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Essar Oil Limited (hereinafter “Essar”) was given the benefit of Sales Tax incentive under the Government of Gujarat =a person

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(Arising out of SLP (C) No.17130/2008)



State of Gujarat & others …Appellant(s)



– Versus –



Essar Oil Limited and another …Respondent(s)









1. Leave granted.



2. This appeal is directed against the judgment of the


High Court of Gujarat dated 22.04.2008 in Special


Civil Application No.24233/2007, whereby the


Respondent No. 1 herein, Essar Oil Limited


(hereinafter “Essar”) was given the benefit of Sales


Tax incentive under the Government of Gujarat
Capital Investment Incentive to Premier/Prestigious


Unit Scheme, 1995-2000″ (hereinafter “the said





3. The State Government in the Industries and Mines


Department vide Resolution dated 11.09.1995


introduced the said scheme to accelerate development


of the backward area of the State and to create


large-scale employment opportunities.






4. The operative period of the said scheme was from


16.08.1995 upto 15.08.2000, during which new units


have to go into commercial production.



5. The Scheme envisaged grant of Sales Tax incentives


by way of Sales Tax Exemption or Sales Tax Deferment


or Composite Schemes, for Premier/Prestigious Units


according to the location, investment and status of


the project. Essar fell in the category of premier


unit i.e. new industrial unit having a project cost


of more than Rs.1,000/- crores and employing 100


workers on a regular basis and following the


employment policy of the State Government. Clause


(v) of the Scheme defined premier unit in the


following terms:-





A new industrial unit or industrial complex

fulfilling the following criteria will be

considered for granting status of a “Premier



(a) The industrial unit shall have a project

cost of Rs.500 crores or more. Such units

having project cost of Rs.1,000 crores and

above shall be entitled for extended period to

avail incentive as provided under para 6 B.


(b) Only one unit per taluka will be eligible

for the Premier Unit status. In banned area no

unit is permitted.


(c) The unit shall employ at least 100 workers

on a regular basis and shall follow the

employment policy of the State Government.”



6. Part II of the said Scheme provided that the rate of


incentive would depend on the location, investment


and status of the project. The incentives offered



were sales-tax exemption or sales-tax deferment or


composite scheme. There is no dispute about the fact


that Essar opted for sales-tax deferment scheme. As


per clause 6(i)(B), the rate of incentive applicable


to Essar was the rate available for the most


backward area. The extent of exemption was 125% of


eligible fixed capital investment.



7. Part II Clause (iii) (b) provided that Under the


Sales Tax Deferment incentive scheme, the recovery


of sales tax connected by the unit on sale of goods


manufactured by it including intermediate products,


by products and scrap/waste generated as incidental


to manufacturing activities and turnover tax,


leviable to Government will be deferred and amount


so deferred will be recovered in six equal annual


installments by Sales Tax Department beginning from


the financial year subsequent to the year in which


the unit exhausts limit of incentive granted to it


under the scheme or after the expiry of relevant


period or time limit during which deferment is


available or whichever is earlier.


8. Since Essar’s investment was going to be more than


Rs.1,000 crores, the duration of incentive of sales-


tax deferment was to be for a period of 17 years


from the date of commercial production.



9. Clause 6(v) of the said Scheme provided for


effective steps for extending date of commercial


production in the following terms :



“6(v) Effective steps for extending date of

commercial production :


The unit which cannot go into commercial

production before expiry of the scheme will be

allowed to go into commercial production beyond

the last date of the scheme provided it has

taken the following effective steps:


(1) The industrial unit should have obtained

provisional registration as a

Prestigious/Premier unit before 15th August



(2) 25% of project cost should have been

incurred before 15th August 2000. The unit

which has taken above effective steps will be

allowed to go into commercial production as

shown below:



(a) The unit with project cost above Rs.100

crores but below Rs.300 crores should go into

commercial production on or before 15th August



(b) The unit with project cost more than Rs.300

crores should go into commercial production on

or before 15th February 2003.


Such units shall have to apply to industries

Commissioner for extending date of commercial

production by 31st August 2000.”



10.A High Power State Level Committee (hereinafter


“HPSLC”) was the Sanctioning Authority for granting


permanent registration of all the


Prestigious/Premier Units



11.Part III provides the procedure for Registration for


Premier/Prestigious Status, the relevant clause of


the said Part in respect of instant case is set out





“An Industrial unit eligible for

Prestigious/Premier status under the scheme

will apply to Industries Commissioner in

prescribed form before expiry of the scheme

along with details of following effective



i) Possession of plot or shed in GIDC Estate.

For units located outside GIDC Estate, the


unit must be in legal possession of land

with valid non-agricultural use permission

of industrial use or as per Revenue Act as

modified from time to time.


ii) The Letter of intent/Letter of Approval or

Registration/ obtained receipt against

filling of IEM to the appropriate


iii) NOC of GPCB (Gujarat Pollution Control



iv) Detailed Project Report.


The following procedure will be adopted for

granting the temporary and permanent

Prestigious/Premier registration.


(a) The Industries Commissioner shall give

provisional registration to the eligible

prestigious/premier unit after approval of

committee where applicable.


(b) The eligible unit after completion of

project will apply to Industries

Commissioner for permanent

prestigious/premier registration,

Industries Commissioner will carryout the

assets verification and submit a

verification report to the High Power

State Level Committee, for granting

permanent registration.”



12.Some relevant facts which arose prior to the


floating of the Scheme and which are necessary for


appreciating the said Scheme, as contended by Essar


and which the records also shows, are as under.



13.Essar was encouraged by the State Government to set


up a major venture at Vadinar in Jamnagar District


of Gujarat as a 100% export oriented unit for


refining of petroleum products with a capacity of 9


Million Tons per annum at an estimated project cost


of Rs. 1900 crores in collaboration with M/s Bechtel


Inc., USA.



14.By letter dated 11th April, 1990, the then Chief
Minister of the State of Gujarat wrote to the


Ministry of Planning, Government of India, stating


that the project was expected to generate foreign


exchange earnings of over Rs.3000 crores within a


period of 5 years and that it was expected to be set


up in 36 months. It was anticipated by the State


Government that the project would “completely change


the face of the Vadinar area, which is traditionally


a backward area of Gujarat offering direct and


indirect employment and will encourage growth of


various other ancillary industries in that region”.


The letter further said that the project had the

full support of the Government of Gujarat and it was


being accorded highest priority and that Essar’s


proposal for setting up the oil refinery should be


cleared by the Government of India urgently. The


clearance for setting up the oil refinery was then


granted by the Government of India.



15.In January, 1993, Essar applied to the Gujarat
Pollution Control Board (GPCB) for grant of a `No


Objection Certificate’ to establish the refinery for


manufacturing several kinds of petroleum products.


By letter dated 15th February, 1993, the GPCB stated


that it had no objection from the Environmental


Pollution potential point of view in the setting up


of the refinery project subject to certain


environmental pollution control measures to be taken


by the appellant. Essar’s proposal regarding the


environmental pollution control system was approved


by the GPCB on 17th April, 1993 and a Site Clearance


Certificate was issued on that date.



16. On 10.11.1994, Essar filed an application for right


of way over 15.49 hectares of forest land for laying


Submarine Crude Oil Pipeline, Cooling Water/Return


Water Pipeline and Product Jetty for establishment


of its Refinery Project at Vadinar, District


Jamnagar, to the Conservator of Forests, Marine


National Park, Jamnagar. Undisputedly, 15.49


hectares of forest land applied for includes 8.79


hectares of Jamnagar Marine National Park and


Sanctuary. Therefore, permission under Section 2 of


the Forest Conservation Act (“FCA”) was required for


the entire 15.49 hectares. At the same time,


permission of State Government was required under


the Wildlife Protection Act (“WPA”) for 8.79





17.On 13.02.1995, the State Government requested the


Chief Conservator of Forests, Regional Office,


Western Region, Bhopal, to move the Government of


India to issue suitable orders to allow Essar to


make geophysical survey in Marine National

Park/Sanctuary area. The proposal was forwarded by


the Chief Conservator of Forests, Bhopal to the


Government of India on 15.05.1995.



18.The Conservator of Forests recommended and forwarded
the proposal of Essar for Right of Way to the Chief


Conservator of Forests (WL) by letter dated 2nd June,


1995 along with an application in the prescribed


form seeking prior approval from the Central


Government under Section 2 of FCA. The application


with its enclosures together with the recommendation


of the State Government that 15.49 hectares of


forest land be made available to the appellant, was


forwarded to the Central Government by the Central


Chief Conservator of Forests on 3rd February, 1997.


Upon receipt of the proposal of the State


Government, the Central Government constituted a


team for joint inspection of the area. The report of


the joint inspection team was that the proposed


activity of the appellant would not have much


ramification from the forestry point of view and the



damage would only be temporary in nature in a


localized area during the construction phase.



19.On 08.09.1995, the State Government in its Forests
and Environment Department informed the Government


of India in the Ministry of Environment and Forests,


inter alia, that the approval “in principle” was


granted to Essar to install Single Buoy Mooring /


Crude Oil Terminal / Jetty and connecting pipeline


in the National Marine Park and Sanctuary area in


Vadinar, District Jamnagar on the terms and


conditions to be decided in due course by the State





20.On 11.09.1995 the said Scheme was announced and


thereafter on 01.02.1996 Essar applied in the new


format to the Industries Commissioner, Gandhinagar


for registering the Industrial Undertaking as a


“Premier/Prestigious Unit” under the said Scheme.



21.On 29.05.1996 the Forest and Environment Department,


State of Gujarat made a proposal to Government of


India seeking approval under Section 2 of FCA for


diversion of 15.49 hectares of forest land for


construction and operation of certain offshore and


onshore facilities for a grass root refinery project


of Essar.



22.On the basis of the letter-dated 30.09.1997 of the


Principal Chief Conservator of Forests, the State


Government conveyed on 16.10.1997 its permission


under section 29 of WPA to Essar’s proposal of right


to way through the National Park and Sanctuary


subject to Essar’s compliance with certain terms and


conditions including obtaining permission of the


Central Government under the FCA, 1980 (which was


granted on 08.12.1999, mentioned later) and also


getting clearance under the Coastal Regulation Zone


(CRZ) Regulations, which was granted on 03.11.2000.



23.This permission was conveyed to Essar by the
Conservator of Forests under cover of his letter-


dated 18.10.1997. The permission was, however,


restricted to the Kandla Port Trust area. Kandla

Port Trust granted permission to Essar to install


“marine facilities” on 10.10.1997.



24.On 27.11.1997 the Ministry of Environment & Forest,


Government of India granted “in-principle” approval


to Essar under FCA, 1980 for diverting 15.49


hectares of forest land for non-forest purpose.



25.On 25.06.1999 Essar was issued the provisional


Premier Registration Certificate by the Industries


Commissioner. The provisional certificate was valid


upto 15.08.2000 i.e. the last date of Scheme, within


this time period Essar was obliged to start


commercial production, failing which Essar would


have to apply for extension of date of commercial





26.In the meantime in view of the permissions granted


to install “marine facilities”, Essar started


construction work of laying of water in-take jetty


and product jetty in the forest area of Marine

National Park and Marine Sanctuary. Essar’s


grievances are that despite the aforesaid


permissions being given to them for construction,


the State Forest Department forced Essar to stop


work and further lodged on 19.3.1999 a criminal


complaint against Essar and its contractor, for


offence committed under sections 17(A), 29, 35(6),


51(1) and 58 of the WPA and section 26 of the Indian


Forests Act.



27.In April 1999, a writ petition being Special Civil


Application No.2840/1999 in the nature of Public


Interest Litigation was filed before the High Court


of Gujarat by one Halar Utkarsh Samiti (hereinafter


“Samiti”) alleging serious violations of several


environmental legislations on the part of Essar, who


was impleaded as Respondent No.4 in the petition.



28.By interim order-dated 20.04.1999 passed in that PIL


High Court directed Essar not to carry on any


construction activity in the Marine National


Sanctuary and Marine National Park in violation of

the statutory provisions including the provisions


contained in Wild life (Protection) Act, 1972.



29.By order-dated 20.08.1999 the High Court disposed of


the said PIL in which Essar undertook to file an


Undertaking to the effect that they would not carry


out any construction activities at the site in


question, without obtaining the approval from the


authorities. Pursuant to the said order, on


28.09.1999 Essar filed an undertaking to the


following effect:



“…no construction activities or marine

facilities will be undertaken without obtaining

the approval from the authorities including

those which are under process before the



This undertaking is given without prejudice to

the rights and contentions of the Respondent



This undertaking will come to an end as and

when the permission is granted by the




30.In the meantime on 09.09.1999, a charge sheet was


filed against the officers of Essar and its


contractor in respect of earlier mentioned offences


allegedly committed by them under the WPA and FCA.



31.On 08.12.1999 the Ministry of Environment and


Forest, Government of India granted approval under


section 2 of the FCA for the total land of 15.49


hectares of forest land.



32.In April 2000, said Samiti filed another PIL being


Special Civil Application No.1778, and subsequently


two other PILs were also filed by one Jan Sangarsh


Manch and one Shri Alpesh Y. Kogje, being Civil


Application Nos.5476 and 5928 of 2000, (hereinafter


“second PILs”) in the High Court of Gujarat


challenging, inter alia, the permission granted by


the State Government to one Bharat Oman Refineries


Ltd. (`BORL’) to lay pipeline in the Marine National


Park and Sanctuary Area. It is pertinent to note


here that Essar was not a party to these petitions.



33.On 29.04.2000 the Government of Gujarat discontinued


the said Scheme with effect from 01.01.2000.


However, vide the same Government Resolution dated


29.04.2000, it was specifically mentioned that


industry units in pipelines cases which have been


registered should start production within two years


from January 1, 2000 failing which such units shall


be rendered ineligible for sales tax incentive.


Therefore, the time to start commercial production


was thus extended to 01.01.2002. It is common ground


that Essar, being a registered unit, was entitled to


the benefit of the said extension.



34.Before the High Court, when proceedings in respect


of the second PILs were going on, the counsel of


Government of Gujarat placed a copy of the letter-


dated 25.07.2000. Relying on the letter, the High


Court noted that there were two more pending


proposals for laying pipeline in the Marine


Park/Sanctuary Area with the State Government – one


from Essar and the other from one Gujarat Poshitra


Port Ltd.



35.Before the High Court, the State Government


submitted that the proposal from Essar for laying


down pipelines in Marine National Park and Marine


Sanctuary, Vadinar in Jamnagar District has been


only approved `in principle’ vide letter-dated


08.09.1995. However, formal sanction under section


29 of the WPA, 1972 is yet to be given by the State





36.By judgment and order dated 13.07.2000, 18.07.2000,


20.07.2000, 27.07.2000 and 03.08.2000 the High


Court, in the second PILs, restrained the Government


of Gujarat from granting any more authorization and


permission for laying down any pipeline in any part


of the sanctuary or the national park. As a result


of this order, Essar was not given permission to lay


down pipelines by the State Government.



37.Being aggrieved, inter alia, on the ground that it


was not a party to the second PILs, Essar filed a


review/recall application before the High Court



being MCA No.250 of 2011 in SCA No.1778 of 2000,


inter alia, seeking review and recall of the


judgment and order dated 13.07.2000, 18.07.2000,


20.07.2000, 27.07.2000 and 03.08.2000 passed in the


second PILs by the High Court and a further


declaration to the effect that Essar’s project at


Vadinar was not affected in any manner by the said





38.By judgment and order dated 23.02.2001 the High


Court rejected the said application for review on


the ground that there was a factual controversy


between Essar and the State Government and that


therefore the grievance of Essar was beyond the


scope of review.



39.Meanwhile, on 12.04.2001 the Government of Gujarat


extended the time for going into commercial


production upto 15.08.2003 for various pipeline


units including Essar, vide Government Resolution


dated 12.04.2001. By that time Essar had obtained


Provisional Premier Unit Registration before
15.08.2000 and had also incurred 25% of the Project


Cost before 15.08.2000 and therefore, it was


entitled to the benefit of this extension.



40.Essar challenged the aforesaid judgment and order


dated 13.07.2000, 18.07.2000, 20.07.2000,


27.07.2000, 03.08.2000 and 23.02.2001 of the High


Court delivered in the second PILs and the rejection


of its review petition in that second PILs


respectively by way of filing Special Level Petition


being (SLP) CC No.3654 of 2001 [later SLP No.9454-


9455 of 2001] before this Hon’ble Court.



41.By interim order-dated 11.05.2001 this Court granted


stay of the judgment of the High Court in so far as


Essar was concerned in SLP No.9454-9455 of 2001 i.e.


SLP filed by Essar. The text of the order of this


Court is set out:



“Permission to file Special Leave Petition is



Issue notice.


Stay of the High Court judgment in so far as

the petitioner is concerned.



Counter affidavit be filed within four weeks.

Rejoinder be filed within four weeks

thereafter. List after eight weeks.”



42.In view of the above stay order granted by this


Court, Essar moved the State Government for


permitting it to proceed with the construction of


jetty and laying the pipeline. By letter dated


29.10.2001, the State Government in the Forests and


Environment Department specifically called Essar to


ensure that no construction activities were


commenced before obtaining all necessary clearances


from different Government departments, agencies and


the conditions stipulated by the Ministry of


Environment and Forests, Government of India as well


as the Forests and Environment Department of the


State Government were strictly complied with.


However, Essar did not commence the construction of


jetty or laying down the pipeline in the National


Marine Park/Sanctuary area. One thing which is of


some importance is that despite the stay of this


Court and the Government letter dated 29.10.2001,


Essar did not challenge the Government stand in the


pending special leave petition filed by it in this





43. It is also pertinent to note that the Government of


Gujarat had also challenged the judgment and order


dated 13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000


and 03.08.2000 of the High Court passed in the


second PILs by way of filing Special Leave Petition


being (SLP) CC No.5123-5125 of 2001 (later SLP


No.17694-96 of 2001) before this Court, wherein by


interim order dated 24.09.2001 this Court passed the


following operative order:



“Issue notice.


Tag with SLP(C) 9454-9455/2001.


There will be status quo as of today with the

result that any permission which has been

granted is not stayed. It will be open to the

State Government to consider the granting of

further permission which will be subject to the

outcome of this appeal.”



44.Essar just requested by its letter dated 11.04.2002
the Industries Commissioner to extend the date of



commercial production to 30.11.2004 instead of


15.08.2003 for the purpose of availing the incentive


benefit under the Scheme and cited that the delay in


completing the project and consequent delay in


starting commercial production was due to the


factors beyond the control of Essar. Further by


letter-dated 07.05.2002 Essar in continuation of the


letter-dated 11.04.2002 requested the Industries


Commissioner to extend the date of commercial


production to August 2006.



45.The Industries Commissioner refused to grant any
further extension of time vide its letter-dated


28.05.2002 and also made it clear to Essar to go


into commercial production within the specified time


i.e. till 15.08.2003. Essar, therefore, submitted a


representation dated 19.06.2002 to the Chief


Minister pointing out the circumstances which had


delayed the completion of the project. Similar


representations were thereafter made to different


authorities of the State Government on 27.06.2002,


14.03.2003, 30.07.2003, 02.12.2003 and 26.12.2003.
It appears that the said representations were not


responded to.



46.By an order-dated 19.01.2004, this Court quashed and


set aside the judgment dated 03.08.2000 of High


Court and directed the State Government to issue the


authorization to Essar in the requisite format under


Sections 29 and 35 of the Wild Life (Protection) Act


within a fortnight after disapproving the


interpretation placed by the High Court on the


provisions of the Wild Life (Protection) Act, 1972.


This Court took the view that the permission granted


by the State Government on 16.10.1997 was the


permission contemplated by Section 29 of the Wild


Life (Protection) Act.



47. In compliance with the above judgment, by letter


dated 12.02.2004, the State Government authorized


the Chief Wild Life Warden, Gujarat State under


Sections 29 and 35 (6) of the Wild Life (Protection)


Act to permit Essar for laying oil pipeline in the



National Marine Park/Sanctuary area. The Chief Wild


Life Warden also issued the requisite permission on





48. In the meantime, the accused i.e. officials and


contractors of Essar involved in the Criminal Case


of 1999 moved an application for discharge before


the Metropolitan Magistrate at Khambalia. By order-


dated 27.05.2004 the Magistrate allowed the said


application and discharged the accused persons from


all the charges levelled against them.



49.In view of the above permission granted by the Chief


Wild Life Warden under Sections 29 and 35 of the


Wild Life (Protection) Act, Essar again sent


representations dated 06.04.2004, 12.07.2004,


27.07.2004 and 22.12.2004 to the Government


requesting extension of time limit for commencement


of commercial production for the purpose of sales


tax deferment incentive scheme. In view of the above


representations, the State Government in the


Industries and Mines Department vide Resolution

dated 10.05.2006 constituted a Committee comprising


of the Advisor to the Chief Minister, the then


Additional Chief Secretary, Finance Department and


the then Principal Secretary, Industries and Mines


department. The Committee was constituted to


consider various such representations of Essar and


other Companies.



50.On 26.11.2006 Essar commenced commercial production


and started paying sales tax on the products sold by


it, under protest.



51.As nothing was heard from the said Committee
constituted in the year 2006 and the representations


made by Essar in respect of granting Sales Tax


Deferment were undecided, Essar filed a writ petition


being Special Civil Application No. 24233/2007 before


the High Court contending that for no fault of it,


Essar was prevented from completing the project and


that it was on account of being so prevented, Essar



could not commence the commercial production within


the time limit of 15.08.2003.



52.It is pertinent to note at this stage that before
the High Court, Essar had expressly withdrawn the


allegation that Department of Forest and


Conservation, Government of Gujarat was guilty of


delay. This is noted in para 6.2 of the High Court


judgment which is set out below:



“6.2 While in the memo of the petition some

allegations/submissions have been made

attributing the delay to the Forests and

Conservation Department of State Government,

but the petitioner Company is not interested in

pursuing those allegations and in fact would

like to withdraw those allegations and the

petitioner would like to invoke the following

maxims of equity:-


(i) “An act of the Court shall prejudice no

man”, and


(ii) “The law does not compel a man to do that

which he cannot possibly perform.”



53. Before the High Court Essar contended that reason


for delay in commencement of commercial production


was on account of the injunction granted by the High


Court on 13.07.2000/03.08.2000, restraining the


State from granting further permission under Section


29 of the WPA in the second PILs (where Essar was


not a party). And this situation continued till


27.02.2004, when pursuant to the judgment-dated


19.01.2004 of this Court the Chief Warden granted


the said permission. Therefore Essar was entitled to


get benefit of the exclusion of the said intervening


period of from 13.07.2000 to 27.02.2004 i.e. three


years and 230 days in calculating the time limit for


commencement of commercial production.



54. By impugned order-dated 22.04.2008 the High Court


excluded the aforesaid intervening period and as


such extended the time limit for commencement of


commercial production from 15.08.2003 to 02.04.2007


after observing in the impugned judgment as under:



“17. …In the facts of the present case also,

the State Government had granted the permission

on 16.10.1997 and the Central Government had

granted the permission on 08.12.1999. The very

fact that the Chief Wild Life Warden issued the

permission on 27.02.2004 after the decision of

the Apex Court on 19.01.2004 is itself

sufficient to show that the request made by the
petitioner for excluding the intervening period

between 13th July/3rd August, 2000 and

27.02.2004 is reasonable.”



55.It is also pertinent to note herein that in the


impugned order, a direction was given to the State


Government that while considering Essar’s


application for the incentives, the State Government


shall stipulate the following conditions, provided


the final eligibility certificate is issued within


one month from the date of receipt of the judgment:-



“22. …


(i) The petitioner shall not be given the

benefit of deferment of Sales-tax/Value Added

Tax beyond 14th August, 2020.


(ii) The amount of Sales-tax/VAT already

paid/payable by the petitioner for the period

upto today shall not be refunded to the



(The above amount is stated by the

petitioner company to be above Rs.300 crores)


(iii) Without adjusting the Sales-tax/VAT

paid for the period upto today as aforesaid,

the amount otherwise computable under the

Incentive Scheme on the basis of the eligible

capital investment made by the petitioner in



the unit under consideration shall be reduced

by Rs.700 crores.”



56. The above direction is based on the submissions of
the counsel of both the parties, which were made


without prejudice to their respective cases. The


counsel of Essar submitted a proposal that Essar was


ready to make the above mentioned concessions no.


(i) & (ii) if the State Government does not


challenge the decision of the High Court and within


one month from that day the State Government grants


Essar the benefit of the Sales Tax/VAT deferment as


per the said scheme. In response to the said


proposal the learned counsel for the State


Government replied that assuming that Essar was


found to be eligible under the said Scheme, the


amount otherwise computable under the Incentive


Scheme on the basis of the eligible capital


investment made by Essar in the unit under


consideration shall be reduced by Rs.700 crores.



57.The learned counsel for the respondents made an


attempt to urge that the judgment of the High Court


was virtually rendered by way of a concession and


the impugned judgment is a consent order. As such


the appeal, at the instance of the State, is not


maintainable. Learned counsel for the State strongly


opposed this contention and submitted that the same


contention was raised at the time of admission of


the special leave petition. Then, further affidavit


was filed by the State with the leave of the Court.


The Court was satisfied and then issued notice.



58. Ultimately, the matter was argued on merits before
this Court and it was common ground that the


impugned judgment is not by consent.



59.The impugned judgment of the High Court is based on
two basic line of reasoning that the respondents are


entitled to the benefit of Sales Tax Waiver Scheme


firstly on the principle of restitution and


secondly, that the respondents cannot be made to


lose the benefit under the Sales Tax Waiver Scheme,


for an act of Court. In this regard it has been


urged that the respondents could not set up the

plant for the purpose of commercial production


within 15th August, 2003 as it was prevented from


doing so by an order of injunction of the High


Court. An order of injunction is an act of Court and


an act of High Court cannot prejudice anyone. The


loss of time suffered by the respondent as a result


of the injunction order cannot cause any prejudice


to the respondent.



60.Examining the aforesaid two contentions, this Court
finds that there is an overlapping area between the


two. The concept of restitution is basically founded


on the idea that when a decree is reversed, law


imposes an obligation on the party who received an


unjust benefit of the erroneous decree to restitute


the other party for what the other party has lost


during the period the erroneous decree was in


operation. Therefore, the Court while granting


restitution is required to restore the parties as


far as possible to their same position as they were


in at the time when the Court by its erroneous


action displaced them. In the case of Lal Bhagwant

Singh v. Sri Kishen Das reported in AIR 1953 SC 136,


Justice Mahajan speaking for a unanimous three-Judge


Bench of this Court explained the doctrine of


restitution in the following words:-



“…the principles of the doctrine of

restitution which is that on the reversal of

a judgment the law raises an obligation on

the party to the record who received the

benefit of the erroneous judgment to make

restitution to the other party for what he

had lost and that it is the duty of the

Court to enforce that obligation unless it

is shown that restitution would be clearly

contrary to the real justice of the case…”



61.Subsequently, in Binayak Swain v. Ramesh Chandra
Panigrahi and another (AIR 1966 SC 948) this Court


relied on the principles in Bhagwant Singh (supra)


and explained the concept of restitution as





“…The principle of the doctrine of

restitution is that on the reversal of a

decree, the law imposes an obligation on the

party to the suit who received the benefit

of the erroneous decree to make restitution

to the other party for what he has lost.”



62.The concept of restitution is virtually a common law


principle and it is a remedy against unjust



enrichment or unjust benefit. The core of the


concept lies in the conscience of the Court which


prevents a party from retaining money or some


benefit derived from another which he has received


by way of an erroneous decree of Court. Such remedy


in English Law is generally different from a remedy


in contract or in tort and falls within a third


category of common law remedy which is called quasi


contract or restitution.



63.If we analyze the concept of restitution one thing


emerges clearly that the obligation to restitute


lies on the person or the authority that has


received unjust enrichment or unjust benefit (See


Halsbury’s Laws of England, Fourth Edition, Volume


9, page 434).



64.If we look at Restatement of the Law of Restitution


by American Law Institute (1937 American Law


Institute Publishers, St. Paul) we get that a person


is enriched if he has received a benefit and


similarly a person is unjustly enriched if the
retention of the benefit would be unjust. Now the


question is what constitutes a benefit. A person


confers benefit upon another if he gives to the


other possession of or some other interest in money,


land, chattels, or performs services beneficial to


or at the request of the other, satisfies a debt or


a duty of the other or in a way adds to the other’s


security or advantage. He confers a benefit not only


where he adds to the property of another but also


where he saves the other from expense or loss. Thus


the word “benefit” therefore denotes any form of


advantage (page 12 of the Restatement of the Law of


Restitution by American Law Institute).



65.Ordinarily in cases of restitution if there is a


benefit to one, there is a corresponding loss to


other and in such cases; the benefiting party is


also under a duty to give to the losing party, the


amount by which he has been enriched.



66.We find that a person who has conferred a benefit


upon another in compliance with a judgment or whose

property has been taken thereunder, is entitled to


restitution if the judgment is reversed or set-


aside, unless restitution would be inequitable (page


302 of the Restatement of the Law of Restitution by


American Law Institute).



67.Equity demands that if one party has not been


unjustly enriched, no order of recovery can be made


against that party. Other situation would be when a


party acquires benefits lawfully, which are not


conferred by the party claiming restitution, Court


cannot order restitution.



68. From the facts of the case which has been discussed


above it is debatable whether the respondent’s


inability to avail benefit under the said Scheme is


because of its own act or because of the act of the


appellant. There is a reasonable basis in the


argument of the appellant that after this Court


granted the stay order on 11.5.2001 on the special


leave petition filed by Essar, the respondents


should have made an effort of obtaining the

necessary licence by again coming to the Court.


Admittedly Essar did not do it. Essar merely


represented to the State for grant of licence.


Assuming that the State had not responded favourably


to the representation of Essar by giving the


clearance, it was open to Essar to approach this


Court for some order as its special leave petition


was pending before this Court. Essar did not do it.


Therefore, the question remains whether Essar acted


with due diligence in obtaining the equitable remedy


of restitution. It is well known that due diligence


must be exhibited by the party to seek equity.



69.Now, if we take the case of Essar on a higher plain
that it has done its duty even then it has been


denied of the benefit of the said scheme, even then


there is no question of restitution by the State for


the simple reason that it is nobody’s case that


State has received any unjust benefit or any unjust


enrichment in view of stay order given by the High


Court in the second PILs filed in the High Court. On


the contrary, it is clear from the record that the

State contested those proceedings and specially,


challenging the orders of the Gujarat High Court


dated 13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000


and 03.08.2000 on the second PILs, the State has


filed its SLP. Therefore, the State has not at all


gained or received any benefit as a result of the


orders passed by the High Court on the second PILs.


Therefore, the principle of restitution cannot be


applied against the State, the appellant before us.


The judgment of the High Court to that extent is





70.The second principle that an act of court cannot


prejudice anyone, based on latin maxim “actus curiae


neminem gravabit” is also encompassed partly within


the doctrine of restitution. This actus curiae


principle is founded upon justice and good sense and


is a guide for the administration of law.



71.The aforesaid principle of “actus curiae” was
applied in the case of A.R. Antulay v. R.S. Nayak &


another reported in (1988) 2 SCC 602, wherein

Sabyasachi Mukharji, J (as his lordship then was)


giving the majority judgment for the Constitution


Bench of this Court, explained its concept and


application in para 83, page 672 of the report. His


lordship quoted the observation of Lord Cairns in


Rodger v. Comptoir D’escompte De Paris, [(1869-71)


LR 3 PC 465 at page 475) which is set out below:


“Now, their Lordships are of opinion, that

one of the first and highest duties of all

Courts is to take care that the act of the

Court does no injury to any of the Suitors,

and when the expression ‘the act of the

Court’ is used, it does not mean merely the

act of the Primary Court, or of any

intermediate Court of appeal, but the act of

the Court as a whole, from the lowest Court

which entertains jurisdiction over the

matter up to the highest Court which finally

disposes of the case. It is the duty of the

aggregate of those Tribunals, if I may use

the expression, to take care that no act of

the Court in the course of the whole of the

proceedings does an injury to the suitors in

the Court.”



72.In the Antulay case (supra), it was found that
directions of this Court in its order-dated


16.02.1984 in the previous Antulay Case {R.S. Nayak


v. A.R. Antuley, (1984) 2 SCC 183} was given per


incuriam and without noticing the provisions of



section 6 and 7 of the Criminal Law Amendment Act,


1952 and also the binding nature of the Larger Bench


decision in The State of West Bengal v. Anwar Ali


Sarkar & another (AIR 1952 SC 75).



73.It was made clear in the Antulay Case [(1988) 2 SCC
602] that when Court passes an order, which is


rendered per incuriam, and the party suffered


because of the mistake of the Court, it is the


Court’s duty to rectify the said mistake. It is in


that context that the concept of actus curiae can be


invoked. In the instant case the order passed by the


High Court in the second PILs was overturned by this


Court by its order-dated 19.01.2004 on a different


interpretation of section 29 of the WPA.



74.This Court while giving a different interpretation


of section 29 of WPA never held that High Court


acted per incuriam in rendering its judgment on


second PIL filed by the Samiti. Therefore in the


case of a mere erroneous judgment of a Court the


principle of “actus curiae” cannot be invoked.

75.The learned counsel for Essar in support of the
applicability of Doctrine of Restitution has cited


the case of South Eastern Coalfields Ltd. v. State


of M.P. & others reported in (2003) 8 SCC 648


wherein this Court through R.C. Lahoti, J (as his


Lordship then was) in para 27 had observed that:



“Section 144 C.P.C. is not the fountain source

of restitution, it is rather a statutory

recognition of a pre-existing rule of justice,

equity and fair play. That is why it is often

held that even away from Section 144 the Court

has inherent jurisdiction to order restitution

so as to do complete justice between the




76.His Lordship at para 28 observed as under:



“That no one shall suffer by an act of the

court is not a rule confined to an erroneous

act of the court; the ‘act of the court’

embraces within its sweep all such acts as to

which the court may form an opinion in any

legal proceedings that the court would not have

so acted had it been correctly apprised of the

facts and the law. The factor attracting

applicability of restitution is not the act of

the Court being wrongful or a mistake or error

committed by the Court; the test is whether on

account of an act of the party persuading the

Court to pass an order held at the end as not

sustainable, has resulted in one party gaining
an advantage which it would not have otherwise

earned, or the other party has suffered an

impoverishment which it would not have suffered

but for the order of the Court and the act of

such party. The quantum of restitution,

depending on the facts and circumstances of a

given case, may take into consideration not

only what the party excluded would have made

but also what the party under obligation has or

might reasonably have made.”



77.As discussed earlier a mere mistake or error


committed by Court cannot be a ground for


restitution. Now in view of the above, two questions


arise for consideration:



(i) Whether the orders dated 13.07.2000,


18.07.2000, 20.07.2000, 27.07.2000 and 03.08.2000


of the High Court whereby the appellant was


restrained from giving any further permission for


laying pipelines has resulted in any undue


advantage to appellant?



(ii) Whether in respect of the order dated


13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000 and


03.08.2000 of the High Court, later on reversed by


this Court on 19.01.2004 on a different

interpretation of Section 29 of WPA, the actus


curiae principle can be invoked.



78.Coming to the first question, as mentioned above, it


is clear that the appellant had also challenged this


restraining order before this Court. It cannot be


said by this restraining order the appellant had


gained any undue advantage. On the contrary, twin


objects of development of the backward areas and


employment opportunities, which were sought to be


achieved by the appellant by floating the said


scheme, were adversely affected.



79.Therefore the principles in South Eastern Coalfield
Ltd. (supra) are not attracted here.



80.In Mumbai International Airport Pvt. Ltd v. Golden
Chariot Airport & another, (2010) 10 SCC 422, after


a Civil Court returned the plaint filed by


respondent, the respondent came up in appeal against


the said order before the High Court and expressly


gave up its claim of irrevocable license in order to

revive the suit and on such stand, the High Court


remanded the suit for trial. Thereafter the


respondent therein tried to urge the same plea of


irrevocable license before the Trial Court and this


Court. This Court did not accept the plea holding


that the common law doctrine of approbation and


reprobation is well established in our jurisprudence


and applicable in our laws too. That principle has


no application to the facts of this case.



81.The principles decided in the case of Karnataka Rare
Earth & Anr. v. Senior Geologist, Department of


& Geology and Anr.

, reported in (2004) 2 SCC


783 is equally of no assistance to Essar. In that


case both the doctrines of “actus curiae” and


“restitution” were discussed together. We have


already held that these equitable doctrines are not


applicable in the facts of the present case. In


Karnataka Rare Earth (supra), the appellants, on the


basis of an interim order granted by this Court,


extracted minerals and disposed of the same.


Ultimately the interim order was vacated by this

Court and the appeal filed by Karnataka Rare Earth


was dismissed. In that context this Court held that


the appellants cannot enjoy the benefits earned by


them under the interim order of this Court and this


Court held that the demand of the State for the


price of mines and minerals from the appellant is


neither unreasonable nor arbitrary.



82.Reliance was placed on the judgment of this Court in
Bareilly Development Authority v. Methodist Church


of India & Anr., reported in (1988) Supp SCC 174. In


that case no principle was decided but the case was


decided on its facts. In Bareilly Development


Authority (supra), a commercial complex was to be


constructed within a time schedule. During the said


period of construction, the work had to be stopped


in view of the demolition order passed by the


authority. This Court held that the said period has


to be excluded in computing the period of


completion. It was not a case of construing any


exemption scheme. What was construed was condition 6


of the construction sanction plan. Therefore

principles of Bareilly Development Authority (supra)


cannot be applied.



83.In the case of Hitech Electrothermics & Hydro Power
Ltd. v. State of Kerala & Ors., reported in (2003) 2


SCC 716 it is true that this case is one relating to


grant of concessional tariff rate. However the fact


shows that in that case the Electricity Board


provided power to the appellant only in the year


1998 and the Court found that the delay in giving


power was for sheer inaction on the part of


Electricity Board. In that context this Court held


that literal construction to the entitlement of


concessional tariff rate should not be done and the


Court also noted that the appellant enjoyed


concessional tariff rates on the basis of interim


order of Court.



84.In the instant case, no inaction on the part of
appellant was pleaded by Essar. In fact before the


High Court, Essar expressly gave up its plea of


delay against the appellant. In fact the High Court

passed the injunction order not because of the


inaction of the appellant but the said order was


passed in a proceedings which was opposed by


appellant right upto this Court. Therefore, the case


of Hitech Electrothermics (supra) is clearly


distinguishable on facts.



85.The learned counsel for Essar relied on a decision
of this Court in Ishwar Dutt v. Land Acquisition


Collector & another reported in (2005) 7 SCC 190.


But no question of issue estoppel was argued before


the High Court and no such question actually has


fallen for consideration in the course of argument


before this Court. Therefore reliance on the


principle of issue estoppel on the basis of Ishawar


Dutt (supra) is not relevant at all.



86.In this case we are to interpret the provisions of


exemption scheme.



87.In Novopan India Ltd. Hyderabad v. Collector of
Central Exercise and Customs, Hyderabad [(1994) Supp

3 SCC 606] the question for consideration before


this Court was that, in case of ambiguity, which


rule of construction will be applicable to exemption


provision. This Court relied on the case of Union of


India & others v. Wood Papers Ltd & another reported


in (1990) 4 SCC 256, wherein at para 4, page 260


this Court observed as under:



“…Truly speaking liberal and strict

construction of an exemption provision are

to be invoked at different stages of

interpreting it. When the question is

whether a subject falls in the notification

or in the exemption clause then it being in

nature of exception is to be construed

strictly and against the subject but once

ambiguity or doubt about applicability is

lifted and the subject falls in the

notification then full play should be given

to it and it calls for a wider and liberal




88.This Court held that the principle that in case of


ambiguity, a taxing statute should be construed in


favour of the assessee, does not apply to the


construction of an exception or an exempting


provision, as the same have to be construed


strictly. Further this Court also held that a person

invoking an exception or an exemption provision to


relieve him of the tax liability must establish


clearly that he is covered by the said provision and


in case of doubt or ambiguity, benefit of it must go


to the State.



89.In this case, Essar was categorically told by letter


dated 28.05.2002, which is much prior to the expiry


of the period, that time for availing the exemption


cannot be extended. Admittedly, Essar failed to meet


the deadline. In that factual scenario, the exercise


undertaken by the High Court in the impugned


judgment by directing various adjustments which


virtually re-wrote the State’s exemption scheme, is


an exercise which is, with great respect, neither


warranted in law nor supported by precedents. There


is no question of equity here, an exemption is a


stand alone process. Either an industry claiming


exemption comes within it or it does not.



90.For the reasons aforesaid we allow the appeal. The


High Court judgment is set aside.

91.The parties are left to bear their own costs.









January 17, 2012





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