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Judgment
K. Kannan, J.—The petitioner seeks for quashing of the order issued by the 2nd respondent on 05.03.2001 and 13.09.2001 slicing the
entitlement of the petitioner (an industrial unit), as being entitled only to one scheme of investment incentive through the impugned orders. It was
contended that since the petitioner had already availed of the subsidy from NABARD to the tune of Rs. 36,17,500/-, he was entitled to the
balance of amount of Rs. 13,82,500/-. The petitioner''s grievance is that in a slew of measures announced by the State Government for engaging
the people to set up industries in cold storage, the State had offered 30% incentive on the capital investment and there had been even a
recommendation for release of the subsidy made by the Deputy Director (Incentive) after a personal inspection and assessment of the investments
made in the unit. It had been assessed that the unit had gone into production on 26.03.2000 and on submission of a claim on 19.07.2000, the
petitioner was entitled to 30% investment which worked out to Rs. 49,48,500/-. It was not however fully released to the petitioner on a specious
ground that the Government modified its scheme on 11.12.2002, in terms of which it was decided as follows:-
(i) While sanctioning Investment Incentive (Capital Subsidy), the amount of subsidy obtained by the unit under any other scheme of the
Government (Except for the cases covered under Prime Minister Rozgar Yojna Scheme which provide for additional Capital Subsidy under the
State Incentive Scheme to such unit) shall be deducted/adjusted by the sanctioning authority.
(ii) In case of expansion under rule 2.5, the incentive shall be granted if the expansion has been undertaken as prescribed under rule 5.1 and fixed
capital investment has been certified by the concerned financial institutions. However, there will be no restriction on the number of times unit can
avail/claim the incentive on expansion.
50% increase in the Fixed Capital Investment is to be seen over and above fixed capital investment immediately proceeding the expansion.
The learned senior counsel appearing on behalf of the petitioner would contend that the petitioner had made the investment only at the initial
promise made by the respondents that the petitioner would be entitled to 30% subsidy on the investment made and even at that time they ought to
have known that NABARD had also assured incentive for cold storage plans. It was not as if the writ petitioner was making any suppression of the
fact and what had been secured from NABARD was an independent incentive which had no bearing to what the State was holding out. In any
event, if there was a change in the policy which had been made, it could be applied only for the units which had been set up subsequent to the
changed policy and it cannot be denied to the petitioner, who on the date when the recommendation was made for the entitlement of subsidy of
30% of the capital, there had been no decision for deducting any subsidy realized from any other Government agency.
As a matter of principle in the grant of subsidies, there could be no vested right, for, if there is a decision taken to withdraw a subsidy, no person
could complain of the same. An exception could be only in situation where on the pronouncement of a policy, a person acts on such a promise and
alters his status so that if he has suffered a detriment by further assessment on the expectation of an investment incentive or a subsidy, the State
could be barred by the principle of promissory estoppel. In this case, there is no denying the fact even at the time when the petitioner was making
his application for grant of State subsidy, there was already a policy of NABARD for subsidy and if under the terms of the policy, a person was
entitled to the 30% incentive of the capital investment, any decision to make deductions for subsidies obtained from the Central Government or
through any other agency could be operative only from the date when the amended policy came into force. The petitioner could not have been
denied what he was already promised.
This view obtains its legitimacy through the judgment of the Hon''ble Supreme Court in Kusumam Hotels (P) Ltd. Vs. Kerala State Electricity
Board and Others, , where the Hon''ble Supreme Court was dealing with case of a new policy of concession announced by a State under which
tourism was treated as an industry and concessions had been extended to tourism industry that included investment subsidy and also some
concession in electricity charges upto 10% and other incentives. A policy statement also was that the State Electricity Board would grant tariff
concessions to classified hotels and motels consequent on the declaration of the State. The appellant in that case had set up and upgraded the
hotels and motels. Subsequently the industrial tariffs granted to the hotels were cancelled and the concession which was declared already stood
suspended. Dealing with the contention that the State was entitled to change or alter its economic policies, the Hon''ble Supreme Court held that
the doctrine of promissory estoppel would apply against a State and when any policy decision was taken withdrawing any concessions, it would
normally operate prospectively only. In order to give retrospective effect, it has to be so stated specifically and it should be in exercise of a
statutory power of issuing such directions. Dealing with the provisions of the Electricity Supply Act of 1948, the Court held that the Act does not
authorize the State to issue any direction with retrospective effect. It held that the G.O. on the basis of which some concessional tariffs were
withdrawn, would be operative only subsequent to the date of the coming into force of the G.O.
In MRF Ltd., Kottayam Vs. Assistant Commissioner (Assessment) Sales Tax and Others, the Hon''ble Supreme Court held that a tax
concession offered by the State on the basis of which large investments had been made could not be allowed to be withdrawn on the principle of
promissory estoppel and it would apply also to statutory notifications.
On the same line of reasoning, I would hold that the decision of the State that the amount of subsidy obtained by the industrial unit under any
other scheme of the Government shall be deducted and which was sought to be applied through a communication dated 11.12.2002 could be
applied only prospectively. In other words, it could not be applied to cases where an industry was claiming the privilege of subsidy prior to that
date of the existing policy. I would, therefore, uphold the contention of the petitioner and direct the respondents to release the balance of amount
as already promised within a period of 8 weeks with interest at 6%. The writ petition is allowed on the above terms.