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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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REPORTABLE

 

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

 

 

CIVIL APPEAL NO_599_ OF 2012

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

 

 

State of Gujarat & others …Appellant(s)

 

 

– Versus –

 

 

Essar Oil Limited and another …Respondent(s)

 

 

J U D G M E N T

 

 

GANGULY, J.

 

 

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
1
Capital Investment Incentive to Premier/Prestigious

 

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

 

Scheme”)

 

 

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

 

2
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:-

 

 

“(v) PREMIER UNIT

 

A new industrial unit or industrial complex

fulfilling the following criteria will be

considered for granting status of a “Premier

Unit”.

 

(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

 

 

3
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.

 

4
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

2000.

 

(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:

 

 

5
(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

2002.

 

(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

 

below:

 

 

“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

steps.

 

i) Possession of plot or shed in GIDC Estate.

For units located outside GIDC Estate, the

 

6
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

authority.

iii) NOC of GPCB (Gujarat Pollution Control

Board)

 

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.

 

 

7
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

 
8
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.

 

 

9
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

 

hectares.

 

 

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

 
10
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

 

 

11
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

 

Government.

 

 

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

 

12
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

 
13
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

 

production.

 

 

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

 
14
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

 
15
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

authorities.

 

This undertaking is given without prejudice to

the rights and contentions of the Respondent

No.4.

 

This undertaking will come to an end as and

when the permission is granted by the

authorities.”

 

 

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

 

filed against the officers of Essar and its

 

16
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.

 

17
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.

 

 

18
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

 

Government.

 

 

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

 

 

19
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

 

judgment.

 

 

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
20
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

granted.

 

Issue notice.

 

Stay of the High Court judgment in so far as

the petitioner is concerned.

 

 

21
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

 

22
pending special leave petition filed by it in this

 

Court.

 

 

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

 

 

23
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.
24
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

 

 

25
National Marine Park/Sanctuary area. The Chief Wild

 

Life Warden also issued the requisite permission on

 

27.02.2004.

 

 

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

 
26
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

 

 

27
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

 

28
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
29
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

petitioner.

 

(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

 

 

30
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

 

31
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

 
32
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

 
33
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

 

follows:-

 

 

“…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

 

 

34
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
35
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

 
36
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

 
37
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

 
38
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

 

erroneous.

 

 

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

 
39
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

 

 

40
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.

 
41
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

parties.”

 

 

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
42
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

 
43
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

 
44
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

 

Mines
& 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

 
45
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

 
46
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

 
47
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

 
48
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

construction.”

 

 

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

 
49
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.

 
50
91.The parties are left to bear their own costs.

 

 

…………………..J.

(ASOK KUMAR GANGULY)

 

 

…………………..J.

New Delhi (JAGDISH SINGH KHEHAR)

January 17, 2012

 

 

51

 

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