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Laxmi Film Laboratory and Studios Pvt. Ltd. and anr. Vs. State of Gujarat and anr. - Court Judgment

LegalCrystal Citation
SubjectMedia and Communication;Civil
CourtGujarat High Court
Decided On
Judge
Reported in(1986)1GLR263
AppellantLaxmi Film Laboratory and Studios Pvt. Ltd. and anr.
RespondentState of Gujarat and anr.
Cases ReferredGujarat State Financial Corporation v. Lotus Hotels Pvt. Ltd. A.I.R.
Excerpt:
.....ure..........up film studios in the gujarat state. that resolution amongst other things provided that the state government would consider guaranteeing advances upto rs. 25 lacs from commercial banks on merits when the parties are unable to get assistance from the gujarat industrial investment corporation for setting up film studios in the state. the resolution also provided exemption to the films produced in the state from entertainment tax for a specified period. the state government passed another resolution annexure 'b' dated january 2, 1970, declaring a policy for granting financial assistance and certain concessions for setting up film processing laboratory in the gujarat state. that resolution provided that the state government would consider on merits guaranteeing of advances upto rs......
Judgment:

R.C. Mankad, J.

1. The question which arises for my consideration in this petition is whether the petitioners are entitled to clam subsidy at the rate of Rs. 50,000/- per film limited to maximum six films per year for feature films produced by them during a period of five years from March 7, 1975 to March 6, 1980 under the resolution Annexure T dated July 25, 1975 of the Government of Gujarat, Industries, Mines and Power Department.

2. Petitioner No. 1 is a private limited Company and petitioner No. 2 is its Chairman. The Government of Gujarat passed a resolution Annexure 'A' dated December 18, 1969, declaring a policy for granting financial assistance and giving incentives for setting up film studios in the Gujarat State. That resolution amongst other things provided that the State Government would consider guaranteeing advances upto Rs. 25 lacs from commercial banks on merits when the parties are unable to get assistance from the Gujarat Industrial Investment Corporation for setting up film studios in the State. The resolution also provided exemption to the films produced in the State from entertainment tax for a specified period. The State Government passed another resolution Annexure 'B' dated January 2, 1970, declaring a policy for granting financial assistance and certain concessions for setting up film processing laboratory in the Gujarat State. That resolution provided that the State Government would consider on merits guaranteeing of advances upto Rs. 2,50,000/- from any commercial Bank when the party is unable to get assistance from Gujarat Industrial Investment Corporation. The Government also decided to grant price preference concession for undertaking Government work and the resolution provided that the Government would give price preference of 10 per cent to the films processing laboratory established in Gujarat over the others situated outside the State for getting Government work through them. It is the petitioners' case that relying on the policy declared by the State Government in its resolution Annexure 'A', they purchased equipments worth about Rs. 7,50,000/-. The State Government arranged for advances only upto Rs. 7,50,000. In other words, the Government failed to make arrangement for guaranteeing advances of Rs. 25 lacs and that it guaranteed advances only of Rs. 7,50,000. As a result of this failure on the part of -the Government, the machinery imported by the petitioners from foreign countries remained idle for want of other equipments. Petitioners also invested Rs. 30,94,538/- upto March 31, 1977, relying on the aforesaid policy of the State Government.

3. Petitioners submit that the Government policy for giving financial assistance and incentives was changed and by resolution Annexure 'C dated February 19, 1974. resolution Annexure 'A' dated December 18, 1969 was cancelled. It was however, provided in the said resolution Annexure 'C as follows:

Government, however, further directs that Laxmi Film Laboratory and Studies Private Limited, Baroda (petitioner herein), which is so far the only Unit entitled to the benefit of the incentives provided under para 2(i) of the said Government Resolution shall continue to benefit from this incentive upto the date when it completes five years from the date of starting its functioning.

Petitioners by their application Annexure 'D' dated March 5, 1974, informed the Government about the loss incurred by them and suggested to the Government that it should consider subsidising the film industry. Thereafter, the Deputy Secretary, Industries, Mines and Power Department, wrote letter Annexure-'E-l' dated December 20, 1974, enclosing therewith a draft Government Resolution Annexure 'E-2' which the Government proposed to pass regarding the policy for film industry. In his letter, the Deputy Secretary wrote to the petitioners as follows:

Before we issue it (resolution as per draft) we need your acceptance as you are the only functioning studio in the State. You are requested to confirm immediately that you accept the terms of this G.R. in supersession of the earlier G.R....

Petitioners by their letter Annexure 'E-3' dated December 23, 1974, conveyed their acceptance of the proposed Government Resolution. It may be mentioned here that under the proposed or draft Government Resolution ('G.R.' for short) Annexure E-2, Government proposed to give cash subsidy of Rs. 50,000/-per film for the films produced in the petitioners' studio. Government, however, did not pass the resolution as per draft Annexure 'E-2'. The Deputy Secretary to the Government, however, by his letter Annexure 'F-l' dated February 20, 1975, sent another draft G.R. to the petitioners and requested them to indicate their acceptance of the terms and contents of the draft G.R. in supersession of the earlier G.R. Annexure 'A' dated December 18, 1969 and G.R. Annexure 'C' dated February 18, 1974. Petitioners accepted the draft resolution but suggested some modifications by their letter Annexure 'F-3' dated February 22, 1975. The Deputy Secretary, however, wrote a letter Annexure G-1 dated March 1, 1975 enclosing therewith yet another draft G.R. Annexure G-2. In this letter, the Deputy Secretary wrote to the petitioners : 'A copy of the draft G.R. is enclosed for your information. Please now communicate your clear cut acceptance of the terms of G.R. in supersession of the earlier G.R. No. FLM-1068/7827-C dated 18-12-74.' The draft resolution Annexure G-2, amongst other things provided that the studio would be eligible to subsidy of Rs. 50,000/- per film and that amount would be released after the commercial release of the film. Petitioners by their letter Annexure G-3 dated March 5, 1975, gave their consent to the new policy contained in the draft G.R. Annexure G-2. Thereafter the State Government passed resolution Annexure 'H' dated. March 7, 1975.

4. Under the G.R. Annexure 'H' dated March 7, 1975, it was provided that the studio would be eligible to a subsidy of Rs. 50,000/- per film this amount would be released after the commercial release of the film. It was further provided that the concession would be available for a period of five years front the date of issue of the order or upto five years from the commencement of a studio whichever is later. So far as the petitioners were concerned their studio had already started working with effect from December 1, 1972 and, therefore, so far as they were concerned, period of five years would begin to run from the date of the order that is March 7, 1975. In other words according to the petitioners under the said resolution, they were entitled to subsidy of Rs. 50,000/ - per film for a period of five years from March 7, 1975 to March 6. 1980. Resolution Annexure H did not provide that cash subsidy of Rs. 50,000/- was limited to certain number of films. The policy contained in the G.R. Annexure H was, however, kept in abeyance. Government thereafter passed resolution Annexure T dated July 25, 1975, wherein it was provided that subsidy of Rs. 50,000/- per film would be limited to maximum six film per year per studio. There was no change in the resolution so far as the period for which subsidy was available. In other world, subsidy as stated above was to be available for a period of five years from March 7, 1985, or from the commencement of the studio which was later. Petitioners contend that under the resolution Annexure H they were entitled to subsidy of Rs. 50,000/- per film without any limit regarding number of films on which subsidy was to be given. However by a subsequent resolution Annexure T which was not issued with their consent subsidy was limited to six films per year. Petitioners therefore protested against the change in the policy. The State Government therefore issued resolution Annexure 1 dated December 8, 1976 and by this resolution subsidy which was given at the rate of Rs. 50,000/- per film, was reduced to Rs. 20,000/- only irrespective of the number of films produced in the studio. The said resolution also provided that concession would be available only upto March 31, 1978. It was clarified that the said order would take effect immediately and all pending cases would also be governed by that order. Petitioners thereupon wrote letter Annexure M dated December 15, 1976 and protested against the retrospective effect given to the resolution Annexure L. Petitioners submit that so far as they are concerned, they should be given subsidy under the old G.R. for a period of five years. The State Government, however, sanctioned subsidy of Rs. 20,000/-per film, which the petitioners accepted under protest. Petitioners made representation to the Chief Minister of the Gujarat State and objected to the frequent changes in the policy of the Government regarding the film industry. Government, however, rejected the objections raised by the petitioners and refused to give subsidy to the petitioners as per the resolution Annexure H dated March 7, 1975. Petitioners have, therefore, approached this Court by way of this petition.

5. The contention which is, raised on behalf of the petitioners, is that they set up the studio in Gujarat State relying on the Government policy of financial assistance and incentives for film studios established in the State. Government had first agreed to guarantee advances upto Rs. 25 lacs taken from commercial bank and it was relying on this policy that the petitioners decided to set up studio in the State. This policy was, however, changed from time to time as stated above. Petitioners agreed to the change in the policy and agreed to accept subsidy of Rs. 50,000/- per film for a period of five years from March 7. 1975 as laid down in resolution Annexure H dated March 7. 1975. Since the petitioners had agreed to change in the policy laid down in resolution Annexure H they are not insisting upon, as indeed they cannot implementation of the policy laid down in G.R. Annexure A dated December 18, 1969 which was subsequently cancelled or superseded. However, one thing which clearly emerges is that petitioners set up studio in the State relying on the policy of the State Government to give financial assistance and incentives for setting up of film studio in the State. Petitioners submit that they are also willing to accept the conditions laid down in the subsequent resolution Annexure I dated July 25, 1975, wherein it was laid down that subsidy of Rs. 50,000/- per film would be limited to maximum six films per year. It is, however, submitted that the State Government cannot go on changing the policy unilaterally which would adversely, affect the interest of the petitioners. It was submitted that petitioners would not have established studio in the State and changed their position to their detriment, had they known that the State Government would go on changing the policy adversely affecting their interest. According to the petitioners, the State Government is bound to keep its promise to give cash subsidy of Rs. 50,000/- per film limited to maximum 6 films per year for a period of five years from March 7, 1975. In other words, petitioners contend that they are entitled to cash subsidy of Rs. 50,000/- per film, limited to maximum six films per year, for the films produced in their studio in this State during the period from March 7, 1975 to March 6, 1980.

6. The stand taken up by the State Government is that it is open to the State Government to change its policy for giving financial assistance and incentives to film industry inasmuch as the G.Rs. are only executive action of the State Government and the State Government is at liberty to change its policy whenever it finds it necessary to do so. It was not necessary for the Government to consult the petitioners before changing its policy. It is further submitted that resolutions dated March 7, 1975 and July 25, 1975, on which petitioners rely were passed much after setting up of the studio by the petitioners in 1972. Petitioners, therefore, could not be said to have acted upon the policy or promise contained in the said resolution for setting up of their Studio Petitioners are, therefore, not entitled to claim benefit under the aforesaid resolutions.

7. Petitioners are claiming benefit of subsidy of Rs. 50,000/- per film on the doctrine of promissory estoppel. At the time of admission of this matter, petitioners gave up all other contentions which are raised in the petition and based their case only on the doctrine of promissory estoppel. According to the respondents, since the petitioners had not acted on any promise held out by them for establishing the studio, the doctrine of promissory estoppel has no application to the facts of this case. Doctrine of promissory estoppel was considered by the Supreme Court in Jit Ram Shiv Kumar v. The State of Haryana : [1980]3SCR689 . The Bench which disposed of this matter consisting 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 paragraph 39 of the judgment at page 1302. The position has been culled out after examination of all the relevant decisions having 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 puts 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 paragraph 50 at page 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 duly under the law. The Government would not be bound by the acts 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 of 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 considerations which necessitated his not being able to comply with his obligation in public interest.

8. The legal position being very clear in the light of the provision (4) and in the light of the last portion of paragraph 50 in M/s. Jitram 's case (supra) in the instant case, since the petitioners have spent a large amount of about Rs. 31 lacs relying on the Government policy of financial assistance and incentives. It is not now permissible to the State Government to back out of the policy and to say to the petitioners that they were not entitled to the benefit of the policy set out in resolutions Annexures H and I. It is true that the petitioners had already set up studio in 1972 before the resolutions Annexures H and I were issued in 1975. Petitioners, as pointed out above, had set up studio relying on the Government policy of financial assistance and incentives as contained in its resolution Annexure A dated December 18, 1969. This policy was subsequently changed, but since the petitioners were to be adversely affected, it appears that before changing the policy, the Government had sought the consent or approval of the petitioners. This is evident from the correspondence and draft resolutions sent to the petitioners as adverted to above. Where was the question of obtaining acceptance or concurrence of the petitioners, if it was open to the Government to change its policy at any time it liked as contended on behalf of the respondents? It is obvious that the Government was aware of the fact of large investments made by the petitioners in setting up studio relying on its policy of financial assistance and incentives and it was, therefore, that before changing its policy it had sought the acceptance or consent of the petitioners. Resolution Annexure H dated March 7, 1975 was issued with the consent of the petitioners and under this resolution the Government amongst other things agreed to give subsidy of Rs. 50.000/- per film for a period of five years from the date of the order that is March 7, 1975. Later on by resolution Annexure I dated July 25, 1975 subsidy of Rs. 50,000/- per film was limited to maximum 6 films per year. The resolution though issued without the consent of the petitioners is acceptable to the petitioners. In other words, although they have not consented, petitioners are willing to accept the subsidy of Rs. 50,000/- per film limited to maximum 6 films per year. The question is could the Government have subsequently changed its policy further and confined the subsidy to Rs. 20,000/- per film and curtailed the period of subsidy. The answer is emphatically no, because as already pointed out above, it was relying on the policy of the financial assistance and incentives that petitioners had changed their position by setting up studio by investing large amount. Petitioners would not have made such large investment had they known that the Government would go on changing its policy of giving financial assistance or incentives. In fact, the Government was bound to carry out the promise given by it in its resolution Annexure A dated December 18, 1969 and the petitioners could have insisted upon the Government to keep its promise contained in the said resolution. However, since the petitioners themselves agreed to change of policy as contained in resolution Annexure H they are not making grievance regarding Governments failure to keep promise contained in resolution Annexure A. However, that does not mean that Government could go on changing its policy adversely affecting the interest of the petitioners. The mere fact that the studio was set up in 1972 before resolutions Annexures H and I were passed with the consent of the petitioners. In view of the consent given by the petitioners, the State Government was in any case, bound to carry out it3 promise and give subsidy as per the terms and conditions laid down in Annexure H. However, since the petitioners are accepting the condition regarding limiting subsidy to maximum 6 films per year contained in resolution Annexure I, Government was bound to give subsidy of Rs. 50,000/- per film limited to maximum 6 films per year for the films produced in the petitioners studio in the State. Since the doctrine of promissory estoppel would very much apply in the instant case, the Government is estopped for a period of five years from March 7, 1975 to March 6, 1980 from denying the benefits of subsidy to the petitioners under the resolutions Annexures H and I.

The view which I am inclined to take derives support from the decision of this Court in Gujarat State financial Corporation v. Lotus Hotels Pvt. Ltd. : AIR1982Guj198 which was confirmed by the Supreme Court in Gujarat State Financial Corporation v. Lotus Hotels Pvt. Ltd. A.I.R. 1983 S.C. 48. As in that case the petitioners acting upon the promise made by the State Government, incurred huge expenditure and if the State Government is not held to be bound by its promise, the petitioners would be put in very disadvantageous position and therefore, principle of promissory estoppel can be invoked in this case. Petitioners must, therefore, succeed.

9. In the result this petition is allowed. It is declared that the petitioners are entitled to subsidy as per resolution Annexure H dated March 7, 1975 and resolution Annexure I dated July 25, 1975 for a period of five years from March 7, 1975 to March 6, 1980. Respondents are directed to pay to the petitioners subsidy in accordance with the said resolutions notwithstanding the subsequent resolutions amending the Government policy, within three months from the date of receipt of the writ of this Court.

Rule accordingly made absolute with costs.


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