D.C.M. LTD. AND ANR.versusUNION OF INDIA AND ANR.

                        D.C.M. LTD. AND ANR.                                  A
                                    v.
                     UNION OF INDIA AND ANR.


                            AUGUST 13, 1996
                                                                              B
           [M.M. PUNCHHI AND K VENKATASWAMI, JJ.]


      Administrative Law : Doctrine <>f Promissory Estoppef-Applicability
of-Held : Doctrine of Promissory Estoppel not applicable-17wugh benefit
of doctrine available against Govemment, but it cannot bar future executive   C
action or executive necessity-Doctrine of Promissory Estoppel to yield when
equity so require-If it is inequitable to hold the Government or public
authority to promise or representation made by it, equity not to be in-
voked-Moreover, expansion earned out by the appellants in pursuance of
licence issued in February, 1975 was independent of incentive announced in    D
December, 1975.

         The appellants owners two sugar factories, where the business of
  manufacturing and selling sugar was carried on. From 10.6.66 the sale of
  sugar was controlled by the Government. Later on, in November, 1975, the
  Government announced certain incentives for establishment of new sugar E
  factories and for expansions carried out in the existing ones to those who
  had applied for and completed their expansions during 1/11/75 to 20/10/80.
· The incentives mainly consisted in providing a higher quota of levy-free
  sugar. In the year 1978, as a result of withdrawal of sugar control by the
  Government, the incentives were no longer required/available. Later on, F
  the Government on December 17, 1979 once again provided for partial
  control of sugar as was the situation prior to August 16, 1978. Then the
  Government revised the scheme to provide incentives w.e.f. 1980-81. This
  made the percentage of levy-free sugar announced in the 1975 scheme
  higher than the percentage announced in the 1980 scheme. The 1980 G
  scheme was even applicable to those who were otherwise entitled to the
  benefit of 1975 scheme. The appellants after carrying out the expansion at
  their two factories on 6/8/80 and 13/8/80 sought additional free-sale sugar
  as per the incentives announced. Though the appellants claimed incentives
  as per 1975 scheme, the respondents allowed them incentives only as per
  the revised scheme of 1980.                                                 H
                                    589
    590                   SUPREME COURT REPORTS (1996) SUPP. 4 S.C.R.

A        Aggrieved, they moved the High Court seeking additional free-sale
    sugar over and above the entitlement allowed to them on the basis of 1980
    scheme. The writ petition was dismissed by the High Court.

          In appeal to this Court it was contended for the appellants that the
    principle of promissory estoppel applied to this case here as the appellants
B
    had spent huge amounts towards the expansion of sugar factories at two
    places on the incentives announced in the year 1975 and therefore, they
    cannot be denied on account of decontrol of the sugar for a short period.
    It was contended on behalf of the respondents that during the period when
    there was no control, the producers sold their total production in the open
c   market and the benefit flowing from such decontrol was fully reaped by
    them and, therefore appellants cannot be allowed to contend that the
    Government cannot change the scheme.

          Dismissing the appeal, this Court
D
           HELD : 1.1. The principle of promissory estoppel has no application
    at all on the facts of this case. It is well-settled that the doctrine of
    promissory estoppel represents a principle evolved by equity to avoid
    injustice and, though commonly named promissory estoppel, it is neither
    in the realm of contract not in the realm of estoppel. The basis of this
E   doctrine is the inter-position of equity which has always, proved to its form,
    stepped in to mitigate the rigour of strict law. It is equally true that the
    doctrine of promissory estoppel is not limited in its application only to
    defence but it can also found a cause of action. This doctrine is applicable
    against the Government in the exercise of its governmental, public or
F   executive functions and the doctrine of executive necessity or freedom of
    future executive action, cannot be invoked to defeat the applicability of this
    doctrine. It is further well-established that the doctrine of promissory
    estoppel must yield when the ec1uity so require. If it can be shown by the
    Government or public authority that having regard to the facts as they
    have transpired, it would be inequitable to hold the Government or public
G   authority to the promise or representation made by it, the court would not
    raise equity in favour of the person to whom the promise or representation
     is made and enforce the promise or representation against the Govern-
     ment or public authority. The doctrine of promissory estoppel would be
     displaced in such a case because on the facts equity would not require that
H    the Government or public authority should be held bound by the promise
                D.C.M. LTD. v. U.0.1. [K VENKATASWAMJ,J.]                591

or representation made by it. [593-G-H; 594-A·C)                                A
       1.2. The Government before refusing the incentive scheme of the year
1975 have taken into acconnt various factors including the decontrol of
sale of sugar for the period from 16.7.78 to 17.12.79. Further, if the prayer
of the appellants were to be allowed, several lakhs of quintals of sugar will
have to be released as incentive levy-free sugar which is otherwise meant       B
for public distribution system. The petitioners who availed of the resulting
benefit due to decontrol cannot in all fairness lay claim to the benefit of
the incentives in full now over again though the basic premise became
non-existent. The benefit under the subsequent scheme in force from
November 15, 1980 has already been accorded to them in full measure.            C
[594·D·F]

      Union of India and Ors. v. Godfrey Philips India Ltd., [1985) 4 SCC
369, relied on.

      2. The company was granted licence in February, 1975 and at that          D
time nobody could imagine about the incentive scheme announced on
December 6, 1975. The appellants, therefore, cannot argue that the scheme
announced induced them to undertake the expansion of which the licence
had been received by it in February, 1975. The expansion carried out by
the appellants in pursuance of the licence issued in February, 1975 was         E
independent and had nothing to do with the incentive announced in
December, 1975 as observed by the High Court. [594-G-H; 595-A)

        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3274 of
1990.
                                                                                F
     From the Judgment and Order dated 19.5.89 of the Allahabad High
Court in W.P. No. 233 of 1984.

        Shanti Bhushan and P. Bhushan for the Appellants.

        M&. Binn Tamta for S.N. Terdol for the Respondents.                     G
        The Judgment of the Court was delivered by

       K. VENKATASWAMI, J. The short point that arises for our con-
sideration is whether the Principle of Promissory Estoppel applies to the
facts of this case. The facts are as under : -                            H
    592                   SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A        The appellants owned two sugar factories at Daurala and Mawana
  (Meerut) and at both these factories the business of manufacturing and
  selling of sugar by vacuum pan process was carried on. The Central
  Government promulgated the Sugar (Control) Order on 10.6.66 under
  which the sale of sugar by producers was controlled. In order to mitigate
  the hardship caused to the sugar industry in the establishment of new
B sugar factories and for effecting substantial expansions in the existing sugar
  factories, the Government sanctioned a scheme in November, 1975 provid-
  ing incentives to the new sugar factories and also to those sugar factories
  who had applied for and completed their expansior, projects during the
  period 1.11.75 to 20.10.80. The incentives consisted partly of higher per-
  centage .of levy-free sugar quota and partly of concessions in the excise
c duty. It was also announced that the eligible sugar factories will be entitled
  for the above-said incentives for a period of five years from the date of
  their completion of licenced expansions. In the year 1978, there was a
  major change in the sugar policy i.e. the control and the price, distribution,
  release and movement of sugar was lifted w.e.f. August 16, 1978. As a result
D of this decontrol, the classification - levy and levy-free sugar - no longer
  existed and consequently the benefits under the incentive scheme were no
  longer required/available. While so, the Central Government w.e.f Decem-
  ber 17, 1979 agains modified the sugar policy to provide for partial control
  with dual pricing as was the situation prior to August 16, 1978. The
   Government after examioing the various altered parameters for revising the
E scheme announced a revised scheme to provide incentives to the new sugar
   factories and expansion projects. This revised scheme came into effect
   from the sugar year 1980-81. At this juncture, it must be noted that the
   percentage of levy-free sugar announced io the 1975 scheme is higher than
   the percentage announced in the 1980 scheme. The new scheme of the year
   19SO was made applicable even to those industries who were otherwise
F
   entitled to the benefit of the scheme announced in the year 1975. The
   appellants after completing the expansion projects at the two places on
   6.8.80 and 13.8.80 applied for necessary eligibility certificate for additional
     free-sale sugar entitlt:menls as per the incentives announced. The respon-
     dents allowed the incentives as per the revised 1980 scheme. However, the
G    appellants asserted that the incentives as per the scheme announced in the
     years 1975 must be giver. to them. The respondents did not accede to this
     claim of the appellants.


           Aggrieved by that they moved the High Court for the i~sue of a writ
H of mandamus directing the first respondent to issue a supplementary
                                                                                     ..
               D.C.M. LTD. v. U.0.1. [K. VENKATASWAMI,J.]               593

eligibility certificate for 1.63 lakh quintals of additional free-sale sugar   A
entitlement over and above the entitlement declared by the Central
Government on the basis of revised 1980 scheme for the year 1980-81 to
1982-83. In addition to that, the appellants also prayed for a writ of
mandamus directing the first respondent to issue a further eligibility cer-
tificate determining the amount of additional free-sale entitlement to the     B
appellants' sugar factory for the year 1983-84 and 1984-85 under the
incentive scheme of the year 1975.

      The High Court rejecting the claim of the appellants dismissed the
writ petition.
                                                                               c
       Mr. Shanti Bhushan, learned senior counsel appearing for the appel-
lants contended that the principle of Promissory Estoppel squarely applies
to the facts of this case. According to him, the new scheme announced in
the year 1980 cannot be applied to the appellants merely because there was
no control for the sale of sugar by the producers for a short period. It is D
further contended that the appellants had spent huge amounts towards the
expansion of sugar factories at two places on the incentives announced in
the year 1975 and therefore, they cannot be denied on account of the
decontrol of the sugar for a short period. In support of that argument, he
placed heavy reliance on a judgment of this Court in Union of India and
Ors. v.Godfrey Philips India Ltd., [1985] 4 SCC 369. On the other hand, E
learned counsel appearing for the respondents placing reliance on the
decontrol order submitted that during the period when there was no
control of sale of sugar by the producers, the producers were enabled to
sell their hundred per cent of that production in the open marke.t and the
benefit flowing from such decontrol changed the whole complex and, F
therefore, the appellants cannot be allowed to contend that the Govern-
ment cannot change the scheme.

      We have considered the rival submissions. It is well-settled that the
doctrine of promissory estoppel represents a principle evolved by equity to
avoid injustice and, though commonly named promissory estoppel, it is G
neither in the realm of contract nor in the realm of estoppel. The basis of
this doctrine is the inter-position of equity which has always, proved to its
form, stepped in to ~itigate the rigour of strict law. It is equally true that
the doctrine of promissory estoppel is not limited in its application only to
defence but it can also found a cause of action. This doctrine is applicable H
    594                 ·• sµPREMECOURTREPORTS [1996]SUPP.4S.C.R.

A   against the Government in the exercise of its governmental public or
    executive functions and the doctrine of executive necessity or freedom of
    future executive action, cannot be invoked to defeat the applicability of this
    doctrine. It is further well-established that the doctrine of promissory
    estoppel must yield when the equity so require. If it can be shown by the
B   Government or public authority that having regard to the facts as they have
    transpired, it would be unequitable to hold the Government or public
    authority to the promise or representation made by it, the court would not
    raise an equity in favour of the person to whom the promise or repre-
    sentation is made and enforce the promise or representation against the
    Government or public authority. The doctrine of promissory estoppel
c   would be di.<placed in such a case because on the facts, equity would not
    require that the Government or public authority should be held bound by
    the promise or representation made by it [vide 1985 4 sec 369 (supra)].

          In this case we have found that the Government before refusing the
D incentive scheme of the year 1975 have taken into account various factors
    including the decontrol of sale of sugar for the period from 16.8.78 to
    17.12.79. Further if the prayer of the appellants were to be allowed, several
    lakhs of quintals of sugar will have to be released as incentive levy-free
    sugar which otherwise meant for public distribution system. We agree with
E   the learned Judges of the High Court when they observed that the
    'petitioners who availed of the resulting benefit due to decontrol cannot in
    all fairness lay claim to be restored the benefit of the incentives in full now
    over again though the basic premise became non-existent. The benefit
    under the subsequent scheme in force from November 15, 1980 has already
    been accorded to them in full measure'.
F
         The High Court also noticed another important factor to decline the
  relief prayed for by the appellants, namely that the appellant company had
  applied for a grant of the licence in the year 1975, had mentioned in the
  licence application that the entire expansion would be done by the said
G company at its own expense. The company was granted licence in February,
  1975 and that time nobody could imagine about the incentive scheme which.
  was announced on December 6, 1975. The appellants, therefore, cannot
  argue that the scheme announced induced them to undertake the expan-
  sion of which the licence had been received by it on February, 1975. The
H expansion carried out by the appellants in pursuance of the licence issued
               D.C.M. LTD. v. U.0.1. [K VENKATASWAMl,J.]                595

in February, 1975 was independent and had nothing to do with the incen-        A
tive announced in December, 1975 as observed by the High Court.

      Taking all these factors into consideration, we have no doubt that on
the facts of this case, the Principle of Promissory Estoppel has no applica-
tion at all. The judgment relied on by the learned Senior counsel for the
appellants, namely, Godfrey Philips case supports the case of the respon-      B
dents on facts. In the result the appeal fails and is accordingly dismissed.
No costs.

S.S.                                                     Appeal dismissed.