1. The first petitioner before us is a partnership firm and the second petitioner is one of the partners of the first petitioner firm. The firm carries on business of manufacture of Vanaspati ghee, edible oil. de-oiled cakes, cotton seed oil, cotton lints and cotton seed oil extraction and for that purpose it has set up a factory at Jetpur Road, Gondal, in Rajkot District. The petitioner firm went into production and started its factory for the purpose of manufacturing Vanaspati ghee somewhere in the month of Feb., 1972 in the industrially backward area of Gondal in the District of Rajkot. The said factory of the petitioner firm is also registered and a licence to that effect has been secured by the petitioner firm under the provisions of the Factories Act. Somewhere, in the end of 1972, the petitioner firm started its oil mill in the same premises for the purpose of procuring raw material for manufacturing Vanaspati ghee. In this oil mill the petitioner firm used to crush groundnuts and there from the raw material, namely, groundnut oil, for, the manufacture of Vanaspati ghee was obtained. Thus by setting up the oil mill the petitioners were starting what may be called a vertical integration. Somewhere in the year 1973 the petitioner firm erected cotton seed plant and the said cotton seed plant was for the manufacture of cotton seed oil by crushing cotton seeds. At that time the Government of India had started giving rebate in connection with excise duty on the usage of non-traditional oils like indigenous cotton seed oil in the manufacture of Vanaspati ghee. In the year 1974 the petitioner firm erected a solvent extraction plant for maximum recovery of oil from oil cakes. All these activities, namely, manufacture of Vanaspati gbee, extraction of groundnut oil, extraction of cotton seed oil and solvent extraction plant are fully carried on in the same premises as before by the petitioners. During the year 1977-78 there was a heavy shortage of edible oil in Gujarat and the Central Government banned the use of groundnut oil in the manufacture of Vanaspati ghee in order to encourage use of minor oil seeds like cotton seeds, soyabean seeds, rice-bran, etc. As a result of this encouragement the first petitioner firm was compelled to stop its activities of using groundnut oil for the purpose of manufacturing Vanaspati ghee and thus at present the petitioner firm is mainly engaged in the activities of processing minor oil seeds like cotton seeds for the purpose of manufacturing Vanaspati ghee. The State of Gujarat issued two resolutions simultaneously, both dated Dec. 22, 1977. They are Annexed as Annexure 'A' collectively to the petition in this special civil application. Under the first resolution which is part of Annexure W, Government made available incentive benefit of cash subsidy for various industrial units in developing areas of the State of Gujarat. It is the petitioners' contention that the cash subsidy as mentioned in the resolution of 22nd Dec., 1977 is available to the first petitioner firm. It may be pointed out that no time limit was laid down so far as the cash subsidy part of it was concerned under the resolution of Dec. 22, 1977 which is the first resolution in Annexure 'A' to the petition. The other two benefits which were mentioned in the other resolution of 22nd Dec., 1977 were a tax-free loan for the purpose of paying sales tax by the units entitled to the benefit of the resolution and the other benefit was an exemption from sales tax. Under Clause 6 of the resolution of 22nd Dec. 1977, which may be called the sales tax resolution, it was pointed that the industries which were set out in Clause 6 were to be excluded from the purview of this scheme. Mr. Trivedi, learned advocate appearing for the petitioners, states that the petitioner firm would be falling within Items 12 and 13 of the list of the excluded industries and therefore, so far as the scheme for the exemption from sales tax was concerned, be is not claiming any relief against the State Government. As regards the scheme for interest-free sales tax loans, that scheme is to be found set out in Cls. 8 to 14, both inclusive, of the second resolution, part of Annexure 'A' to the petition. Both the schemes, namely, the scheme for exemption from sales tax and the scheme for tax-free sales tax loans, were to be in operation for a period of five years from lst Nov.' 1977. In para 5 of the petition it has been mentioned that in the month of Feb., 1978, the first petitioner firm diversified its activities by starting manufacturing cotton lints by erecting a delinting plant and the said process of delinting of cotton seeds for the purpose of the recovery of cotton lints therefrom was amongst the first few to be adopted in the State of Gujarat. They have further submitted that the aforesaid expansion was done by the petitioner company with an intention to get the aforesaid two incentive benefits, namely, cash subsidy and interest-fee sales tax loan, though the cost for the said expansion was very high. Thus there is a specific case of the petitioners that relying on the two resolutions, both dated 22nd Dec., 1977, collectively marked Annexure 'A', they have erected the plant by spending considerable amount in that behalf. So far as the cash subsidy is concerned, it may be pointed out that it was recognised that the cotton delinting plant of the first petitioner firm was entitled to cash subsidy under the provisions of the first scheme, and by Annexure 'C' to the petition, the decision of the State Level Committee in its 34th Meeting held on 27th Feb., 1979, had sanctioned cash subsidy of Rs. 6,43,891/- to the first petitioner firm, and it was mentioned in that document, Annexure 'C' which is dated March 13, 1979, that amount of Rs. 42,92,000/- was the accepted capital investment in the proposed unit of cotton delinting plant it appears that out of this amount of Rs. 6,43,891/- an aggregate amount of Rs. 5,79,828/- has admittedly been received by the petitioners, and the balance of Rs. 64,063/- has yet to be received from the Government. The General Manager of the District Industrial centre, Rajkot has, by Annexure 'G' to the petition, certified on Jan. 2, 1980 that the cotton delinting plant of the petitioners is a new plant.
2. The Government of Gujarat passed a resolution of Sept. 26, 1979 stating that the State Government had decided to reserve the edible oil industry including manufacture of Vanaspati, for the co-operative sector and in the context of the policy of encouraging cooperative societies in the field of manufacture of edible oils, the entire matter was under consideration of the Government and it was decided after considerable deliberation that to the units falling outside co-operative sector the benefits of the two resolutions of 22nd Dec., 1977, for the manufacture of edible oils and manufacture of Vanaspati, would not be available to such units falling outside the cooperative sector. It was stated that this order, of 26th Sept., 1979 would be enforced immediately. In the case of private units in whatever cases benefits have been sanctioned, cash subsidy which has already been sanctioned was to be paid but after the date of the resolution, 26th Sept., 1979, any further cash subsidy or exemption from sales tax or, interest-free sales tax loans would not be available and no further amount under any of the three heads and incentives for such units would be available. It was further mentioned in the resolution that in the case of those units whose cases were not sanctioned, no benefit whatsoever, either by way of cash subsidy or by way of exemption from sales tax or by way of interest-free sales tax loans, would be sanctioned thereafter. That document is Annexure 'H' to the petition. Annexure 'I' to the petition is by way of an explanation to the resolution of 26th Sept., 1979 and by the resolution, Annexure 'I' dated Feb. 27, 1980 it was clarified that the three types of edible oils, namely, groundnut oil, cotton seed oil and castor oil, and th3 industry of Vanaspati manufacture, were to be reserved for co-operative sector and it was further declared that for the units failing outside the co-operative sector, so far as the above-mentioned reserved areas were concerned, the benefits of the schemes set out in the resolutions of Dec. 22, 1977 would not be available to those private sector units.
3. In the affidavit-in-reply, C. N. Shah, Additional Commissioner of Industries, State of Gujarat, being the affidavit dated 14th July, 1981, so far as the remaining amount of cash subsidy is concerned, the deponent says that the Government is prepared to pay the amount provided the formalities for the obtaining of that cash subsidy are complied with. Mr. Trivedi for the petitioners is agreeable that on complying with the necessary formalities, the balance of the cash subsidy may be., made available to them. As regards the exemption from sales tax, there is no claim on behalf of the petitioners and as regards the claim for interest-free sales tax loans, the case of the Government is that because the cotton seed delinting plant of the petitioners falls in Items 12 and 13 of Clause 6 of the second resolution of Dec. 22, 1977 the petitioners are not entitled to interest-free sales tax loans. Now this contention urged on behalf of the Government in the affidavit-in-reply is utterly untenable. From the two schemes under the second resolution of Dec. 22, 1977, one scheme is for exemption from sales tax and the other scheme is for interest-free sales tax loans. Clause 6 of the resolution which sets out the list of the excluded industries is only in the context of the scheme from exemption from sales tax and not as regards the scheme for interest-free sales tax loans. Yet, according to the affidavit-in-reply, the petitioners are not entitled to the benefit of the scheme for interest-free sales tax loans, though under the notification of Dec. 22, 1977 the scheme was to remain in force for the period of five years from 1st Nov., 1977.
4. Mr. Trivedi for the petitioners has relied upon the doctrine of promissory estoppel and contended that inasmuch as a large sum of nearly forty-three lakhs rupees has been invested by the petitioners in their cotton delinting plant relying on the assurance of the State Government the benefit of the incentive ad out in the two resolutions of Dec. 22, 1977 would be available to them. According to him it is now not open to the State Government to resile from the two schemes and tell the petitioners that they will not be entitled to interest-free sales tax loans.
5. The doctrine of promissory estoppel was considered by the Supreme Court in Jit Ram Shiv Kumar v. State of Haryana, AIR 1980 SC 1285. The Bench which disposed of this matter consisted of two learned Judges, namely, Fazal Ali and Kailasam, JJ. and Kailasam, J. speaking for the Supreme Court, summed up the legal position as follows, in para 39 of the judgment at page 1302. The position has been culled out after examination of all the relevant decisions having a bearing on the point and the principles laid down are as follows:
'(1) The plea of promissory estoppel is not available against the exercise of the legislative functions of the State.
(2) The doctrine cannot be invoked for preventing the Government from discharging its functions under the law.
(3) When the officer of the Government acts outside the scope of his authority, the Plea of promissory estoppel is not available. The doctrine of ultra vires will come into operation and the Government cannot be held bound by the unauthorised acts of its officers.
(4) When the officer, acts within the scope of his authority under a scheme and enters into an agreement and makes a representation and a person acting on that representation put, himself in a disadvantageous position, the Court is entitled to require the officer to act according to the scheme and the agreement or representation. The officer cannot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the Prejudice of the person who had acted upon such representation and put himself in a disadvantageous position.
(5) The officer would be justified in changing the terms of the agreement to the prejudice of the other party on special considerations such as difficult foreign exchange position or other ' matters which have a bearing on general interest of the State.'
The position was again reiterated in more or less the same terms in para 50 at p. 1305:
'On a consideration of the decisions of this Court it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of his authority. The Court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the Government. It would be open to the authority to plead and prove that there were special consideration-, which necessitated his not being able to comply with his obligations in public interest.'
6. It may be pointed out that there is a decision earlier to the decision in Jit Ram's case (AIR 1980 SC 1285) (supra) and it is a decision by a Bench of three Judges of the Supreme Court in the case of Bhim Singh v. State of Haryana, AIR 1980 SC 7168. In that case the State Government held out certain, specific promises as inducements for its employees, to move into a newly created department and the Supreme Court held, applying the doctrine of promissory estoppel, that the employees having believed the representations of the State Government and having acted thereon could not be denied the rights and benefits promised to them. Under these circumstances, it is clear that even in the field of purely executive functions of the State, the doctrine of promissory estoppel has been applied by a Bench of three Judges of the Supreme Court. Though the decision in Bhim Singh's case (supra) was delivered on 24th July, 1979 and the decision in Jit Ram's case (supra) was delivered on ,April 16, 1980, the decision in Bhim Singh's case is not considered in the case of Jit Ram's case but the principle so far as the instant case is concerned is the same, namely, that if the Government or any authority on behalf of the Government has made a representation and acting on that representation a party has altered its situation, then, it is not open to the Government to resile from that position and at the instance of the party who has altered its situation to its disadvantage, the Court is entitled to direct the Government or the authority to carry out its promises as its scheme.
7. Mr. Mehta for the respondent State has relied on certain observations of a Bench consisting of Goswami, Jaswant Singh and Kailasam JJ. in Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh, AIR 1977 SC 2149. There, it was pointed by Jaswant Singh J. speaking for the Supreme Court that there could not be any estoppel against the Government in exercise of its sovereign legislative and executive functions. The decision in the Bihar Eastern Gangetic Fishermen Co-operative Society's case (supra) was thus explained by Kailasam, J. in Jit Ram's case (AIR 1980 SC 1285 at p. 1300) (supra).
'......... this Court held that the respondent could not invoke the doctrine of promissory estoppel because he was unable to show that relying on the representation of the Government, he had altered his position to his prejudice. The Court accepted the view of this Court expressed in Ram Kumar's case (AIR 1976 SC 2237) and held that there cannot be any estoppel against the Government in the exercise of its sovereign, legislative or executive functions.'
8. The legal position being very clear in the light of proposition No. (4) and in the light of the last portion of para 50 in lit Rain's case (supra), in the instant case since the petitioners, have shown that they have spent nearly Rs. 43,00,000/- in the setting up of the cotton delinting plant after Feb., 1978 relying on the schemes set out in the two notifications of Dec. 22, 1977 it is now not permissible to the State Authorities to back out of the schemes and to say that the petitioners will not be entitled to the benefits of the schemes set out in the said two resolutions under which they are eligible to obtain the benefits. We have pointed out that as regards the cash subsidy, there is no dispute now left between the parties. As regards exemption from sales tax, the petitioners do not claim the same and the dispute now remains only as regards interest-free sales tax loan. Since the doctrine of promissory estoppel would very much apply in the instant case, Government is estopped for a period of five years from Nov. 1, 1977 from denying the benefits of the scheme for interest-free sales tax loan to the first petitioner firm so far as its cotton delinting plant is concerned. We therefore hold that the resolution of Sept. 26, 1979, in so far as it purports to take away the benefits of interest-free sales tax loan from the petitioners, is not applicable in the case of the petitioners and cannot be allowed to apply as against the petitioners. That resolution is Annexure 'H' to the petition.1 This special civil application is tberefore allowed and the respondents are directed not to apply the impugned resolutions dated September 26, 1979 and Feb. 27, 1980 to the interest-free sales tax loans, for which the petitioners are eligible for a period of five years from Nov. 1, 1977 in respect of their cotton delinting plant The special civil application is allowed accordingly. Rule is made absolute to that 'tent. The respondants must pay the costs of this special civil application to the petitioners.
9. Application allowed.