THE HIGH COURT OF KARNATAKA AT BANGALORE
Petition No. 21793 of 2005
Bellary Steel and Alloys Limited Regd. under the Companies Act, 1956
rep. by its Managing Director Sri S. Madhav
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
Ashok B. Hinchigeri, J.
For Appellant/Petitioner/Plaintiff: Soli Sorabji, Sr. Adv. for Mllind
G. Gokhale, Adv.
R.B. Satyanarayana Singh, HCGP for R1 and R2 and S. N. Rajendra, CGSC
Constitution of India - Article 14
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
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. ***
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 -
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
“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.”
B. Hinchigeri, J.
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.
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.
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.
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
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.
petitioner is entitled, by way of promissory estoppel, to the writ
of mandamus sought.
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:
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.
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.
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.
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:
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
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.
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
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.
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.
order as to costs.