Equivalent Citation: ILR2008KAR2441
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Write Petition No. 21793 of 2005
Decided On: 05.09.2007

Appellants: Bellary Steel and Alloys Limited Regd. under the Companies Act, 1956 rep. by its Managing Director Sri S. Madhav
Vs.
Respondent: State of Karnataka represented by its Secretary to Government, Department of Industries, The Director of Mines and Geology and The Director of Mines, Department of Mines, Government of India

Hon'ble Judges:
Ashok B. Hinchigeri, J.

Counsels:
For Appellant/Petitioner/Plaintiff: Soli Sorabji, Sr. Adv. for Mllind G. Gokhale, Adv.

For Respondents/Defendant: R.B. Satyanarayana Singh, HCGP for R1 and R2 and S. N. Rajendra, CGSC for R3

Subject: Commercial

Acts/Rules/Orders:
Constitution of India - Article 14

Cases Referred:
Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (1979)2 SCC 409; Ganges Manufacturing Co. v. Sourujmull; Radhakrishna Agarwal v. State of Bihar; MRF Limited Assistant Commissioner (2006)8 SCC 702; Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Ors. (2005)1 SCC 625

Disposition:
Petition allowed

Citing Reference:

***            Discussed

Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Ors.  ***
Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh. ***
MRF Limited v. Assistant Commissioner.                                 ***
Case Note: 
          
Commercial - Captive Mining lease - Promissory Estoppel - Government offered to lease the captive mining areas for meeting the Petitioner’s iron ore requirements - Petitioner submitted an application for the same - State Government issued the Government Order, confirming its commitment to make available to the Petitioner Company seven lakh tones of iron ore per annum for a period of 50 years - Pursuant to the promises and assurances Petitioner invested a huge sum for implementing its expansion programme - Thereafter, Petitioners representations for mining lease did not produce definitive and positive response - Hence, the present petition - Held, if Government makes a promise and the promisee acts in reliance upon it and alters his position, no reason why the Government must not be compelled to make good such promise - Rule of promissory estoppel to be applied to ensure that the Government abides by its promises and representations - In the case on hand, Government cannot retract from its promise or assurance, when the Respondents have failed to show that the assurance in question is against any law, public policy, public good or against equity itself -- Therefore, not considering the Petitioner’s application for the grant of mining lease violative of Article 14 - Petition allowed

Constitution --Grant of mining lease - Assurance by Government - Legitimate expectation - Assurances given by Government for grant of mining lease not fulfilled - Held, legitimate expectation of a citizen may not by itself be a distinct enforceable right - Requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, which is a necessary concomitant of the rule of law - Hence, Petitioners application to be considered so as to avoid arbitrariness - Petition allowed

Ratio Decidendi:

“If Government makes a promise and the promisee acts in reliance upon it and alters his position, no reason why the Government must not be compelled to make good such promise.”

“The requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, which is a necessary concomitant of the rule of law.”

ORDER

Ashok B. Hinchigeri, J.

Page 1893

1. The grievance of the petitioner is that the captive mining lease in respect of 242.82 hectares in Ramandurg Range and Village, Sandur Taluk, Bellary District, sought vide its application, dated 14th September, 1993, is not granted.

2. The brief facts of the case are that the petitioner/Company has been running a sponge iron plant in Bellary. It proposed to set up an integrated steel plant. The Government of Karnataka offered to lease the captive mining areas for the purpose of meeting the petitioner's iron ore requirements. In this regard, the petitioner submitted an application, dated 21st September, 1993. The State Page 1894 Government issued the Government Order, dated 4th December, 1995 (Annexure-C) confirming its commitment to make available to the petitioner Company seven lakh tonnes of iron ore per annum for a period of 50 years. The issuance of this Government Order was followed up by a meeting held on 27th February, 1997 between the Principal Secretary to Government, Commerce and Industries Department and the project proponents. A copy of the proceedings of the meeting, produced as Annexure-D to the writ petition, makes a reference to the assurances given by the State Government to the major steel plant projects in the matter of grant of captive mines and other techno-economic considerations. The petitioner made umpteen number of representations to the respondents for the grant of mining lease, as is evident from its letters, dated 7th and 9th February, 2005 (Annexures-E to Grespectively). The then concerned Minister sent a reply, dated 15th February, 2005 informing the petitioner that he has requested the Secretary of the concerned Department to examine the petitioner's proposal and to take appropriate action.

3. Pursuant to the promises and assurances made by the State Government, the petitioner has invested about Rs. 1,250 crore for implementing its expansion programme. As there was no positive and definitive response from the Government, this petition is instituted.

4. Sri Soli Sorabji, the learned Senior Counsel for Sri Milind G. Gokhale for the petitioner, complains of continued failure on the part of the Government to honour its commitment. He advanced the following contentions:

(a) It is the legitimate expectation of the petitioner that the Government would fulfill the promises made to the petitioner. Acting on the assurance of the Government, the petitioner has invested huge sums of money.

(b) The petitioner is entitled, by way of promissory estoppel, to the writ of mandamus sought.

(c) The learned Senior Counsel has relied upon a judgment of the Apex Court in the case of M/S. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh reported in MANU/SC/0336/1978 wherein it has held that the Government cannot resile from its statement regarding tax holiday for new units in vanaspathi; it is bound by the doctrine of promissory estoppel to grant the exemption from the payment of tax to the new unit. The relevant portions of the said judgment are extracted hereinbelow:

19. When we turn to the Indian law on the subject it is heartening to find that in India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognised 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 Page 1895 has also been applied against the Government and the defence based on executive necessity has been categorically negatived. It is remarkable that as far back as 1880, long before the doctrine of promissory estoppel was formulated by Denning, J., in England, a Division Bench of two English Judges in the Calcutta High Court applied the doctrine of promissory estoppel and recognised a cause of action founded upon it in the Ganges Manufacturing Co. v. Sourujmull. The doctrine of promissory estoppel was also applied against the Government in a case subsequently decided by the Bombay High Court in Municipal Corporation of Bombay v. The Secretary of State.

31. We may point out that in the latest decision on the subject in Radhakrishna Agarwal v. State of Bihar this Court approved of the decisions in the Indo-Afghan Agencies case and Century Spinning and Manufacturing Co.'s case and pointed out that these were cases ''where it could be held that public bodies or the State are as much bound as private individuals are to carry out obligations incurred by them because parties seeking to bind the authorities have altered their position to their disadvantage or have acted to their detriment on the strength of the representations made by these authorities." It would, therefore, be seen that there is no authoritative decision of the Supreme Court which has departed from the law laid down in the celebrated decisions in the Indo-Afghan Agencies case and the Century Spinning & Manufacturing Co's case. The law laid down in these decisions as elaborated and expounded by us continues to hold the field.

(d) Sri Soli Sorabji sought to draw support from the Hon'ble Supreme Court's decision in the case of MRF Limited v. Assistant Commissioner reported in MANU/SC/4217/2006 wherein it is reiterated that the principle underlying legitimate expectation is based on Article 14 and the rule of fairness. It was observed in the case of Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Ors. reported in MANU/SC/0994/2004 that where a person's legitimate expectation was not fulfilled by taking a particular decision, then the decision-maker should justify the denial of such expectation by showing some overriding public interest.

5. Per contra, Sri R.B. Satyanarayana Singh, the learned High Court Government Pleader appearing for the respondents submits that no promise whatsoever was made to the petitioner that the petitioner would be given the mining lease. He further submits that the petitioner's application would be considered in due course of time and in accordance with law. He brings to my notice the interim order, dated 17th August, 2007 passed by this Page 1896 Court in writ petition No. 21608 of 2005. By virtue of the said interim order, the Government is directed to ensure that no mining activities take place in any of the notified areas, particularly in forest areas, pursuant to the Notification, dated 15th March, 2003. In the wake of the passing of this interim order, the Government's hands are tied; the consideration of the petitioner's application for the grant of mining lease has to await the outcome of writ petition No. 21608 of 2005.

6. In the course of his rejoinder submissions, Sri Soli Sorabji stated his case that the petitioner has not made any application in response to the Notification, dated 15th March, 2003; on the other hand the petitioner's case is based on the promise made by the Government in Government Order dated 4th December, 1995 [Annexure-C]. He therefore submitted that the passing of the interim order does not constitute any legal impediment in granting mining lease in favour of the petitioner.

7. In the wake of the rival submissions made at the bar, the petitioner's prayer for a direction for the grant of mining lease has to be considered. The submissions urged on behalf of the Government that no promise was made to the petitioner is not acceptable. The Government Order dated 4th December, 1995 [Annexure-C] indeed contains the assurance in no uncertain terms. The relevant portion of the said Government Order is extracted hereinbelow:

RAW MATERIAL: The unit will be granted Iron ore Mining lease in Ramandurg area to meet the plant requirement of 7 lakh tonnes per annum for a period of 50 years. The unit will also be granted mining lease in Bagalkot area for the requirement of Dolomite and Limestone.

8. In the wake of the afore-extracted contents of the Government Order, I have no hesitation in holding that the Government has indeed held out an assurance that the mining lease would be granted to the petitioner. If the Government wants to go back on its word, it amounts to lack of fair treatment. In the instant case it is not the case of the Government that the granting of mining lease is not in the public interest or it violates any statutory provision or is against public policy. Therefore not considering the petitioner's application for the grant of mining lease is violative of Article 14 of the Constitution of India. The Government is expected to act fairly, reasonably and if I may say so, predictably.

9. My perusal of the interim order, dated 17th August, 2007 passed by this Court in writ petition No. 21608 of 2005 reveals that no mining activity is to be permitted in any of the notified areas, particularly in the forest areas, if the applications for mining lease ate submitted in response to the Notification, dated 15th March, 2003. In the instant case the Government itself has held out the assurance of granting the mining lease way back in 1995, i.e., eight years prior to the date specified in the interim order. I therefore hold that the said interim order would not come in the way of the respondents considering the petitioner's application for the grant of mining lease.

Page 1897

10. If the Government makes a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government must not be compelled to make good such promise. The object of the equitable doctrine of promissory estoppel is to ensure that the Government abides by its promises and representations. Promissory estoppel is a rule of equity. Government can not retract from its promise or assurance, more so when the respondents have failed to show that the assurance in question is against any law, public policy, public good or against equity itself.

11. No doubt the legitimate expection of a citizen may not by itself be a distinct enforceable right. But the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, which is a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process.

12. For the aforesaid reasons I allow this petition, direct the State Government to consider the petitioner's application for the grant of mining lease in accordance with law. The respondents shall pass appropriate orders on the petitioner's application for the grant of mining lease within an outer limit of three months from today. If the respondents decide to grant the mining lease, the same shall be subject to the approval of the Central Government and by placing the petitioner on such permissible terms that the State Government may deem fit.

13. No order as to costs.