V.S. Deshpande, J.
1. Can equity or Promissory estoppel bar the Government from changing a scheme or Policy before the expiry of its period and if so under what circumstances This question has come up for consideration in this and the connected writ petition (No. 183 of 1974) in the background of law and facts stated below.
2. The Imports and Exports (Control) Act, 1947 enables the Central Government to regulate in various ways the imports and exports of commodities into and out of India. This may be done by the issue of orders under Section 3 of the Act. Such orders may be legislative or executive. Walnut in shell and also its kernel mainly grown in Jammu and Kashmir is exported from India mainly to the Western Countries. With a view to encourage this export, a scheme was announced by the Government on 2nd February, 1973, to be effective for three Years from 1st October 1972 to 30th September, 1975. The first Paragraph of the scheme stated the decision of the Government to allow cash assistance against exports of walnut kernel as well as in shell at 5 Per cent. of the F. O. B. value to the registered exporters on exports made during the period from 1st October, 1972, to 30th September, 1975. Over and above this normal cash assistance of 5 per cent an additional incentive assistance was also announced in the second paragraph of the scheme as follows:-
(1) 2 1/2 per cent of the F. O. B. value if the exports of a registered exporter during 1-10-1972 to 30-9-1973 exceed by at least 10 per cent of their exports during 1-10-1971 to 30-9-1972.
(2) 2 1/2 per cent of the F. O. B. value on the exports made during 1-10-1973 to 30-9-1974 if they exceed by at least 10 percent of the exports for the year 1-10-1972 to 30-9-1973, and
(3) 2 1/2 per cent of the F. O. B. value of the exports made during 1-10-1974 to 30-9-1975 if the experts exceed by at least 10 percent. of the exports during the Previous year. namely A-10-1973 to 30-9-1974. The third paragraph of the scheme stated that application in the prescribed form may be submitted for the Purpose of obtaining both kinds of cash assistance, namely.
(a) the normal cash assistance of 5 percent and
(c) the additional incentive assistance of 2 1/2 Percent within three months off the end of the relevant 12 months Period supported by the prescribed documents.
3. On 20th August, 1973, the Government wrote to the Secretary Upper India Exporters Association of which both the petitioners are members as follows -
'There has been a world failure in production of many kinds of edible nuts this year as a result of which price of all kinds of edible nuts including walnuts have shot unconsiderably. In this context it is felt that there should be no losses in the export of walnuts this year, and there is thereforee, ample justification for review of the decision to grant cash subsidy on walnut exports. Before a final decision in this regard is taken you are requested to represent your position in writing within 10 days from the date of issue of this letter together with detailed justification, if any for the continued grant of Cash subsidy on walnut exports.
The Association replied to this letter or 29th August, 1973, as follows:--
'The matter will be discussed in a regular meeting shortly and considered views of the members and justification for continuity of the Cash subsidy on walnuts exports will be advised to you very soon latest by 10-9-1973.'
The Association however, did not give any reply by 10-9-1973 and on the other hand wrote a second letter to the Government on that date as follows : -
'A meeting of the trade was ordered but could not be held since some of the important members are Presently out of India on business. After holding a meeting of the Association. the findings will be conveyed to you in due course.'
The Government thereafter withdrew the scheme dated 2nd February 1973 with effect from 30th September 1973 by a letter issued on 28th September 1973 on a review of the various developments which had taken place.
4. The cash assistance scheme thus lasted for only one year instead of three years. The validity of the order dated 28th September 1973 is challenged is these writ petitions. Though various grounds were urged in support of the writ petitions in their oral arguments, the learned counsel for the petitioners, namely Shri Anoop Singh and Shri P. C. Khanna, confined themselves in urging only the following grounds, namely : -
(1) The Government by the promulgation of the scheme dated 2nd February, 1973 made a representation that the scheme would operate for three years from 1-10-1972. Relying upon this representation the petitioners changed their position to their detriment by investing and spending a lot of money on the urbanisation of their trade and by entering into contracts for the purchase of walnut to be exported to foreign countries. The walnut season ends with September each year. The purchase of the walnut in the season and its transport from Jammu and Kashmir to the Ports and its export outside can be completed only after September. Due to the action of the Government in winding up the scheme from 30th September, 1973, the petitioners could not take advantage of the cash assistance even for the year 1972-73, Further, the Government was estopped from withdrawing the scheme before the end of the promised three years both by promissory estoppel as also by equity.
(2) The justification for the withdrawing of the scheme was based on the rise in foreign prices in the year 1972-73. No account was taken as to what the prices would be in the subsequent two years. There was no justification, thereforee for withdrawing the scheme for the subsequent years, and
(3) The scheme was divisible into two independent Parts, namely, (a) the normal cash assistance of 5 percent for all exports, and (b) the incentive cash assistance for increasing exports each year at least by 10 per cent. over the exports of the pervious year. The reason for withdrawing the scheme was that the walnut exporters would not suffer any loss in view of the rise in the world prices. This reason could apply to the withdrawal of the normal cash assistance but it would not apply to the withdrawal of the incentive cash assistance. In regard to the latter, thereforee, at any rate the withdrawal was invalid.
5. The defense of the Government was that the scheme was announced on 2nd February, 1973 on the assumption that the cash assistance for covering the actual loss to the exporters of walnut would be required for some considerable time, that is, for three years. The principle on which the scheme was based was to offset the loss which the exporters, would otherwise incur. The scheme was not intended to be a source of profit to the exporters. In July-August, 1973 due to worldwide shortage of edible nuts there was a spurt in the international prices for walnuts resulting in considerable increase in unit value realisation on exports. Accordingly the Government felt that there was no longer any likelihood of any losses being incurred on exports and thereforee hardly any justification for continuing the scheme of cash assistance. An opportunity was given to the exporters to justify the continuation of the cash assistance scheme but the exporters did not avail themselves of the opportunity. This was in reply to the first contention of the petitioners. As to the second contention, the writ Petitions were filed in February, 1974. There was neither any pleading nor any material put forward by the petitioners regarding years 1973-74 and 1974-75 from which it could be argued that the scheme could not have been withdrawn in respect of the second and the third years. As to the last contention, it was Pointed out that the scheme was one and indivisible. If the normal cash assistance itself could be withdrawn, the incentives also had to be withdrawn.
6. In the rejoinders filed by the petitioners, there was no denial of the averment of the Government that world prices had risen in 1972-73 after the promulgation of the scheme and that the exporters were, thereforee, not likely to suffer any loss. The petitioners evaded the issue by denying that the cash assistance had been announced by the Government with the object of off-setting the losses to the exporters. The petitioners said that the question of actual loss having been suffered or not by the exporters was irrelevant. The petitioner in the present writ petition, however, admitted that it may be correct that the cash incentive was not intended to be given as a source of profit to the exporters but it was given to reduce losses which the trade was suffering in competition with China and the United States and the uncertainty for booking orders in advance by foreign buyers. The petitioners pointed out that the contracts with foreign buyers had been entered into by them long before the cash assistance scheme was withdrawn. The petitioners would have to fulfill these contracts. Had the Government withdrawn the cash assistance before the petitioners entered into these contracts, the petitioners may not have entered into some of these contracts.
7. The principal ground urged by the petitioners is that the Government must be held bound by the representation made on 2nd February, 1973, that the scheme of cash assistance would operate for three years. Since the representation by the Government to the public at large and to the exporters of walnut in particular was made in respect of a future period, the petitioners would have to show that the Government was estopped from withdrawing the representation before the expiry of three years either by the principle of promissory estoppel or by some equity.
8. As distinguished from the estoppel as a rule of evidence embodied in Section 115 of the Evidence Act which relates to a representation as to an existing fact, the doctrine of promissory estoppel relates to a representation of a future intention. The doctrine is still evolving and there is considerable uncertainty as to the conditions which must be fulfillled before it can be applied. This has been pointed out in Chapter Xiv of SpencerBower and Turner on Estoppel by Representation, Second Edition. As Between two private parties, the doctrine of Promissory estoppel was applied by the Supreme Court in Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd., : 85ITR607(SC) . Broadly speaking the conditions necessary for the application of the doctrine of promissory estoppel are the same as those for the ordinary estoppel with the difference that the former would apply even when the representation is as to the future while the latter applies when it relates to the present.
9. We have, thereforee, to inquire firstly whether the circumstances of the case are such as to raise the bar of promissory estoppel or an analogous equity and secondly whether such a bar can be raised against the Government in respect of a policy decision and its withdrawal.
10. On the first aspect of the question, the petitioners have to prove that relying on the representation of the Government, they have changed their position to their detriment. The petitioners were already exporters of walnut before the scheme of cash assistance was announced. They have continued to be such exporters even after the scheme has been withdrawn. They did not either start exporting walnut because they relied upon the scheme nor have they discontinued the exports after they found they could not rely on the scheme. It was urged for them that they were encouraged to expand their trade by relying upon the scheme. It may be assumed for the sake of argument that some of the expansion would not have occurred but for the scheme. But the expansion of the trade cannot be said to be an act which caused any detriment to the petitioners. thereforee, even considering the principle of promissory estoppel or some principle of equity analogous to the equity in Ramsden v. Dyson, (1866) 1 Hl 129 which has been applied in India, it cannot be said that the petitioners have changed their position to their detriment by acting upon the representation made by the Government.
11. The application of the principle, of promissory estoppel for an analogous principle of equity is rendered more difficult in relation to the Government as distinguished from a private person. The executive action of the Government may be of two distinct kinds. Firstly, the Government may act like a private person under the rules of private law. When, for example the Government purchases property or enters into contracts in such transactions, the Government is subject to the rules of the private law including the doctrines of estoppel, promissory estoppel and the equity in Ramsden v. Dyson, (1866) 1 Hl 129. But there is a totally different kind of action which the Government may take. This relates to enunciation of policy and action there under. The difference Between an ordinary administrative act and policy action is well known in administrative law. While ordinary administrative action is fully subject to judicial review, the greater the element of policy involved in Government action, the more difficult it is for the Courts to review such action. Between which of these two categories does the promulgation of the scheme of 2nd February, 1973 fall? The power to regulate imports and exports is given to the Government by statute and the promulgation of the scheme is a method of implementing the statutory policy. The regulation of imports and exports and the question whether the export of a certain commodity should be encouraged by cash assistance are questions of policy. For, these decisions are taken by the Government in the light of overall national interest. The balance of trade and the position of the foreign exchange reserves have to be guiding considerations in taking these decisions. These considerations do not relate to any individual such as the particular exporters or the petitioners. They relate to the country as a whole. It is clear, thereforee, that the promulgation and the withdrawal of the policy of cash assistance were both policy actions and not ordinary administrative acts.
12. Both an ordinary representation as also a policy declaration may be subject to an implied condition. Such a condition may not be expressed but may be implied in the circumstances of , the particular case. In the well known case of Rederiaktiebolaget Amphitrite v. The King, (1921) 3 Kb 500, the British Government had given an undertaking to the petitioners who are ship owners that their ship may be sent to London and that it would not be detained there. On the, faith of that undertaking the owners sent the ship to London. The British Government thereafter withdrew the undertaking and detained the ship. Nevertheless, the claim for damages for breach of contract was turned down by the Court with the following observation : -
'No doubt the Government can bind itself through its officers by a commercial contract and if it does so it must perform it like anybody else or pay damages for the breach. But this was not a commercial contract, it was an arrangement whereby the Government purported to give an assurance as to what its executive action would be in the future in relation to a particular ship in the event of her coming to this country with a particular kind of cargo. And that is, to my mind, not a contract for the breach of which damages can be sued for in a Court of law. It was merely an expression of intention to act in a particular way in a certain event. My main reason for so thinking is that it is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State.' The latest refinement of this doctrine is to be found in the recent decision of the Supreme Court in the Indian Aluminium Company v. State of Kerala, announced on 23rd July, 1975, (Reported in : 1SCR70 ). The Electricity Board had entered into a contract with the company to charge lower rates for the supply of electricity for a long period. The Board later on raised the rates of electricity supplied to the company on the ground that the statute under which the Board functioned required that, as far as possible, the Board shall not carry out its operations at a loss. It was argued for the Board that the statutory discretion of the Board could not be fettered for a future period by a stipulation in an agreement. The Court observed that while this principle was unexceptionable, it could not be applied to the case before the Court. The private contract entered in general terms could not fetter the statutory discretion of the Board but a contract entered into in exercise of a statutory power could not be said to fetter the statutory discretion of the Board and could not, thereforee, be ignored by the Board. In the present case there is no contract Between the Parties which could fetter the discretion of the Government in changing or withdrawing the policy.
13. In Robertson v. Minister of Pensions, (1949) 1 Kb 227, Denning, J., applied the principle of estoppel against the Government. This decision was later expressly disapproved by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd., 1951 Ac 837. But even Denning, J., in Robertson's case had observed regarding the decision in Rederiaktiebolaget Amphitrite case (1921) 3 Kb 500 as follow.-
'In my opinion the defense of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract.'
14. As in a contract so also in a representation, there may be an implied term. The policy of the Government in the imports and exports matters is based on ever changing international circumstances in the field of international trade and the balance of foreign exchange. The declaration of a policy by the Government on 2nd February, 1973, was thereforee subject to the implied condition that the Policy was likely to change if these circumstances altered. In Union of India v. Anglo Afghan Agencies, : 2SCR366 , a decision relied upon by the Petitioners also the Supreme Court observed at page 379-F that 'the Controller could impose restrictions if special considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the State warranted.' In M/s. Ramchand Jagadish Chand v. Union of India. : 3SCR72 , also the Supreme Court had observed that though the licensing authority would normally issue an import license for 100 per cent. of the goods exported 'having regard to special considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the State, import licenses for a smaller percentage may be granted to the exporters'. These decisions recognise the power of the Government to change its policy due to general circumstances. Even if a concluded contract cannot fetter this discretion of the Government muchless can a mere representation do so.
15. Courts have recognised such implied terms even in contracts entered into by Government. On the same principle, representations of policy made by Government would also be subject to such implied terms. In Crown Lands Commissioners v. Page, (1960) 2 Qb 274, the Court refused to imply a covenant for quiet enjoyment in a Crown lease so as to exclude the Crown from exercising the statutory exclusion powers. Professor S. A. de Smith in his Judicial Review of Administrative Action, 3rd Edition. page 279, has, thereforee, summarised the law on this point as follows:-
'Contracts and covenants entered into by the Crown are not to be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good; on the contrary, they are to be construed as incorporating an implied term that such powers remain exercisable.'
The petitioners contended that in the declaration of 2nd February, 1973, no mention was made that the cash assistance was being granted to the exporters of walnut to offset the losses. But the Government has sworn an affidavit that it was this consideration which formed the basis of the issue of this policy. This averment has not been controverter in the rejoinder. As requested by the petitioners, we called for the relevant Government files and found that the nothings of the 10th and 12th of January, 1973, which form the basis of the issue of the Policy on 2nd February 1973 (of which a copy has been taken on record) support the defense taken by the Government. In the noting of 10th January, 1973, it was stated that : -
'The flat rate of first 5 % is to compensate for the loss being incurred by the Trade on exports of walnuts. Trade has furnished detailed break-up of its costs and realisation which has been scrutinized by the Ministry of Finance (P. T. & T. Division) to prove the uneconomic nature of this Trade. Higher rate of cash assistance was suggested to Provide for an incentive to the Trade to appreciably increase foreign exchange earnings from the exports of this commodity.'
16. It is settled law that a con tract itself may be frustrated if an implied condition on which it was based disappears or cannot be fulfillled. Similarly, a representation, even if acted upon, would not estop the maker of the representation if the implied condition on which the representation was based no longer continues to exist.
17. In Union of India v. Anglo Afghan Agencies, (AIR 1968 Sc 718), the Supreme Court recognised that the change of circumstances would lead to change of policy. The change should, however, be made for good reasons and should not be arbitrary and capricious. In the present case, the change of circumstances took away the basis of the policy, namely, the implied condition that cash subsidy was necessary to offset the trade losses of walnut exporters. Further, an opportunity was given by the Government to the Trade to show cause why the policy should not be changed. It is the trade which failed to take advantage of the opportunity probably because the traders were aware that the change of policy was justified. As they had no cause to show why the policy should not be changed, they did not attempt to do so.
18. At the time of declaring the policy, the Government may not anticipate that the circumstances on which the policy is based would change. The declaration of policy may not also be expressly based an the existence of circumstances. But it is always implicit in the promulgation of the policy that it is based on the existence of circumstances and is made with a view to achieve certain objects. If the circumstances change and the achievement of objects become either impossible or unnecessary then a change in policy would be justified. Further, instances of reasons which would justify the change of policy by the Government are furnished by two subsequent decisions of the Supreme Court.
19. In State of Tamil Nadu v. S. K. Krishnamurti, : 3SCR104 , the State Government had prescribed text books for the schools for a period of three years. Relying on this declaration, the petitioners and others incurred heavy expenditure on the publication of text books for the schools. But the State Government later decided to nationalise the publication of school text books and prescribed new text books in place of the old ones. The publishers contended that the State Government was estopped from going back on the representation which was acted upon by the publishers to their detriment. This contention failed. The representation that the text books once prescribed would remain in force for three years was not necessarily addressed to the publishers. It was more an injunction to the managers of the schools. The prescribing of the text books does not, thereforee, confer any rights on the publishers that the period of three years for which they are prescribed must be adhered to by the Government. There is no holding out by the Government that the text books once prescribed would not be changed before the expiry of three years.
20. In M. Ramanatha Pillai v. State of Kerala, : (1973)IILLJ409SC , the petitioner was appointed as Vigilance Commissioner for a period of five years or till he reaches the age of sixty. But the post was abolished before either of the two events happened. The contention of the petitioner that the Government was estopped from abolishing the Post earlier was negatived because the power to abolish post was an incident of sovereign Government Power. Such discretion could not be fettered by a contract with the petitioner.
21. We are of the view thereforee, that the mere fact that the implied term was not expressed in the declaration of 2nd February, 1973, does not mean that the said declaration was not based on the implied term that the object of the scheme was to offset losses of the trade. The Government was, thereforee, entitled to withdraw the scheme when the implied term ceased to exist. The Government have made a specific pleading about the world prices for 1972-73. In replying to para 9 of the writ petition, Government stated that the price of Indian Light Halves in May 1972, was 755 per tonne while the Price in May 1973 was 795 per tonne and in August 1973 850-860 per tonne. In the case of Indian Light Brokens, the price went up from 435-440 in May 1972 to 805-815 in May 1973 and to 825-835 in August 1973. The unit value realisation during the period 1-4-1973 to 31-8-1973 had also gone up to Rs. 8.09 per Kg. in the case of walnuts in shell and Rs. 10.88 per kg. in the case of walnut kernels as against Rs. 3.83 and Rs. 8.29 per kg. respectively during the corresponding period of the previous year. This assertion of fact was not denied by the petitioners. The petitioners, on the other hand, argued that the question of loss was irrelevant. We are of the view that the offsetting of losses of the trade was the basic consideration for the grant of the cash assistance. It is well known that subsidy is not granted merely to enrich the exporters. We believe the Government affidavit that it was granted to offset the losses. The Petitioners have not rebutted the figures given by the Government from which it would appear that with the increase in the world prices the unit realisation. of the exporters went up. The exporters, thereforee, made profit in stead of incurring any losses. The figures filed by the petitioners in Civil Writ No. 183 of 1974 at Annexure A-2 (page 264 of the paper book) are based on the petitioners' calculation regarding the expenses incurred by them in purchasing and exporting the walnuts. These figures themselves show that the expenses incurred by the petitioners were less than the price which would have been realised by them at the increased foreign prices. This would be so even if the Indian Prices have been correspondingly increasing. We hold, thereforee, that the Government was justified in law and on facts in withdrawing the scheme with effect from 1st October 1973, namely, after the expiry of the first year.
Contention No. 2:-
22. Since the scheme was for three years, it is presumed that the Government would consider for each of the three years whether the export of walnut was not in danger of resulting in losses. In respect of each of these years, the Government should be able to take a separate decision as to whether the scheme should be continued or not. If, for instance, the circumstances in 1973-74 or 1974 -75 changed and the walnut export trade resulted in losses then the Government would not be justified in withdrawing the scheme. The burden of proof was, however, on the petitioners to show any such adverse change of circumstances. They have not done so. They are, how ever, free to make any representation to the Government if there is any such change and the Government should be willing to consider any such. representation. This disposes of the second contention of the petitioners.
23. The scheme has been treated by the Government as a whole. Had it not been necessary to grant the normal cash subsidy to offset losses, the Government would not have thought of granting any incentives for increasing the exports. It is difficult to read the scheme as consisting of two schemes independent of each other. It stands to reason also that incentive to exports is also necessary when the exports are languishing. The increase in the world prices not only led to the increase in the export unit realisation of the walnut trade but also to an increase in the volume of exports. The two are connected with each other. It would appear, thereforee, that the incentive to increase the exports was connected with the normal cash assistance to offset losses. Since the losses turned into profits and the volume of exports also increased the Government was justified in withdrawing the normal cash assistance to offset losses as also the incentive cash assistance for increase of exports. This contention also, thereforee, fails.
24. Learned counsel for the petitioners have stated that an administrative practice by the Government in respect of some other exports has been that whenever a scheme subsidising exports is withdrawn before running its full period, the Government consider the representation of the exporters for some ex gratia compensation. It is open to the petitioners to make such representation to the Government and if the anology is applicable, the Government should be able to deal with the petitioners in the same way as they have dealt with the exporters of other commodities who were deprived of cash assistance before the expiry of the period of the schemes.
25. For the above reasons. The writ petitions are dismissed but without any order as to costs.
26. Petitions dismissed.