Ras Resort and Apart Hotels Ltd. and Anr. Vs Union of India and Ors.

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 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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 APPELLATE SIDE

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 Writ Petition No. 2705 of l990

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 l. Ras Resorts and Apart Hotels
 a public limited
 company incorporated under
 the Companies Act, l956
 having its office at 99/C

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 Tulsi Wadi, Tardeo Bombay. 34

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 2. Vishamber Shewakramani of

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 Bombay Indian Inhabitant,

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 Shareholder and Managing Director
 of M/s Ras Resorts and Apart

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 Hotels Limited, having his office

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 at 99/C Tulsiwadi Tardeo,

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 Bombay.400034 ...petitioners

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vs

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 l. Union of India,through

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 the Ministry of Tourism

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2. The Administrator of Dadra and

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 Nagar Haveli Raj Bhavan

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 Panjim Goa

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3. Collector of Dadra and Nagar

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 Haveli Silvasa 396 230

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4. Deputy Conservator of Forests

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 and Tourism in Charge

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 Administrator of Dadra and

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 Nagar Haveli Silvassa. .......respondents

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 Ms Nilima Dutta with Mr.Anand Grover for
 petitioners

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 Mr. Suresh Kumar for respondents.

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 CORAM;A.P.SHAH & S.C DHARMADHIKARI JJ.

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 Dated 4.ll.2004

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 P C:

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 l. Heard advocates.

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 2. The petitioner no.l is a public limited company
 incorporated under the Companies Act, l956 and the
 petitioner no. 2 is the shareholder and Managing
 Director of the petitioner no.l. The petitioner
 company had been leased a piece of land by the
 respondents at Silvassa in Union Territory of Dadra
 and Nagar Haveli for constructing a 3-Star hotel.
 It is the case of the petitioners that no hotels
 existed in the Union Territory of Dadra and Nagar
 Haveli to cater to the needs of the tourists at
 that time. The petitioners as well as general
 public invested large sums of money in the said
 project on the clear representation made by the
 respondents that 5% interest subsidy would be
 available from the local Administration. After the
 petitioners and the general public had invested
 large sums of moneys, the respondents illegally
 refused to grant and disburse the said 5% interest
 subsidy. Therefore by this petition the
 petitioners are seeking direction to the
 respondents to pay 5% interest subsidy to the
 financial institutions and banks on the basis of
 the bills raised by them in the past and to be
 raised in future in respect of loans taken by them
 for the development of their hotel at Silvassa.

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 3. The Dadra and Nagar Haveli is a Union Territory
 situated on the Western Coast of India and is
 considered to be one of the industrially backward
 area. The petitioners were allotted a site near
 Damanganga for construction of a 3-Star Hotel in
 l984.The Administration of Dadra and Nagar Haveli
 in or about January l985 made an annual plan for
 the year l985-86, part of the 7th Five Year Plan,
 providing incentive to hotel industries to develop
 basic infrastructure for the promotion of tourism.
 It was proposed to subsidize the interest on loan
 by 5% besides the 25% subsidy on fixed assets as
 the Union Territory had been declared as a ’No
 Industry District". There is no dispute that 25%
 subsidy was received by the petitioners. The
 controversy in the present petition relates to 5%
 interest subsidy. The petitioners are heavily
 relying upon a letter addressed by the 3rd
 respondent dated 29.8.l985 inter alia stating that
 "....it is proposed to subsidized interest on loans
 by 5% besides 25% subsidy on fixed assets as the
 Union Territory had been declared as a "No Industry
 District" under 7th Five Year Plan....". It is
 also the case of the petitioners that they were
 given categorical assurance by the the respondent
 no.2 vide his letter dated 29.8.l995 that subsidy

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 will be available on interest on loans and fixed

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 assets. Further reliance is placed on the letter
 addressed by the Administrator Dadra and Nagar
 Haveli to the Dy Secretary, Government of India
 stating that it was proposed in the 7th Five Year
 Plan to provide financial assistance to hoteliers
 by subsidizing interest on loans by 5% taken by the
 entrepreneurs for hotel construction in the 7th
 Five Year Plan from l987. The petitioners are also
 relying upon the instructions from the Union of
 India that no objection or clearance was not
 required from the Union of India and concerned
 State Financial Corporation had to send the bill
 for interest subsidy to the Administration of Union
 Territory of Dadra and Nagar Haveli which is to be
 paid by the latter.The petitioners contend that
 they have altered their position to their prejudice
 inasmuch as they have invested large sums of money,
 invited the public to invest on the express
 representation that they would receive the 5%
 interest subsidy.

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 4. The respondents have resisted the petition by
 filing counter affidavit of Mr. K K Wahal of
 respondent no. 4. contending inter alia that no
 scheme of payment of 5% subsidy has so far been

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 formulated by the Governor or the Administrator.
 When the petitioners were given piece of land for
 construction of hotel vide letter dated l2.6.l984
 issued by the third respondent there was no promise
 or assurance or representation of payment of 5%
 subsidy. In fact the proposal for interest subsidy
 was mooted only in 7th 5 Year Plan pertaining to
 the period l985-90 and the proposal for grant of 5%
 interest subsidy was included for the purpose of
 consideration of the same as a part of the overall
 comprehensive plan of development of tourism in the
 Union Territory. This plan was to be included in
 the subsequent annual plan subject to the approval
 and sanction of the Planning Commission and
 Government of India. However, the Administrator
 was not able to get sanction from the Planning
 Commissioner.Consequently no specific scheme was
 formulated to grant such interest subsidy and
 criteria for payment of 5% interest subsidy also
 could not be framed. For want of sanction from the
 Planning Commission the said proposal was not
 finalized for the enforcement of the scheme for
 interest subsidy. It was contended that a mere
 proposal in the plan which was yet to be finalized
 cannot be construed as a representation to the
 petitioners. A contention is also raised that in

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 any event the respondent no. 3 had no authority to
 make representation in the letter addressed to the
 petitioners .

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 5. The short question is whether in the facts and
 circumstances of the case the respondents are bound
 by the principles of promissory estoppel. The
 principles of promissory estoppel have been
 explained by a two Judge Bench in M/s Motilal
 Padampat Sugar Mills Co Ltd vs The State of Uttar
 Pradesh and ors, AIR l979 C 62l wherein it was
 observed as under:

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 "In India not only has the doctrine
 of promissory estoppel been adopted
 in its fullness but it has been
 recognized as affording a cause of
 action to the person to whom the
 promise is made. The requirement of
 consideration has not been allowed
 to stand in the way of enforcement
 of such promise. The doctrine of
 promissory estoppel has also been
 applied against the government and
 the defence based on executive
 necessity has been categorically

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 negatived. Where the government
 makes a promise knowing or intending
 that it would be acted on the
 promisee and, in fact, the promisee
 acting in reliance on it alters his
 position the government would be
 held bound by the promise and the
 promise would be enforceable against
 the government at the instance of
 the promisee notwithstanding that
 there is no consideration for the
 promise and the promise is not
 recorded in the form of a formal
 contact as required by Act 299 of
 the Constitution. It is elementary
 that in a republic governed by the
 rule of law no one howsoever high or
 low is above the law. Every one is
 subject to the law as fully and
 completely as any other and the
 government is no exception. It is
 indeed the pride of constitution
 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

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 concerned the former is equally
 bound as latter. The Government

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 cannot claim to be immune from the
 applicability of the rule of
 promissory estoppel and repudiate a
 promise made by it on the ground
 that such promise may fetter its
 future executive action. If the

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 Government does not want its freedom
 of executive action to be hampered
 or restricted the Government need
 not make a promise knowing or
 intending that it would be acted on

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 by the promisee and the promisee
 would alter his position relying
 upon it. But if the Government
 makes such a promise and the
 promisee acts in reliance upon it

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 and alters his position there is no
 reason why the Government should not
 be compelled to make good such
 promise like any other private
 individual. But since the doctrine
 of promissory estoppel in an
 equitable doctrine it must yield
 when the equity so requires. If it

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 can be shown by the Government that

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 regard to facts as they have
 subsequently transpired it would
 inequitable to hold the Government
 to the promise made by it the Court
 would not raise as equity in favour
 of the promisee and enforce the
 promise against the Government. The
 doctrine of promissory estoppel
 would be displaced in such a case
 because on the facts equity would

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 not require that the Government
 should be held bound by it. When
 the Government is able to show that

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 in view of the facts which have
 transpired since the making of the
 promise, public interest would be
 prejudiced if the Government were
 required to carry out the promise,

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 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

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 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 it.The Government
 cannot claim to be exempt from the
 liability to carry out the promise
 on some indefinite and undisclosed

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 ground of necessity or expediency
 nor can the Government claim to be
 the sole judge of the liability and
 repudiate it on an exparte
 appraisement of the circumstance.If
 the Government wants to resist the
 liability, it will have to disclose
 to the court what are the subsequent

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 events on account of which the
 Government claims to be exempt from
 the liability and it would be for
 the court to decide whether those
 events are such as to render it

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 inequitable to enforce the liability
 against the Government .Mere claim
 to 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 reasons 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 and adequate
 material played by the Government
 that overriding public interest
 requires that the Government should
 not be held bound by the promise but
 should be free to act unfettered by
 it, that he court would refuse to
 enforce the promise against the
 Government.The court would not act
 on the mere ipse dixit of the
 Government; for it is the court
 which has to decide and not th
 Government whether the Government
 should be held exempt from

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 liability. This is the essence of
 the rule of law. The 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 burden. But even where
 there is no such overriding public
 interest, it may still be competent
 to the Government 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 of course it
 is possible for the promisee to
 restore status quo ante. If,
 however, the promisee cannot resume
 his position, the promise would
 become final and irrevocable.Where
 the Government owes a duty to the

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 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 .form acting in discharge
 of its duty under the law. The
 doctrine of promissory estoppel
 cannot be applied in teeth of an
 obligation or liability imposed by
 law. It may also be noted that
 promissory estoppel cannot be
 invoked to compel the Government or
 even a private party to do an act
 prohibited by law."

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 6. The issue of promissory estoppel thus will have
 to be considered in the light of the above
 principles laid down by the Supreme Court. What is
 required to be established in order to succeed on
 the promissory estoppel is that there was definite
 representation by the respondent to the petitioner
 and that the petitioner in fact altered his
 position acting upon the such representation and he
 has suffered prejudice sufficient to constitute
 estoppel. In the instant case the petitioners

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 decided to set up a hotel in Silvassa in Dadra and
 Nagar Haveli in the year l984. The plot was
 allotted to the petitioners in l984. At that time
 there was no scheme which was promulgated and did
 not have any provision for interest subsidy. In
 fact there is no nexus between the petitioners
 decision to set up the hotel at Silvassa and the
 interest subsidy which was included in the 7th 5
 Year plan. The 7th 5 Year Plan was published in
 l985 wherein it was proposed that interest subsidy
 would be provided. This was only draft plan and
 all along there was only proposal for interest

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 subsidy . At no stage the scheme for interest
 subsidy was finalized. It appears that the
 Administration failed to get sanction from the
 Planning Commission for the proposal of 5 Year Plan
 for interest subsidy. Consequently the
 Administration was not able to implement the scheme
 for interest subsidy. In the above facts it is
 difficult to hold that there was definite
 representation by the respondents for interest
 subsidy and petitioners cannot be said to have
 altered their position on the basis of the

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 proposal. At the time of allotment of land to the
 petitioners there was proposal of only 25% subsidy
 and the proposal for interest subsidy came much

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 later. Therefore we are of the opinion that the
 principle of promissory estoppel is not attracted
 in the facts and circumstances of the case.
 Petition is accordingly dismissed.

Ras Resort and Apart Hotels Ltd. and Anr. v. Union of India and Ors.

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Ras Resort and Apart Hotels Ltd. and Anr. v. Union of India and Ors.

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