions on behalf of the appellant. Dr. Dhawan submits
H
946
SUPREME COURT REPORTS
[2010) 1 S.C.R.
A that in the aforesaid judgment the High Court has held that:
B
c
i.
the petitioner had a right to be granted sales tax
exemption under 1995 Industrial Policy;
ii
the decision of 6 January 2001 denying such
exemption was arbitrary (which was challenged but
alleged not to be on record);
iii.
the decision of 5 March 2001 was wrong, even
though not on record and not challenged.
14. According to Dr. Dhawan the High Court has wrongly
quashed the order dated 06.01.2001 on the basis that it was
an arbitrary somersault after 05.12.2000. This conclusion is
erroneous as the aforesaid order had given four cogent
reasons in support of the decisions which have been duly
D noticed by the High Court. The aforesaid reasons could not be
said to be extraneous to the decision dated 06. 01. 2001.
Thereafter, it is submitted that the relevant rule/clauses 22 and
24 were wrongly interpreted because it stated "Clause 22.2 of
the policy would come into force after a notification under
E Clause 24 is issued. "The High Court has wrongly held that the
precondition of revival under Clause 22 came into effect after
the final decision under Clause 24. According to the learned
senior counsel the High Court failed to notice that clause 22.2
was about revival of the Company and not just granting Sales
F · Tax exemptions. Furthermore, Clause 22.3 barred exemption/
deferment to be given to such sick and closed industrial units
which have once availed of such facilities in the past. This
Company has availed the deferment in the past and had not
paid the sums due. It is then emphasized that Clause 24 was
G a monitoring Clause, but the time period of one month was
simply a target. Therefore, it was neither mandatory nor
directory.
15. Learned Senior counsel then submitted that the High
H Court has wrongly base<:l its decision on Mangalore Chemical
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 947
LTD. [SURINDER SINGH NIJJAR, J.]
and Fertilizer Ltd. Vs. Deputy Commissioner of Commercial A
Taxes and others, (1992) Suppl. 1 SCC 21. According to Dr.
Dhawan, this case would be inapplicable because in fact, in
that case, prior permission had already been granted. He
further submitted that the High Court wrongly ignored the
significance of the Chief Ministers' Conference although the
B
High Court notices the Conferences of the Chief Ministers, it
failed to give sufficient importance to this ,national public policy
aspect emanating from the Conferences between the Chief
Ministers of all States and the Union Government. Dr. Dhawan
further submitted that the High Court has wrongly assumed that c
there was any allurement offered to the Company. In fact the
High Court did not properly apply the doctrine of 'Promissory
Estoppel'. At best the High Court only found a case of possible
intention on the part of the State to grant exemption to the
Company during the limited period from 5th December, 2000
D
to 6th January, 2001. Yet the High Court issued a writ in the
nature of Mandamus directing the State to issue the exemption
notification.
16. In support of his submissions, learned senior counsel
has made detailed reference to the facts and the documents
E
. on record. According to him, the facts in this case are not such
as to give rise to a cause of action, relying on the doctrine of
'promissory estoppel'. There is no material on the record to
show that any unequivocal promise was made to the Company
and it had acted on such a promise. All the meetings were only
F
exploratory in nature. In any event, no mandamus could have
been issued after the Scheme had lapsed and no default by
the appellant-State has been established. According to the
learned senior counsel, the impugned judgement of the High
Court is wrong in law, in respect of the rules, orders of the State
G
and the Scheme of the Industrial Policy. It is also wrong on
facts.
17. Learned Senior counsel relied on number of judgments
in support of the submissions Central London Property Trust,
H
948
SUPREME COURT REPORTS
[2010) 1 S.C.R.
A Ltd. Vs. High Trees House, Ltd. (1956) 1 All ER 256; Kasinka
Trading vs. Union of India (19~5) 1 SCC 274; STO vs. Shree
Durga Oil Mills (1998) 1 SCC 572; Baku/ Cashew Co. vs.
STO (1986) 2 SCC 365; Sharma Transport vs. Govt. of AP
(2002) 2 SCC 188; Bannari Amma Sugars Ltd. Vs.
B Commercial Tax Officer (2005) 1 SCC 625 at 637; Shri Baku/
Oil Industries vs. State of Gujarat (1987) 1 SCC 31; Motilal
Padampat Sugar Mills Co. Ltd. Vs. State of UP (1979) 2 SCC
409; DCM Ltd. Vs. Union of India (1996) 5 SCC 468; Shrijee
Sa/es Corpn. Vs. Union of India (1997) 3 SCC 398; Pawan
C Alloys & Castings (P) Ltd. UP SEB (1997) 7 SCC 251.
18. Mr. Dinesh Dwivedi, Senior Advocate submitted that
there are two categories of cases, where incentive is given (i)
to set up or start an industry;(ii) benefits to improve the industry.
The incentive in the second category can be withdrawn as it is
D only an enabling provision. In such circumstances, the Executive
is permitted to resile. Referring to the detailed provisions of the
1995 Policy, he submitted that Clause 16(1) and 16(2) relate
to new unit. 16(3) relates to units undertaking expunction/
diversification. Clause 22.1 relates to industrial sickness in SSI
E sector. Clause 22.2 deals with sickness in large and medium
scale sector. According to him, under this Clause nothing
definite is promised. It permits the Committee to recommend
concessions and facilities for revival of the sick units to the
State-level Empowered Committee (SLEC). Therefore, any
F recommendations made by this Committee cannot be said to
be assurances capable of attracting the doctrine of 'promissory
estoppel'. According to the learned Senior Counsel the entire
matter is covered against the Company by the judgment of this·
Court in M.P. Mathur vs. OTC (2006) 13 SCC 706. Learned
G Senior Counsel also relied on Kasinka Trading (supra) in
support of his submission that clear foundation has to be laid
of the assurance that was given. It is further submitted that the
claim of the Company cannot possibly succeed by invoking the
doctrine of 'promissory estoppel' as the Company has not
H altered its position by relying on the assurances given by the
STArE OF BIHAR & ORS. v. KALYANPUR CEMENTS 949
LTD. [SURINDER SINGH NIJJAR, J.]
appellant~State. Learned counsel then submitted that the
A
Company has misunderstood the meaning of exemption. They
are under the impression that they can collect tax and not pay
to the Government. That according to the learned Senior
Counsel is not correct. Exemption simply means that no tax shall
be chargeable on goods. In the affidavit filed in reply to IA No.3,
8
it is admitted by the Company that the tax collected has not
been deposited. Therefore, the Company is in contempt of the
interim orders passed by this Court.