C/WPPIL/96/2013

CAV JUDGMENT

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD WRIT PETITION (PIL) NO. 96 of 2013

FOR APPROVAL AND SIGNATURE:

HONOURABLE THE CHIEF JUSTICE MR. BHASKAR BHATTACHARYA and HONOURABLE MR.JUSTICE J.B.PARDIWALA
================================================================
1 2 3 Whether Reporters of Local Papers may be allowed to see the judgment ? To be referred to the Reporter or not ? Whether their Lordships wish to see the fair copy of the judgment ? Whether this case in!ol!es a substantial "uestion of law as to the interpretation of the #onstitution of $ndia% 1&'( or any order made thereunder ? ' Whether it is to be circulated to the ci!il judge ?

================================================================

HIMANSHU V PATEL....Applicant(s) Versus STATE OF GUJARAT & 2....Opponent(s)

================================================================
Appearance: MR YATIN OZA, SR. COUNSEL with MR. JIT P PATEL, ADVOCATE for the Applicant(s) No. 1 DELETED for the Opponent(s) No. 2 MR P.K. JANI, GOVERNMENT PLEADER with Ms. Vacha Desai, AGP for the Opponent(s) No. 1 MR. MIHIR THAKORE, SR. COUNSEL with MR. SANDEEP SINGHI for SINGHI & CO, ADVOCATE for the Opponent(s) No. 3

================================================================

#)R*+, HONOURABLE THE CHIEF JUSTICE MR. BHASKAR BHATTACHARYA and HONOURABLE MR.JUSTICE J.B.PARDIWALA Date :24/04/2014 CAV JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA)

Page 1 of 53

C/WPPIL/96/2013

CAV JUDGMENT

-y this writ.application in the nature of a public interest litigation% the petitioner% a practicing *d!ocate in the /istrict #ourt at 0andhinagar% has brought to our notice that the 1tate 0o!ernment has issued a 0o!ernment Resolution dated 1st 2anuary% 2((&% pro!iding for a loan to be paid to the respondent 3o43% e"ual to the gross !alue of the 5alue *dded Ta6 7for short 85*T89 and #entral 1ales Ta6 payable to the 1tate 0o!ernment% which tantamountly amounts to the refund of 5*T4 The petitioner has brought to our notice that such Resolution has been passed by the 1tate 0o!ernment only with a !iew to fa!our the respondent 3o43% Tata +otors Limited4 24 The case made out by the petitioner in this petition may

be summari:ed as under,. 241 The petitioner is a local resident of !illage *dalaj% The

situated at the outs;irts of the city of *hmedabad4

petitioner is a practicing *d!ocate in the /istrict #ourt at 0andhinagar and is also a +ember of the 1yndicate of the 0ujarat <ni!ersity4 242 $t is his case that the 1tate 0o!ernment has% in !iolation

and contra!ention of its policy decisions% been pro!iding fiscal incenti!es to the Tata +otors Limited% in the form of a loan to the Tata +otors Limited at (41= simple interest per annum for the amounts e"ual to the gross 5alue *dded Ta6 and #entral 1ales Ta6 payable to the 1tate 0o!ernment% on the sale of the 3ano #ar and it>s parts and components from the date of commencement of the sale of the 3ano car4

Page 2 of 53

C/WPPIL/96/2013

CAV JUDGMENT

243

*ccording to the petitioner% in the year 2((?% the newly

introduced project of the Tata +otors Limited% !i:4 83ano project8 had to be shifted from 1ingur% West -engal to the 1tate of 0ujarat4 $t is his case that only with a !iew to show the de!elopment by way of in!estment of mega projects by the multinational companies in the !arious sectors% the 0o!ernment decided to gi!e a loan against the same amount which would be paid by the Tata +otors Limited by way of 5*T payable to the 1tate 0o!ernment on sales of 3ano car manufactured at the plant in the 1tate of 0ujarat4 24 *ccording to the petitioner% such a policy decision on the

part of the 1tate 0o!ernment could be termed as per se illegal and against the public interest% as it amounts to refund of ta64 24' $t is also the case of the petitioner that the 1tate

0o!ernment entered into an agreement with the company and on the basis thereof% a 0o!ernment Resolution dated 1st 2anuary% 2((& was issued4 $t is also his case that the 1tate 0o!ernment has already issued a che"ue to the tune of Rs4 1%@A%2(%((%(((4(( 7Rupees one hundred si6ty se!en crore and twenty lac only9 in fa!our of the respondent 3o43% Tata +otors Limited4 1uch disbursement was made in +arch% 2(134 24@ $t is also the case of the petitioner that thereafter% a

further disbursement by way of loan to the tune of Rs4 1'@ crore against the 5*T paid by the Tata +otors Limited has been made4 *ccording to the petitioner% he has learnt through the reliable sources that the 0o!ernment is on the !erge of disbursing Rs4 '(( crore once again by way of a loan in fa!our

Page 3 of 53

C/WPPIL/96/2013

CAV JUDGMENT

of the Tata +otors Limited4 24A *ccording to the petitioner% in the B6ecuti!e +eeting

con!ened on 3(th +arch% 2(13% while discussing such issue of loan against 5*T% the #hief 1ecretary of the 1tate 0o!ernment +r4 /4 Rajagopalan had strongly objected to the same% as the same is in !iolation and contra!ention of the 0o!ernment Resolutions and Policies framed from time to time4 $t is also the case of the petitioner that for the purpose of ma;ing the most of such arrangement with the 1tate 0o!ernment% the respondent 3o43% Tata +otors Limited has been misusing the same by showing the total sales of the 3ano cars% to ha!e been made to a wholly owned subsidiary company of the respondent 3o43 in the 1tate of 0ujarat and after such sale being shown to the wholly owned subsidiary company% the cars are indirectly sold in the different parts of the country by such wholly owned subsidiary company4 $t is alleged that in such a manner% a larger amount of loan is being a!ailed of from the 1tate 0o!ernment by showing fictitious sale in the 1tate% which in fact% could not be said to be the true figures of the sale of the 3ano cars all o!er the country4 34 $n such circumstances referred to abo!e% the petitioner

has prayed for the following reliefs,.

7*94 7-94

-e pleased to admit and allow the present petition4 -e pleased to issue a writ of +andamus or a writ in nature of +andamus andCor any other appropriate writCs% orderCs% andCor directionCs and thereby "uashing and setting aside 0o!ernment Resolution dated (1C(1C2((& at *33BD<RB.# and further be

Page 4 of 53

C/WPPIL/96/2013

CAV JUDGMENT

pleased to "uash and set aside the agreement made between 1tate 0o!ernment and the respondent no4 3 pursuant to the impugned go!ernment resolution and further be pleased to declare the sanctioned and disbursed loan bad and !oid in nature and also direct the 1tate go!ernment authority to reco!er the same from the respondent no4 34 7#94 -e pleased to issue a writ of +andamus or a writ in nature of +andamus andCor any other appropriate writCs% orderCs% andCor directionCs and thereby declare no e6emption% concession or any ;ind of benefit or relief on and against the collection of 5*T and further be pleased to declare the sales of 3*3) car as a /epot Transfer instead of sale4 7/94 Pending hearing and final disposal of this petition% be pleased to stay and suspend implementation% e6ecution and operation of the sanctioned and disbursed loan amount granted by 1tate go!ernment towards respondent no4 3 and further be pleased to stay and suspend implementation% e6ecution and operation of future disbursements in fa!our of the respondent no4 3 in light of 0o!ernment Resolution dated (1C(1C2((& as well as agreement dated 31C(3C2(124 7B94 1uch other and further reliefCs as may be deem just and proper in the facts and circumstances of the case may please be granted in fa!our of the petitioner in the interest of justice4

1tance of the respondent 3o41% 1tate of 0ujarat, *n affida!it.in.reply has been filed by the /eputy

1ecretary% $ndustries and +ines /epartment% inter alia stating as under,.

Page 5 of 53

C/WPPIL/96/2013

CAV JUDGMENT

8That the loan of Rs42A34'( crore is disbursed to the company as per the 04R4 dated (1C(1C2((&4 That the white paper was published by the #entral

0o!ernment4 0o!ernment of 0ujarat had issued resolution dated 2&C( C2((( and decided that the 1tate 0o!ernment will not offer any incenti!e to attract industries4 Eowe!er% other 1tates ha!e continued the 5*T incenti!es for the de!elopment of $ndustries in their 1tates4 The details are as under,. 14 )rissa 1tate F $ndustrial Policy 2((A 24 -ihar 1tate F $ndustrial Policy 2((@ 34 +aharastra 1tate F $ndustrial Policy 2((@ 4 Earyana 1tate Policy 2((A '4 Tamilnadu 1tate Policy 2((A $t is pertinent to note that these 1tate go!ernments and other 1tate go!ernments ha!e continued the incenti!es e!en after the white paper published by the #entral 0o!ernment4 *fter the earth"ua;e of 2@th 2anuary% 2((1% the 0ujarat 1tate 0o!ernment has also granted the 5*T $ncenti!e for rehabilitation of Gutchh /istrict4 The 1tate 0o!ernment has truly implemented the decision of the 0)$ in its true spirit% in spite of the facts that other 1tates were pro!iding 5*T incenti!es for the de!elopment of $ndustries4 $n the year 2((?% the 1tate 0o!ernment has initiated to formulate the 3ew $ndustrial Policy to attract in!estment in the 1tate4 $t was recommended under the proposed new industrial policy to offer need based assistance to certain sectors under +ega and $nno!ati!e projects4 <nder the +ega Project scheme% the department has proposed to gi!e assistance to the projects generating si:able employment and new technology adopted for the first time4 To "ualify for a +ega project% the minimum

Page 6 of 53

C/WPPIL/96/2013

CAV JUDGMENT

in!estment is Rs41((( crore and employment generation to 2((( persons is proposed by the department4 The Huantum of incenti!e and type of incenti!es are also not specifically proposed4 $t was proposed to gi!e need based assistance to +ega project which ha!e a spin off effect on the employment and industrial de!elopment in the 1tate4 The sectors of +ega projects proposed are as under,. 14 24 34 4 '4 *uto and auto components 1hip building and ship repair 1emi conductor fabrication $ndustries ha!ing a 3ano technology application +aintenance% repair and o!erhaul 7+R)9 hub for air craft

The proposed e!aluation criteria of +ega projects are as under,. 14 24 34 $t should be a manufacturing unit4 The project should en!isage the use of high.end 1tate.of.the artC cutting edge technology4 $t should meet the criteria of capital in!estment of Rs41((( crore and employment generation of 2((( persons4 $t should ha!e a pro!en multiplier effect4 $t should add to s;ill formation and capacity building4

4 '4

$t is a fact that 0ujarat has a strong engineering base and number of engineering units% mainly in +icro 1mall and +edium Bnterprise 7+1+B9 sector are supplier of auto components as )riginal B"uipment +anufacturer 7)B+9 to auto manufacturers4 Though large number of manufacturing units were in the 1tate since long% 1tate lac;ed major

Page 7 of 53

C/WPPIL/96/2013

CAV JUDGMENT

automobileC !ehicle manufacturing company4 $n this scenario the 1tate 0o!ernment found a good opportunity to in!ite Tata 3ano Project in the 1tate% as T*T* group had decided to close down 3*3) project from 1ingur and announced to shift the same to other 1tate ha!ing amicable en!ironment4 The 1tate go!ernment was of the opinion that if this project comes to 0ujarat% it would facilitate and gi!e opportunity to second and third tire !endors to supply their products and ser!ices to the 3ano project4 The project has good potential for de!elopment of new engineering industries and ser!ice sectors and will also generate employment in the *uto sector4 1oon after the signing an *greement with T*T* group for 3ano project% the project was shifted at 1anand% /ist4 *hmedabad from 1ingur 7West -engal94 *fter signing *greement with T*T* +otors Ltd4% number of petitions including P$L were filed in the Eigh #ourt in order to delay the said project% on !arious ground li;e allotment of land% compensation of land% concessions gi!en to the projects etc4 The EonIble #ourt has ordered as under,. 7194 1#* 3o4 1 2'A of 2((? and 1 @3& of 2((?% para 2',. JKKKKWe impose cost of Rs41(%(((C. on each of these writ petitions% to be paid to the 0ujarat Eigh #ourt +ediation #entre within one month from today4 1pecial #i!il *pplications stand dismissed4L The EonIble 1upreme #ourt also dismissed 1pecial Lea!e *ppeal 7ci!il9 3'&&& ## 1&?A&C2((& from the judgment and order dated 2&C( C2((& in 1#* 3o4 1 @3&C2((? on dated 1 C12C2((&4 7294 7P$L9 1#* 3o4 12'A( of 2((?,.

Page 8 of 53

C/WPPIL/96/2013

CAV JUDGMENT

JWe are% therefore% of the !iew that petitioner has not succeeded in establishing that the decision ta;en by the 0o!ernment in allotting the land to 2nd respondent has in any way !iolates any statutory pro!ision or statutory rules or regulations4 0eneral allegation that if the lands are allotted% it will ad!ersely affect the agriculture% power supply% etc4 cannot be countenanced by a writ court4 Petitioner has not succeeded in showing that the transaction entered into between the 1tate 0o!ernment and 2nd respondent is a malafide e6ercise of power4 <nder the circumstances% we find no reason to entertain this Public $nterest Litigation% which is not in public interest and intended only for media attention and publicity4 #onse"uently% 1pecial #i!il *pplication is dismissed4 Eowe!er% in the facts of the case% we are not awarding any costs4L 7394 1#* 3o4 1'&&3 of 2((?,. J@4 B!en so% ha!ing regard to the fact that the petitioners ha!e been residing on the land in "uestion for "uite some time and that the petitionersI children are studying in the primary school at 3orth;otpura which primary school is being run by the 1tate 0o!ernment and the #ollector% *hmedabad% we are inclined to direct the 1tate authorities to continue to run the primary school at 3orth;otpura till the end of the current academic year and to permit the petitioners to occupy their residential accommodation on the land in "uestion till the end of the current academic year4 Eowe!er% these benefits shall be e6tended to only those petitioners who file an underta;ing before this #ourt by 3(C11C2((& stating that they will hando!er !acant and peaceful possession of the land in "uestion at the end of the academic year 2((&.1(% that is% 3(th *pril% 2(1( and that they will not induct any other persons in the temporary accommodation being occupied by them4

Page 9 of 53

C/WPPIL/96/2013

CAV JUDGMENT

$n case of only those petitioners who file such underta;ings before this #ourt% in respect of the accommodation in the occupation of those petitioners% the respondents shall restore electricity supply within one wee; from the date of filing the underta;ing subject to the concerned petitioners paying the necessary amounts for restoration of electricity supply and consumption of electricity and to permit them to occupy the present accommodation4 A4 The petition as well as the #i!il *pplications are disposed

of in terms of the aforesaid directions4L 7 94 1#* 3)4 1(3?( of 2(12,. J$n the abo!e circumstances% learned #i!il 2udge 714/49% *hmedabad 7Rural9% is directed to decide B6h4 ' application in 1pecial #i!il 1uit 3o4 A& of 2(1( as e6peditiously as possible% preferably on or before 3(C1(C2(12 in accordance with law4 With the aforesaid direction% this petition is disposed of4 3otice is discharged with no order as to costs4 $t is made clear that this #ourt has not entered into merits of the case4 /irect 1er!ice is permitted4L 7'94 *ppeal Mrom )rder 3o4 &2 of 2(12,. )R*L )R/BR JLearned *d!ocate +r4 *4 +4 Ea!a ma;es statement at the bar that he has instruction to appear on behalf of the respondent no4 ? and he will file his appearance within two days from today4 14)4 to 2&C(AC2(134L +r4 2ustice +4 -4 1hah #ommission is also in"uiring the similar

Page 10 of 53

C/WPPIL/96/2013

CAV JUDGMENT

type of allegation put before them in this regard4 The final report is still awaited4 *fter 3ano Project coming to 0ujarat% leading national and international automobile companies ha!e also started showing interest to set up their project in the 1tate4 The names of such companies are as under,. 14 24 34 Mord +otors $ndia P!t4 Ltd4 at 1anand +aruti 1u:u;i $ndia Ltd4 at +andal Eero +otocorp Ltd4 at Ealol

Thus% the intention of the 0o!ernment% to gi!e thrust to the +1+Bs engineering industries% as en!isaged while granting incenti!es% to Tata +otors Ltd4 is fulfilled4 The 1tate would be automobile manufacturing hub in the nation% when all the abo!e mentioned projects will be commissioned in future 7i4e4 within 2 to 3 years94 Though Tata 3ano Project% was a pioneer +ega Project% the 1tate 0o!ernment offered some less concessions% compared to the concessions already agreed to them at 1ingur4 $t is also pertinent to note that projects coming after 3ano will get e!en less incenti!es% compared to T*T* 3ano Project4 These companies were offered remission of 5*TN #1T to the amount e"ual to the 1((= of fi6ed capital in!estment made by the company or 1' years whiche!er is earlier4 Tata 3ano Project being the first large automobile project in the 1tate% more incenti!es were offered compared to other *utomobile projects4 *utomobile industries are non polluting industry4 *fter the publication of white paper by 0)$ in 2(((% the 0o!ernment of $ndia has published a report on *utomoti!e +ission 2((@.2(1@ for the de!elopment of $ndian *utomoti!e

Page 11 of 53

C/WPPIL/96/2013

CAV JUDGMENT

$ndustries4 The 0o!ernment of $ndia% +inistry of Eea!y $ndustries and public enterprise had prepared the report on automoti!e mission 2((@.2(1@ for the de!elopment of $ndian *utomoti!e $ndustries% in which !arious inter!entions from 1tates were recommended by the +inistry in its report4 <nder the said inter!ention% the +inistry has suggested that the manufactures of automobile company shall be supported by Ta6 Eoliday% one.stop.clearance% Ta6 deduction of 1((= of e6port profit etc4 The copy of the chapter ' 7Page 329 of report in which !arious inter!entions recommended% is anne6ed herewith 7Annexure-R194 Thus% 0o!ernment of $ndia has also fa!ored incenti!es for the de!elopment of automobile industries in the 1tates4 *s mentioned earlier% the e6ercise of finali:ation of 3ew $ndustrial policy was o!er by /ecember 2((?4 *fter ta;ing the appro!al from the 1tate cabinet% 0o!ernment has formerly announced 3ew $ndustrial Policy in 2anuary% 2((&4 *fter completing all the re"uired procedures% as per the Rules of business% department issued a 0o!ernment Resolution 3o4 T+LC1(C2((?C' C$ dated (1C(1C2((&% to sanction loan to +Cs4 Tata +otors Ltd4 for 3ano #ar Project4 Therefore% there is no !iolation of any rules or policy4 *s per the constitution of $ndia $ndustries is a 1tate subject and therefore% the 1tate go!ernment is empowered to pro!ide 5*T incenti!es or any other ;ind of support for the industrial de!elopment in the 1tate4 $t was the policy of 1tate 0o!ernment since 1&?( to grant deferment of amount to the 3ew $ndustrial unit to the e6tent of the sales Ta6 collected on their sales4 The sales ta6 collected by the company would be retained by the company

Page 12 of 53

C/WPPIL/96/2013

CAV JUDGMENT

and this amount is deferred for 1' to 12A years depending upon the amount in!estedC areaC schemes4 This deferment in sales ta6 were granted without interest4 *fter the completion of deferment period% the unit shall ha!e to repay the entire amount in yearly installment as per the pro!ision in the rele!ant scheme4 The longest period of deferment granted by the 1tate 0o!ernment in earlier scheme 1&&'.2((( scheme is for 1A years to premier units ha!ing an in!estment of more than Rs41((( #rore4 These schemes were in operation before the introduction 5*T% now the eligible units are getting remission of 5*T and defermentC loan on the amount of 5*T collected on sales4 The 1tate 0o!ernment has pro!ided the loan to T*T* +otors Ltd4 on the basis of 0ross 5alue *dded Ta6 75*T9 plus central sales ta6 payable by the company to 1tate 0o!ernment4 Thus% the scheme sanctioned to the Tata +otors Ltd4 is almost similar to the earlier scheme of deferment introduced since 1&?(4 There is $ndustrial /e!elopment in the 1tate4 The 3ew $ndustrial Projects are continuously being set up in the 1tate4 /ue to proacti!e administration and support pro!ided by the 1tate 0o!ernment% 2 large scale projects ha!ing a cost of Plant and +achinery abo!e Rs41( #rore is set up in the 1tate and these projects ha!e made the in!estment of Rs4 12'A #rore since 2anuary% 2((& i4e4 after the coming of 3ano project in 1anand4 *t the same time% the 0o!ernment has also promoted the +icro% 1mall and +edium Bnterprise 7+1+B9 $ndustrial units4 The year wise data are gi!en as under,.

Year 2((@.(A 2((A.(? 2((?.(& 2((&.1(

N . -./0 122-. 1/-42 130-1

! MSME Un"#$

In%e$#&en# 'R$. In La($) 11/21/.-. 4-012/.05 42411-.54 405111.21

E&*+ ,&en# 30-2151055 2104321.-01

Page 13 of 53

C/WPPIL/96/2013

CAV JUDGMENT

2(1(.11 2(11.12 2(12.13 Total

2.2-1 11--0 1001. 11302/

531-23.51 11.10/4./3 1--3--1.21 /0/5./5..1

21.150 203501 2--1/2 1-2/.04

The Tata 3ano Project at 1anand% /ist4 *hmedabad started production in *pril% 2(1(4 Thereafter% +1+B units registered only in *hmedabad /istrict are as under,.

Year 2((@.(A 2((A.(? 2((?.(& 2((&.1( 2(1(.11 2(11.12 2(12.13 Total

N . 4-5 2215 1311 03./3/2 11--0 10005 -/231

! MSME Un"#$

In%e$#&en# 'R$. In La($) -344-.10 12551-.21 103/-/.4/ 24-4.5.41 245201.2/ -0/.//.54 /1305..1/ 15411/0./5

E&*+ ,&en# 6enera#e7 125.. 10121 -/.1/ -5-3010-0 30..4 44150 104/35

This shows sharp rise during two years4 *fter the year 2(1(% the 1tate go!ernment had discontinued to gi!e 5*T incenti!es to the large $ndustrial <nit 7Ea!ing in!estment of Rs41( #rore or more in Plant and +achinery9 but continued to support micro small and medium industries by way of '= interest subsidy for fi!e years with a ceiling of Rs42' Lac per annum4 /ue to support of 1tate 0o!ernment% the 3ew +1+Bs units are established in the 1tate and ha!e ta;en the ad!antages of schemeC the details are as under,.

Year

N .

! MSME Un"#$

E&*+ ,&en# 6enera#e 7 -.122 -1/31 -2201

2(1(.11 2(11.12 2(12.13

0210 -311 0/1-

A$$"$#an(e 7"$8ur$ e7 'R$. Cr re$) 104.23 101.-10....

Thus% the 1tate 0o!ernment has ta;en due care of +icro% 1mall and +edium $ndustries of the 1tate4 *part from the
Page 14 of 53

C/WPPIL/96/2013

CAV JUDGMENT

de!elopment of +1+Bs sectors in the 1tate% the large and medium industries ha!e shown interest in and around the 3ano Project4 -efore the establishment of 3ano Project% there was a 0$/# estate ha!ing an area of only 2 hectares since 1&?3 ha!ing 23 units and pro!iding employment to appro6imate A( persons4 *fter the establishment of 3ano #ar Project and loo;ing to the demand of the industries% the 0$/# has planned another estate of 1&&A43A hectares and allotted to ??4&' hectares land 23 industrial units4 This will generate the employment for

'?((( persons and in!estment of appro6imate Rs4A((( #rore is in pipe line 'Annexure-R2)4 $t is also pertinent to note that there is a spurt in economic acti!ities in and around 1anand4 *t present establishment of 3ano Project% only 11 2 nationali:ed ban;s were and pri!ate ban;s are wor;ing in 1anand bloc;4 -efore the functioning4 'Annexure-R1)4 Thus% 3ano Project has huge positi!e and multiplier impact on the economicC industrialC de!elopment acti!ities in the 1anand area4 The 0o!ernment did not o!errule the decision of #entral 0o!ernment 7white paper94 $n Para 241' of the white paper% related to 1tate incenti!es says that the e6isting incenti!e schemes may be continued in the manner deemed appropriate by the 1tates% after ensuring that 5*T chain is not affected4 $n T*T* 3ano Project case% the company has already started depositing the 5*T since *pril.2(1(4 Thus% 5*T chain is not bro;en4 *gainst the 5*T paid by the company% till now% the 1tate 0o!ernment has not released proportionate loan as per 04R4 dated (1C(1C2((&4

Page 15 of 53

C/WPPIL/96/2013

CAV JUDGMENT

The loan is to be disbursed to the company as per the 0o!ernment Resolution dated (1C(1C2((& to the e6tent of 0ross 5alue *dded Ta6 paid by the #ompany4 *s per the record of commercial Ta6 #ommissioner )ffice% the company has paid Rs43?24(( #rore 5*T up to 31C(3C2(134 $ndustries #ommissionerate has paid Rs42A34 ' #rore of loans paid to the company as per para 1 of the 04R4 dated (1C(1C2((&4 The meeting of B6ecuti!e #ommittee was held on 3(C(3C2(13% is as per para ? of the 04R4 dated (1C(1C2((&4 $ndustries #ommissioner is a #hairman of the said committee and chief secretary is not a member of the committee4 The loan is paid to the company as per the para 1 of the 0o!ernment Resolution dated (1C(1C2((&4 Therefore% there is no !iolation of the contra!ention of the policy4 The company has sold car to its distribution company in 0ujarat and company has paid the amount of Rs43?24(( crore 5*T to the 1tate 0o!ernment4 *s stated earlier% the loan gi!en to the company for amount e"ual to the gross !alue added ta6 paid 75*T9 and #entral 1ales Ta6 7#1T9 payable to 0o!ernment of 0ujarat is as per para 1 of the resolution4 The scheme of loan is based on 5*T plus #1T payable by the company on 1ales of 3ano #ar4 $f the Tata +otors sells car to distribution company or any other dealers in the 1tate% then Tata +otors has to pay 5*T on sells of such cars4 1ubse"uently% these cars are sold outside the 0ujarat by the mar;eting company or dealers% the 5*T paid is refunded to them is as per the 5*T law4 3ot only T*T*% this refund pro!ision is applicable to all the dealers across the 1tate4 1ales of goods through distribution company% is a general practice adopted all o!er the world and in the nation4 That because of such policies of the 1tate 0o!ernment the

Page 16 of 53

C/WPPIL/96/2013

CAV JUDGMENT

industriali:ation in the 1tate of 0ujarat has achie!ed high rate of growth4 That simultaneously the 1tate has gi!en e"ual importance to the agricultural growth4 The 1tate of 0ujarat ran;s amongst top 1tates e!en in agricultural sector4 That along with the establishment of a major industry% other medium and small scale industries also get a boost and fillip4 That before 1( years there were hardly and significant industries in and around 1anand where TataIs 3ano Plant is located4 That with the entry of 3ano Project the entire area has become an industrial hub4 This has resulted in to pro!iding employment to the youths of the area4 $t has resulted into pro!iding rich di!idends to the farmers who own the lands in surrounding areas4 That with the entry of TataIs 3ano +otor #ar the industrial acti!ities in the area has got the boost4 $n addition there to the infrastructure has de!eloped4 There is corresponding increase in ser!ice industries li;e hotel industries and other industries4 Therefore% the incenti!e granted has the effect of gi!ing return in manifold ways4 Therefore% the allegations and a!erments made by the petitioner are without any basis4 That the entire area in and around completely changed4 That the 1tate has come out with this initiati!e with the object of not gi!ing ad!antage to a particular group but the same is with the object of pro!iding o!erall growth to industrial acti!ities4 That it is a fact ac;nowledged by all the economists that no country in the world or no society has sustained progress without de!eloping industries and without becoming leader in industrial segment4 1anand Talu;a has got

Page 17 of 53

C/WPPIL/96/2013

CAV JUDGMENT

That

the

de!elopment

of

the

industry

brings

capital

in!estment which results into generation of employment and results into de!elopment of incidental industrial acti!ities in small scale and medium scale industries4 $t also results into further de!elopment of ser!ice industries li;e ban;ing% hospitality and such other industries4 This de!elopment o!erall contributes to the growth of society% 1tate and nation4 $t is for these reasons that the 1tate of 0ujarat is a leading contributor to the #entral 0o!ernment in terms of direct and indirect ta6 of nation4 #onsidering all these aspects it is respectfully submitted that the petition is de!oid of any substance and merits48

'4

1tance of the respondent 3o43% Tata +otors Limited, *n affida!it in reply has been filed by one Eemant

5asude! Gul;arni% Plant Eead% *hmedabad% on behalf of the respondent 3o43% Tata +otors Limited4 respondent 3o43 may be summari:ed thus,

The stance of the

The petitioner has no locus standi to file the present petition under *rticle 22@ of the #onstitution of $ndia behind the !eil of public interest litigation4 3o real and genuine public interest is espoused in the petition and in such circumstances% the petition is re"uired to be dismissed with e6emplary costs4 The petition suffers from gross delay and laches4 -y way of the present petition% the petitioner see;s to challenge the resolution dated (1C(1C2((& issued by the respondent no4 14 Passing of the aforesaid resolution is
Page 18 of 53

C/WPPIL/96/2013

CAV JUDGMENT

within the personal ;nowledge of the petitioner% as claimed by him in the petition4 Murther% based on the resolution passed by the respondent no4 1% the respondent no4 3 has in!ested huge sum of money for its project in the 1tate of 0ujarat and has started its commercial acti!ities with effect from *pril% 2(1(% a fact which is within the public domain4 The present petition is filed in *pril% 2(13 i4e4 after more than years from the dates of passing of the aforesaid resolution% and that too after the commencement of the commercial business acti!ities by the respondent no4 3 in the 1tate of 0ujarat4 1ince no e6planation is gi!en by the petitioner in respect of such gross delay and laches% the petition is re"uired to be dismissed4 The respondent no4 1 has already announced its

$ndustrial Policy F 2((&4 The said policy is within public domain4 $n the said policy it is categorically stated that for financial benefits to the mega projects% li;e that of the respondent no4 3% the respondent no4 1 would decide the same on the merits of each case4 Prior to 2((&% when the Tata 3ano Project of the respondent no4 3 was under consideration during the 2((& policy framing stage% the respondent no4 1 adopted the same process of deciding on the financial benefits to be e6tended to mega projects in the 1tate of 0ujarat by ta;ing specific appro!als of the cabinet on a case to case basis and enshrining the principles of industrial promotion assistance through appropriate 0o!ernment Resolution% as is e!ident from the resolution dated (1C(1C2((& anne6ed to the petition4 Murther% se!eral 1tates in $ndia ha!e also announced their
Page 19 of 53

C/WPPIL/96/2013

CAV JUDGMENT

policies from time to time% either offering tailor made benefits to suit to a particular in!estment re"uirement on case to case basis andCor financial supportCindustrial promotion assistance andCor financial support e"ui!alent to the 5alue *dded Ta6 75*T9 paidCto be paid by an industrial unit andCor e"ui!alent to certain percentage of 5*T4 The 5*T refund or loan e"ui!alent to 5*T actually paid is only a mechanism to ensure that the benefit e6tended to is in line with the actual production at the plant4 1uch policies announced by se!eral 1tates are within public domain4 The petitioner has claimed himself to be a practicing ad!ocate and a syndicate member of the 0ujarat <ni!ersity4 $n such circumstances% it was incumbent and mandatory on the part of the petitioner in a public interest litigation to conduct due and proper in"uiry and place before the #ourt all the rele!ant facts% documents and information4 Ead this disclosure been made% there would ha!e been no cause of action a!ailable to the petitioner4 That the petitioner% by alleging that the respondent no4 1 is disbursing the amounts by way of loan against the payment of 5*T% is see;ing to gi!e an impression as if the respondent no4 1 is gi!ing any deferment of 5*T payment or any 5*T incenti!es or concessions to the respondent no4 34 The said a!ermentsC allegations are wrong and incorrect4 $n fact% the respondent no4 1 by its resolution dated (1C(1C2((& has agreed to pro!ide industrial promotion assistance in the from of repayable loan which would be e"ui!alent to the gross 5*T paid on the sale of 3ano #ars and its parts and components from the date of
Page 20 of 53

C/WPPIL/96/2013

CAV JUDGMENT

the commencement of the sale of 3ano #ars by the respondent no4 34 The terms and conditions for pro!iding such industrial promotion assistance to the respondent no4 3 is already mentioned in the resolution dated (1C(1C2((& and such industrial promotion assistance in the form of loan is neither new nor uncommon4 5*T is only a measure applied by the 1tate to ensure that the financial assistance disbursed is in line with the production achie!ed and not more4 That many 1tates% under their respecti!e policies% ha!e announced industrial promotion assistance including the "uantum which is e"ui!alent to 5*T paidC to be paid4 +erely that the 1tate of 0ujarat F respondent no4 1 has disbursed loan to the respondent no4 3% as part of the objecti!es sought to be achie!ed by the respondent no4 1 under its policy% would not ma;e the huge in!estment and de!elopment of the project in the 1tate of 0ujarat madeC done by the respondent no4 3% Jso calledL% as alleged or as sought to be alleged or in the manner alleged or at all4 The allegation that the respondent no4 3 is misusing or abusing any of the conditions issued by the respondent no4 1 !ide its resolution dated (1C(1C2((& is baseless4 The allegation that selling of the 3ano #ars by the respondent no4 3 to its wholly owned subsidiary company is done with a !iew to misuse or abuse any of the conditions of the respondent no4 1 is false4 $n respect of all the 3ano #ars manufactured by the respondent no4 3 at its 1anand plant in the 1tate of 0ujarat and sold by it to its wholly owned subsidiary% the respondent no4 3 ma;es proper and ade"uate payment of 5*T to the 1tate
Page 21 of 53

C/WPPIL/96/2013

CAV JUDGMENT

of

0ujarat4

The

wholly

owned

subsidiary

is

not

established% as sought to be made out by the petitioner% to fetch any larger amount of loan or by showcasing any fictitious sales figure as alleged or in the manner alleged or at all4 That globally se!eral automobile manufacturers ha!e set up such centrali:ed distribution models which ha!e enabled them to achie!e significant impro!ements in ser!ice le!els as well as reduction in supply chain costs in the long run4 With geographically portfolio spread of out manufacturing base% deep and wide networ; reach and with e!er e6panding product di!erse products% a need was felt much earlier by the respondent no4 3 to ha!e an e6clusi!e distribution and logistics entity to meet domestic and international customers e6pectations by pro!iding high ser!ice le!els with cost effecti!e solutions4 Mollowing the global trend% T+L /istribution #ompany Limited was established% much earlier% in +arch% 2((? as a wholly owned subsidiary of the respondent no4 3 to loo; after the outbound logistics needs of the respondent no4 3 at !arious locations around the country and for !arious ;inds of !ehicles including commercial !ehicles and pro!ide sales and finance support to its dealers and sales team and it was but natural for respondent no4 3 to entrust the distribution of !ehicles manufactured at 1anand as well to T+L /istribution #ompany Limited4 That the wholly owned subsidiary of the respondent no4 3 was established to accomplish the aforesaid objecti!es4 The 0ujarat 5*T *ct prescribes the circumstances under which a sale can be made on which 5*T can be charged4 *ll sales made and 5*T charged for the cars produced at 1anand ha!e been
Page 22 of 53

C/WPPIL/96/2013

CAV JUDGMENT

in clear compliance with the pro!isions of the 0ujarat 5*T *ct and ta6 has been deposited as per the pro!isions of the said *ct4 To term such sales as fictitious or as a misuse or abuse is wholly incorrect4 1ale of cars made within the 1tate of 0ujarat and then dispatched as per the pro!isions of the 0ujarat 5*T *ct andCor #entral 1ales Ta6 *ct is well recogni:ed and in line with the widely accepted trade practices in this regard4 The respondent no4 3 has in fact paid 5*T and #1T amounting to o!er Rs43?( crore to the 1tate 0o!ernment on such sales of cars to the T+L /istribution #ompany Limited4 The respondent no4 1 is aware about the aforesaid wholly owned subsidiary of the respondent no4 3 including the sale of the 3ano #ars from the 1anand plant to the wholly owned subsidiary of the respondent no4 34 That as on 31C12C2(12% the respondent no4 3 has already in!ested a sum of about Rs43%?&1 crore% for Phase.$ of the Tata 3ano #ar Project at the aforesaid plant at 1anand4 The in!estment amount could increase further as the in!estment period a!ailable to the respondent no4 3% for ma;ing the Phase $ in!estment% is yet to get o!er4 The respondent no4 3 has underta;en !arious #orporate 1ocial Responsibility initiati!es in the areas of health% education% employability and en!ironment4 The !ision is to impro!e the "uality of the life of people li!ing in and around the aforesaid plant4 $n last three years the wor; has e6panded to about 32 !illages and certain wor;s ha!e also been ta;en up at the Talu;a le!el of 1anand4 The programs implemented include low cost sanitation%
Page 23 of 53

C/WPPIL/96/2013

CAV JUDGMENT

safe drin;ing water% eye chec;up camps% s;ill building training for women% dairy de!elopment% solid waste management% water har!esting% alternati!e source of coo;ing% comprehensi!e health care% tree plantation% malnutrition pre!ention% primary teachersI training% alternati!e school program for drop.out students% health awareness on malaria pre!entionC E$5.*$/1 amongst others4

@4

1ubmissions on behalf of the petitioner, +r4 Oatin ):a% the learned 1enior *d!ocate appearing for

the petitioner !ehemently submitted that the 0o!ernment Resolution pro!iding for a loan e"ual to the gross !alue of 5*T and #entral 1ales Ta6 payable to the 1tate 0o!ernment is illegal as it tantamounts to refund of 5*T4 $n support of such principal argument of +r4 ):a% strong reliance has been placed on the decision of the 1upreme #ourt in the case of *mrit -anaspati #ompany Ltd4 5s4 1tate of Punjab and anr4 reported in 71&&29 2 1## 114 +r4 ):a submitted that the incenti!e policy of the 1tate 0o!ernment is being thoroughly misused by the respondent 3o43 at the cost of public e6che"uer% by first showing the sales on paper to its wholly owned subsidiary company in the 1tate of 0ujarat and thereafter% the cars are indirectly sold all o!er the country by such wholly owned subsidiary company4 *ccording to +r4 ):a% such modus operandi is with a !iew to claim larger amount of loan from the 1tate 0o!ernment by showing fictitious sales figure within the 1tate of 0ujarat% which in fact% should be the sales figure of the car sold at

Page 24 of 53

C/WPPIL/96/2013

CAV JUDGMENT

different places all o!er the country4 +r4 ):a submitted that the special fa!our shown to the respondent 3o43 by the 1tate 0o!ernment smac;s of lac; of bonafide and by pro!iding such incenti!e% the 1tate 0o!ernment is not gaining anything out of the same4 +r4 ):a prays that there being merit in this petition% the same deser!es consideration and the reliefs prayed for in this petition may be granted4 A4 1ubmissions on behalf of the respondent 3o41% 1tate of

0ujarat, +r4 P4G4 2ani% the learned 0o!ernment Pleader

!ehemently opposes this petition and submits that the petition is lac;ing in bonafide and deser!es to be rejected solely on such ground4 +r4 2ani submitted that in the past also% many petitions in public interest were filed to stall the project of the respondent 3o43% and all those petitions were rejected with costs4 +r4 2ani submitted that the details of the petitions filed in the past ha!e been pro!ided in the affida!it in reply filed on behalf of the 1tate4 +r4 2ani submitted that the 0o!ernment Resolution% which is the subject matter of challenge% in no manner could be termed as unconstitutional or illegal% warranting any interference by this #ourt in e6ercise of the public interest jurisdiction4 +r4 2ani submitted that after the establishment of the project by the respondent 3o43% Tata +otors Limited% there has been a phenomenal progress so far as the re!enue and employment is concerned4 +r4 2ani submitted that because of

Page 25 of 53

C/WPPIL/96/2013

CAV JUDGMENT

such policies of the 1tate 0o!ernment% the industriali:ation in the 1tate has achie!ed high rate of growth4 become an industrial hub4 +r4 2ani also submitted that with the 3ano project% the entire area has The project has resulted in pro!iding employment to the youths of the area4 +r4 2ani submitted that all the allegations le!elled by the petitioner against the 0o!ernment are absolutely fri!olous and !e6atious4 *ccording to +r4 2ani% the 1tate 0o!ernment too; the initiati!e with the object of not showing any undue fa!our or showering any ad!antage to a particular industrial group% but the same is with the object of pro!iding o!erall growth to the industrial acti!ities4 +r4 2ani prays that there being no merit in this petition% the same deser!es to be rejected with costs4 ?4 1ubmissions on behalf of the respondent 3o43% Tata

+otors Limited, +r4 +ihir Tha;ore% the learned 1enior *d!ocate has !ehemently opposed this petition submitting that the petition deser!es to be rejected solely on the ground of delay and laches4 +r4Tha;ore submitted that the petitioner see;s to Ee submitted that based on the challenge the Resolution dated 1st 2anuary% 2((&% issued by the 1tate 0o!ernment4 Resolution passed by the 1tate 0o!ernment% his client has in!ested a huge sum of money for its prestigious project of manufacturing of 3ano car in the 1tate of 0ujarat4 +r4 Tha;ore submitted that the commercial acti!ities ha!e started from *pril% 2(1(% which is ;nown to one and all4 The petition has

Page 26 of 53

C/WPPIL/96/2013

CAV JUDGMENT

been filed almost after a period of four years from the date of passing of the impugned Resolution and that too% after the commencement of the business acti!ities4 +r4 Tha;ore submitted that the 1tate 0o!ernment has announced it>s $ndustrial Policy% 2((&% and such policy is within the public domain4 The 0o!ernment Resolution% which has been challenged% is a part of the $ndustrial Policy% 2((&4 +r4 Tha;ore submitted that the principal contention can!assed on behalf of the petitioner that the 0o!ernment is disbursing the loan amount in fa!our of his client against the payment of 5*T% which amounts to refund of ta6% is de!oid of any merit4 *ccording to +r4 Tha;ore% the 0o!ernment% !ide it>s Resolution dated 1st 2anuary% 2((&% has agreed to pro!ide industrial promotional assistance in the form of a repayable loan% which would be e"ui!alent to the gross 5*T paid on the sale of the 3ano cars and its parts and components from the date of the commencement of the sale of 3ano cars by his client4 +r4 Tha;ore submitted that 5*T is only a measure applied by the 1tate to ensure that the financial assistance disbursed is in line with the production achie!ed and nothing more than that4 +r4 Tha;ore also refuted the allegations le!elled by the petitioner that his client has floated its own subsidiary in 0ujarat and is effecting sales to its subsidiary% which is impermissible under the +otor 5ehicles *ct% 1&??% and also amounts to paying 5*T in the 1tate of 0ujarat% resulting in higher entitlement of loan4 +r4 Tha;ore prays that there being no merit in this petition% the same be rejected with costs4 &4 Ea!ing heard the learned counsel appearing for the

Page 27 of 53

C/WPPIL/96/2013

CAV JUDGMENT

parties% and ha!ing gone through the materials on record% the only "uestion that falls for our consideration in this petition is% whether the 0o!ernment Resolution dated 1st 2anuary% 2((&% pro!iding for a loan e"ual to the gross !alue of 5*T and #entral 1ales Ta6 payable to the 1tate 0o!ernment% amounts to refund of ta6% which could be termed as contrary to law or against the public interest4

1(. )rdinarily% the court would allow a litigation in public interest if it is found , 7i9 That the impugned action is !iolati!e of any of the rights enshrined in Part $$$ of the #onstitution of $ndia or any other legal right and relief is sought for its enforcementP 7ii9 That the action complained of is palpably illegal or mala fide and affects the group of persons who are not in a position to protect their own interest on account of po!erty% incapacity or ignoranceP 7iii9 That the person or a group of persons were approaching the #ourt in public interest for redressal of public injury arising from the breach of public duty or from !iolation of some pro!ision of the #onstitutional lawP 7i!9 That such person or group of persons is not a busy body or a meddlesome inter.loper and

Page 28 of 53

C/WPPIL/96/2013

CAV JUDGMENT

ha!e not approached with mala fide intention of !indicating their personal !engeance or grie!anceP 7!9 That the process of public interest litigation was not being abused by politicians or other busy bodies for political or unrelated objecti!e4 B!ery default on the part of the 1tate or Public *uthority being not justiciable in such litigationP 7!i9 That the litigation initiated in public interest was such that if not remedied or pre!ented would wea;en the faith of the common man in the institution of the judiciary and the democratic set up of the countryP 7!ii9 That the 1tate action was being tried to be co!ered under the carpet and intended to be thrown out on technicalitiesP 7!iii9 Public interest litigation may be initiated either upon a petition filed or on the basis of a letter or other information recei!ed but upon satisfaction that the information laid before the #ourt was of such a nature which re"uired e6aminationP 7i69 That the person approaching the #ourt has come with clean hands% clean heart and clean objecti!esP
Page 29 of 53

C/WPPIL/96/2013

CAV JUDGMENT

769

That before ta;ing any action in public interest the #ourt must be satisfied that its forum was not being misused by any unscrupulous litigant% politicians% busy body or persons or groups with mala fide objecti!e of either for !indication of their personal grie!ance or by resorting to blac;.mailing or considerations e6traneous to public interest4

114

$n the case of 1hri 1achidanand Pandey 5s4 1tate of West

-engal% reported in *$R 1&?A 1# 11(&% the 1upreme #ourt obser!ed as follows ,. Today public spirited litigants rush to file cases in profusion under this attractive name. They must inspire confidence in Courts and among the public. They must be above suspicion. Public Interest Litigation has now come to stay. But one is led to think that it poses a threat to Courts and public alike. uch cases are now filed without any rhyme or reason. It is therefore necessary to lay down! clear guidelines and to outline the correct parameters for entertainment of such petitions. If Courts do not restrict the free flow of such cases in the name of Public Interest Litigation! the traditional litigation will suffer and the Courts of law! instead of dispensing "ustice! will have to take upon themselves #dministrative and e$ecutive functions. This does not mean that traditional litigation should stay out. They have to be tackled by other effective methods! like decentrali%ing the "udicial system and entrusting ma"ority of traditional litigation to &illage Courts and Lok #dalats without the usual populist stance and by a complete restructuring of the procedural law which is the villain in delaying disposal of cases.... It is only when Courts are apprised of gross violation
Page 30 of 53

C/WPPIL/96/2013

CAV JUDGMENT

of fundamental rights by a group or a class action or when basis human rights are invaded or when there are complaints of such acts as shock the "udicial conscience that the Courts! especially the upreme court! should leave aside procedural shackles and hear such petitions and e$tend its "urisdiction under all available provisions for remedying the hardships and miseries of the needy! the underdog and the neglected. It is necessary to have some self'imposed restraint on Public Interest Litigants.(

124 $n a recent pronouncement of the Eon>ble 1upreme #ourt in the case of 1tate of <ttaranchal 5s4 -alwant 1ingh #haufal and )rs4% reported in '2.1.) 1 SCC -.29 in paragraphs 1A?% 1A&% 1?( and 1?1% the 1upreme #ourt laid down the following guidelines relating to Public $nterest Litigation,. )*+. ,e must abundantly make it clear that we are not discouraging the Public Interest Litigation in any manner! what we are trying to curb is its misuse and abuse. #ccording to us! this is a very important branch and! in a large number of PIL petitions! significant directions have been given by the Courts for improving ecology and environment! and the directions helped in preservation of forests! wildlife! marine life etc. It is the bounden duty and obligation of the Courts to encourage genuine bonafide PIL petitions and pass directions and orders in the public interest which are in consonance with the Constitution and the laws. )*-. The Public Interest Litigation! which has been in e$istence in our country for more than four decades! has a glorious record. This Court and the .igh Courts by their "udicial creativity and craftsmanship have passed a number of directions in the larger pubic interest in consonance with the inherent spirits of the Constitution. The conditions of marginali%ed and vulnerable section of society have significantly improved on account of Court/s

Page 31 of 53

C/WPPIL/96/2013

CAV JUDGMENT

directions in PIL. )+0. ,e have carefully considered the facts of the present case. ,e have also e$amined the law declared by this Court and other Courts in a number of "udgments. In order to preserve the purity and sanctity of the PIL! it has become imperative to issue the following directions1 2)3 The Court must encourage genuine and bonafide PIL and effectively discourage and curb the PIL filed for e$traneous consideration. 243 Instead of every individual "udge devising his own procedure for dealing with the Public Interest Litigation! it would be appropriate for each .igh Court to properly formulates rules for encouraging the genuine PIL and discouraging the PIL filed with obli5ue motives. Conse5uently! we re5uest that the .igh Courts who have not yet framed the rules! should frame the rules within three months. The 6egistrar 7eneral of each .igh Court is directed to the ecretary 7eneral of this Court immediately thereafter. 283 The Courts should prima'facie verify the credentials of the petitioner before entertaining a PIL. 293 The Courts should be prima'facie satisfied regarding the correctness of the contents of the petition before entertaining petition. 2:3 The Courts should be fully satisfied that substantial public interest is involved before entertaining the petition. 2;3 The Court should ensure that the petition which involves larger public interest! gravity and urgency must be given priority over other petitions. 2*3 The Courts before entertaining the PIL should ensure that the PIL is aimed at redressal of genuine public harm or public in"ury. The Court should also ensure that there is no personal gain! private motive or obli5ue motive behind filing the Public Interest Litigation.
Page 32 of 53

C/WPPIL/96/2013

CAV JUDGMENT

2+3 The Courts should also ensure that the petitions filed by busybodies for e$traneous and ulterior motives must be discouraged by imposing e$emplary costs or by adopting similar novel methods to curb frivolous petitions and the petitions filed for e$traneous considerations.( 134 $n a !ery recent pronouncement of the Eon>ble 1upreme #ourt in the case of P41eshadri 5s4 14+angati 0opal Reddy and )rs4% reported in '2.11) 0 SCC -4-% has obser!ed that ,. Public Interest Litigation can only be entertained at the instance of bonafide litigants. It cannot be permitted to be used by unscrupulous litigants to disguise personal or individual grievances as Public Interest Litigations. The upreme Court does not approve of an approach that would encourage petitions filed for achieving obli5ue motives on the basis of wild and reckless allegations made by individuals i.e. busybodies! having little or not interest in the proceedings. The credentials! the motive and the ob"ective of the petitioner have to be apparently and patently aboveboard. <therwise the petition is liable to be dismissed at threshold.( 1 4 $t appears from the materials on record that the

0o!ernment of 0ujarat has introduced its $ndustrial Policy% 2((&% by which it see;s to transform into a global in!estment destination4 <nder the $ndustrial Policy% 2((&% it is the endea!our on the part of the 1tate 0o!ernment to promote mega projects in focus sectors% which includes auto and auto components and which would ha!e the multiplier effect and would be integral to the employment generation acti!ity4 1uch mega project would also promote ancillary and au6iliary industries4 $t appears that with such objects in mind% the 0o!ernment issued the Resolution dated 1st 2anuary% 2((&4

Page 33 of 53

C/WPPIL/96/2013

CAV JUDGMENT

1ince the 0o!ernment Resolution dated 1st 2anuary% 2((&% which pro!ides for sanction of loan to the Tata +otors Limited for the 3ano car project is the subject matter of this petition% we deem it necessary to loo; into the resolution in details4 The preamble of the Resolution reads as under,.
:Prea&8+e;Mor more than three decades% 0ujarat is the preferred destination for in!estment in almost all industrial sectors% barring a few4 *s a result of the proacti!e role of the 1tate 0o!ernment to attract in!estments% number of entrepreneursC industrial houses are selecting the 1tate as a destination of choice for in!estments in the sectors of Te6tile% 0ems and 2ewellary% #hemicals and Petrochemicals% Pharmaceuticals and /rugs% 1teel% #ement% Bngineering among others4 Eowe!er% the 1tate is yet to attract good in!estment in the *utomobile and *uto ancillary sector4 The auto sector has strong presence in other 1tates li;e +aharashtra% Tamil 3adu and outs;irts of /elhi 1tate% where as 0ujarat has only one car project4 Though 0ujarat has a strong engineering base% and number of engineering units% mainly in the +1+B 1ector% are engaged in the supply of auto components as )B+s to auto manufacturers% no major player has set up any unit in the 1tate during recent past4 Tata 0roup is one of $ndiaIs leading industrial houses and enjoys a reputation as a responsible corporate citi:en e!en prior to independence4 Tata +otors Limited 7T+L9% which is a part of the Tata 0roup% is see;ing to relocate some of its operations related to manufacturing plant for automobile products and components for the manufacture of the small car

Page 34 of 53

C/WPPIL/96/2013

CAV JUDGMENT

J3anoL from 1ingur in West -engalKKK $n addition to the Phase $ $n!estment% subject to mar;et response and conditions% T+L may ma;e such additional increase to its in!estment in the Project to increase the capacity of the Plant as mentioned abo!e% from 2%'(%((( 3ano cars per annum or 3%'(%((( 3ano cars per annum as the case may be% to '%((%((( 3ano cars per annum 7JT+L Phase $$ $n!estmentL9 with an additional in!estment of about Rs411(( #rore4 The abo!e in!estments would pro!ide the 1tate of 0ujarat with opportunities for infrastructure de!elopment% growth of allied industries and de!elopment of the local economy% by creating employment opportunities for s;illed and uns;illed wor;ers48

1'4

* bare perusal of the preamble would indicate the object The

and the intention behind passing of such resolution4

0o!ernment of 0ujarat too; notice of the fact that the auto sector in the 1tates li;e +aharashtra% Tamil 3adu and at the outs;irts of the 1tate of /elhi has been doing !ery well o!er a period of time and all the three 1tates ha!e been dominating in the auto sector4 )n the other hand% the 1tate of 0ujarat has only one such project4 *lthough the 1tate of 0ujarat has a strong engineering base and there are number of engineering units in the +1+B sector% yet the same are engaged in the supply of auto components as )B+s to the auto manufacturers4 The 0o!ernment of 0ujarat noticed that no

major industry had been set up in the 1tate during the recent past4 *s the respondent 3o43% Tata +otors Limited is a leading !ehicle manufacturing company and has e6tensi!e sales

Page 35 of 53

C/WPPIL/96/2013

CAV JUDGMENT

networ; through out the territory of $ndia% the 0o!ernment of 0ujarat found that the in!estment by the respondent 3o43% Tata +otors Limited would pro!ide the 1tate with opportunities for infrastructure de!elopment% growth of allied industries and de!elopment of the local economy% by pro!iding employment opportunities for s;illed and uns;illed wor;ers4 This appears to be the main objecti!e behind the issuance of the Resolution dated 1st 2anuary% 2((&4 1@4 We shall now loo; into the few salient features of the

Resolution dated 1st 2anuary% 2((&4

814 Type of Loan 0o!ernment of 0ujarat 70o09 will pro!ide fiscal incenti!es to T+L in the form of a loan to T+L at (41= simple interest per annum for amounts e"ual to the gross 5alue *dded Ta6 75*T9 and #entral 1ales Ta6 7#1T9 payable to the 0o0 7or an e"ui!alent 0oods and 1er!ices Ta6 701T9 or any other similar law for the le!y of ta6 in 0ujarat% on sale and purchase of goods% as and when introduced9% on the sale of the 3ano car and its parts and components from the date of commencement of the sale of the 3ano car4 24 i4 Huantum of Loan, The ma6imum loan amount will be e"ual to, 7a9 33(= of the JT+L Phase $ $n!estmentL or 7b9 such amount as has been disbursed to T+L by the 0o!t4 till the 2(th year from the date of commencement of the sale of the J3anoLP whiche!er is lower4 Eowe!er o!erall amount of loan shall in no case e6ceed the gross amount of ta6 paid to the 0o0 in the 2( year period under abo!e mentioned laws4 JT+L Phase $ $n!estmentL means an amount based on fi6ed
Page 36 of 53

C/WPPIL/96/2013

CAV JUDGMENT

#apital $n!estment as set out in 1chedule $ attached hereto4 *s at present it is an estimate and may !ary based on the actual T+L Phase $ $n!estmentC e6penditure incurred in relation thereto4 ii4 Mor the a!oidance of doubt% it is made absolutely clear that the T+L Phase $ $n!estment shall be related only to the de!elopment% manufacture and sale of the 3ano car% its components and related acti!ities including the items set out in 1chedule $4 iii4 $t will include the e6penditure towards power supply i4e4 22( G5 connection 7ha!ing double circuit F feeding from two sources9 up to the ProjectIs recei!ing station% as well as final power re"uirement of the Project in the range of (.'( +5*4 The project would re"uire a separate @@C11 G5 sub.station 7ha!ing double circuit F feeding94 *ll abo!e re"uirement will be made at the e6pense of T+L which would constitute a part of the T+L Phase $ $n!estment4 i!4 $t will include the e6penditure made by T+L towards water supply% i4e4 water up to 1 ((( #umCday up to a point% as mutually agreed to by 0o0 and T+L% re"uired for T+L Phase $ Project4 !4 The actual T+L Phase $ $n!estment shall be certified by a reputed chartered accountant firm which shall be mutually agreed upon by the 0o0 and T+L4 4 Project Period, The project period to implement the Phase $ Project will be fi!e years from the date of allotment of the land to T+L4

Page 37 of 53

C/WPPIL/96/2013

CAV JUDGMENT

'4 i4

Procedure, The Eigh Le!el #ommittee shall appro!e pro!isionally the $n!estment of Phase $ Project on the basis of a /etailed Project Report 7/PR9 to be submitted by T+L within three months from the date of issue of this Resolution4

ii4

Mor final eligibility certificate% T+L shall submit the details of in!estment made in the Phase $ Project duly certified by a statutory *uditor of the #ompany and a reputed chartered accountant firm as referred to in Para 2 7!9 abo!e% to the $ndustries #ommissioner within @ months after completion of Phase $ $n!estment or after ' years from the date of signing the agreement whiche!er is earlier4

iii4

$ndustries commissionerIs office% upon receipt of the said details% will !erify the in!estment details and submit its report to the Eigh Le!el #ommittee for its appro!al on final $n!estment4 The EL# will decide the final amount of Loan on the basis of report and other rele!ant details4

@4

Loan /isbursement )n each month% loan disbursement to T+L will be made by $#% in accordance with the Loan *greement to be signed between 0o0 and T+L% on the basis of appro!al of an B6ecuti!e #ommittee4 1eparate account will be maintained by $# office for loan amount released to T+L4 * copy of the order releasing the loan amount will be sent to ##T% $+/ and M/ in addition to *0 and other rele!ant offices4

A4

Eigh Le!el #ommittee, The Eigh Le!el #ommittee means the committee constituted

Page 38 of 53

C/WPPIL/96/2013

CAV JUDGMENT

under 0o!t4 Resolution 3o4 +$1.1(2((?.''.$ dated (1C(1C2((& of $ndustries and +ines /ept4 0o!t4 of 0ujarat4 &4 Repayment This loan will be repayable in monthly installments stating from the Mirst month of 21st Oear 7from the date of drawdown of such loan amount9 of the commencement of first sale of the J3anoL4 The loan amount a!ailed in the first month of the first year will be repaid in the first month of the 21 st year along with interest and the loan amount a!ailed in the second month fo the first year will be repaid in the second month of the 21st year along with interest and so on4 The repayment will be along with the interest amount for that amount of principal4 124 i4 )ther #onditions,. T+L will set up a Plant with the capacity to manufacture appro6imately 2%'(%((( 3ano cars per annum pursuant to T+L Phase $ $n!estment% which could be e6panded to 3%'(%((( 3ano cars per annum4 $ncenti!es outlined abo!e would be limited to T+L Phase.$ $n!estment only4 ii4 1ubse"uently% subject to mar;et response and conditions% T+L may ma;e such additional increase to its in!estment in the Project to increase the capacity of the Plant as mentioned abo!e% from 2%'(%((( 3ano cars per annum or 3%'(%((( 3ano cars per annum% as the case may be% upto '%((%((( 3ano cars per annum in Phase $$4 iii4 $ncidental to the establishment of the Project% T+L will establish an $nstitutionC *cademy for Technical Bducation and aiding de!elopment of technical s;ill sets4 The purpose of this $nstitutionC *cademy would be to impart Technical Training primarily to local persons so as to enhance their Bmployability4

Page 39 of 53

C/WPPIL/96/2013

CAV JUDGMENT

i!4

T+L will underta;e steps for the de!elopment of the general society in and around the project in a manner consistent with T+LIs e6isting corporate society responsibility practices4

!4

T+L will establish a dri!ing training school for the purposes of enhancing s;ill sets and employability of local persons on mutually acceptable terms that will be agreed to between 0o0 and T+L4

!i4

The T+L will pro!ide e6tension ser!ices to 5endors for establishment of ancillary units for the supply of products relation to the Project% and other ser!ice pro!iders% ensure that its actions shall generate significant direct in and will

and

indirect employment opportunities4

!ii4 T+L shall pro!ide an appropriate subser!ient charge o!er its Project assets% in fa!our of the 0o0 in respect of the loan amounts disbursed under this 0R4 Mor the a!oidance of doubt% this will not in any way restrict T+LIs right or ability to secure third party financing for the Project and create any number of superior charges in fa!our of such third party lenders in respect of the Project assets% which ran; higher than any charge that may be created in fa!our of such lenders4

1A4

$t appears from the materials on record that the

respondent 3o43% in the year 2((@% decided to set.up the manufacturing unit of 3ano car at 1ingur% situated in West -engal4 The 0o!ernment of West -engal% after se!eral rounds of discussion% granted formal appro!al of the project and the same was set up and commissioned at 1ingur4 *ccording to

Page 40 of 53

C/WPPIL/96/2013

CAV JUDGMENT

the respondent 3o43% the trial production had also commenced4 Eowe!er% on account of agitations at the end of the farmers whose lands were ac"uired by the 0o!ernment for the project% and due to political unrest% the respondent 3o43 had to wind up the project at 1ingur4 Later on% they started negotiations with the 0o!ernment of 0ujarat and ultimately% the 1tate 0o!ernment allotted land in fa!our of the respondent 3o43 at 1anand% /ist4 *hmedabad% for the project of manufacturing of 3ano car4 1?4 $t also appears from the materials on record that no

sooner had the 0o!ernment of 0ujarat decided to allot the land in fa!our of the respondent 3o43% than !arious public interest litigations were filed before this #ourt on the premise that the 0o!ernment should not allot such a huge parcel of land in fa!our of the respondent 3o43% as it would amount to distributing the natural resources% which belongs to the people4 Eowe!er% it appears that all those petitions filed in the public interest were rejected with costs4 Thus% so far as the issue with regard to the allotment of land and the set.up of the project at 1anand is concerned% was set at rest by this #ourt with the dismissal of all petitions filed in the public interest4 Long thereafter% i4e4 almost after a period of four years% the present petition has been filed with altogether a new issue as discussed abo!e4 1&4 We are not impressed by the submission of +r4 ):a that

the 0o!ernment Resolution pro!iding for a loan e"ual to the gross !alue of 5*T and #entral 1ales Ta6 payable to the 1tate of 0ujarat amounts to refund of ta64

Page 41 of 53

C/WPPIL/96/2013

CAV JUDGMENT

2(4

Ea!ing gi!en our an6ious thoughts and consideration to

the issue in "uestion% we are of the opinion that the loan ad!anced in the instant case by the 0o!ernment in fa!our of the respondent 3o43 is with a !iew to encourage the establishment of the automobile industries in the 1tate as a part of its industriali:ation policy and the establishment of the project in "uestion has encouraged establishment of other industries li;e Mord $ndia Pri!ate Limited and +aruti 1u:u;i $ndia Limited4 214 The "uantum of 5*T and #entral 1ales Ta6 reco!ered is We ha!e noticed that the ma6imum amount of

only a measure for determining the "uantum of loan to be ad!anced4 loan% which can be ad!anced on an year to year basis is made dependent on the sales effected by the respondent 3o434 The respondent 3o41 1tate of 0ujarat instead of gi!ing a lump.sum loan% has made the entitlement of loan dependent upon the performance of the respondent 3o434 224 We are also not impressed by the submission of +r4 ):a

that a huge amount of loan to the tune of appro6imately Rs4 &%((( crore would be granted by the 0o!ernment in fa!our of the respondent 3o43 as indicated in #lause 241 of the Resolution dated 1st 2anuary% 2((&4 in!estment by the respondent 3o434 $t is true that the Eowe!er% we ha!e ma6imum amount of loan will be e"ual to 33(= of the Phase.$ noticed that there is an additional condition that the loan amount shall be e"ual to the gross 5*T and #entral 1ales Ta6 payable to the respondent 3o41 on the sale of 3ano cars and its parts and components from the date of commencement of sale of 3ano cars4 Therefore% while the total loan amount

Page 42 of 53

C/WPPIL/96/2013

CAV JUDGMENT

cannot e6ceed 33(=% the actual loan would depend on the "uantum of sale of 3ano cars and its components4 234 $ndisputably% such amount is a loan and not refund of ta64

We ha!e also noticed that the respondent 3o43 is obliged to also pro!ide prior subser!ient charge o!er its project assets in fa!our of the respondent 3o41 in respect of the loan amounts disbursed and the loan amount will ha!e to be returned bac; with (41= simple interest on the e6piry of 2( years4 This is e!ident from #lause 2 7!ii9 of the Resolution dated 1st 2anuary% 2((& referred to abo!e4 2 4 $t has also been brought to our notice that such a

pro!ision of loan dependent upon the reco!ery of 5*T is found in !arious other incenti!e policies of different 1tates4 We ha!e been ta;en through the 0o!ernment of Earyana $ndustrial Policy% 2(('P )rissa $ndustrial Policy% 2((AP 1tate of Tamil 3adu <ltra +ega $ntegrated *utomobile Project PolicyP 1tate of *ndhra Pradesh $ndustrial $n!estment Promotion Policy% 2(1(. 1'P -ihar $ndustrial $ncenti!e Policy% 2(11 and the West -engal 1tate 1upport for $ndustries 1cheme% 2((?4 $n all the abo!e referred policies of the different 1tate 0o!ernments% we found such incenti!e being pro!ided to the industries4 2'4 We are also not impressed by the submission of +r4 ):a

that the incenti!e policy of the 1tate 0o!ernment is being misused by the respondent 3o43 by showing the sales first to its wholly owned subsidiary company in 0ujarat and thereafter% the subsidiary company effecting the sales to the different dealers of the respondent 3o43 all o!er the country4 *ccording to +r4 ):a% this is impermissible under the +otor 5ehicles *ct%

Page 43 of 53

C/WPPIL/96/2013

CAV JUDGMENT

1&?? and amounts to paying 5*T in the 1tate of 0ujarat with the intention to procure higher amount of loan4 2@4 We find absolutely no legal bar under any of the

pro!isions of the +otor 5ehicles *ct% 1&??% in transferring a !ehicle to a distribution and logistic company so that such a company can in turn transfer the !ehicle to the dealers in other parts of the country4 We are of the !iew that this itself would not ma;e the !ehicle a secondhand !ehicle in the hands of the ultimate purchaser4 2A4 Mrom the materials on record% it appears that the T+L

/istribution #ompany Limited was incorporated in +arch% 2((? as a wholly owned subsidiary with a !iew to loo; after the outbound logistic needs of the respondent 3o434 $t is e!ident that the said distribution and logistic company was established e!en before the impugned Resolution dated 1st 2anuary% 2((& was passed4 The object% according to the respondent 3o43 of establishing such a distribution company% is to impro!e the ser!ice le!els in respect of logistics and distribution and reduction in chain costs in the longer run4 $t has been brought to our notice that not only the respondent 3o43% but !arious other companies ha!e also such distribution companies4 2?4 We are also not impressed by the submission of +r4 ):a

that there is total absence of e6change of consideration during the sale of 3ano cars from the respondent 3o43 to the aforesaid distribution company4 )ur attention has been drawn to the fact that the sale of 3ano cars from the respondent 3o43 to the distribution company are supported by in!oices and the necessary ta6es in respect of the same are also paid4

Page 44 of 53

C/WPPIL/96/2013

CAV JUDGMENT

2&4

+r4 Tha;ore% the learned 1enior *d!ocate appearing for

the respondent 3o43 as well as +r4 P4G4 2ani% the learned 0o!ernment Pleader appearing for the 1tate of 0ujarat are right in submitting that the project has to be ta;en as a whole and must be adjudged whether it is in the larger public interest4 $t should not be split into different components and to consider whether each and e!ery component will ser!e the public good4 The holistic approach should be adopted in such matters4 $f the project ta;en as a whole is an attempt in the direction of enhancing the re!enue for the 1tate 0o!ernment% generating employment opportunities and securing other economic benefits to the 1tate and the public at large% it will ser!e the public purpose4 3(4 $n this conte6t% we may "uote with profit the decision of

the 1upreme #ourt in 34/ 2ayal and ors4 5s4 <)$% reported in 72(( 9 & 1## 3@2% wherein the 1upreme #ourt made the following obser!ations% which are worth noting,. )0. <nce such a considered decision is taken! the proper e$ecution of the same should be undertaken e$peditiously. It is for the 7overnment to decide how to do its "ob. ,hen it has put a system in place for the e$ecution of the pro"ect and such a system cannot be said to be arbitrary! then the only role which the Court has to play is to ensure that the system works in the manner it was envisaged. It is made clear in that decision that the 5uestions whether to have an infrastructural pro"ect or not and what is the type of pro"ect to be undertaken and how it has to be e$ecuted! are part of policy'making process and the Courts are ill'e5uipped to ad"udicate on a policy decision so undertaken. .owever! a note of caution was struck that the Courts have a duty to see that in the undertaking of a decision! no law is violated and people/s fundamental rights as guaranteed under the
Page 45 of 53

C/WPPIL/96/2013

CAV JUDGMENT

Constitution are not transgressed upon e$cept to the e$tent permissible under the Constitution. ,hen a law has been enacted in relation to the protection of environment and such law is being given effect to and there is no challenge to such law! the duty of the Courts would be to see that the 7overnment and other respondents act in accordance with law and there is no other obligation for the Court to e$amine further in the matter. ,e respectfully agree with the view e$pressed in the ardar arovar pro"ect/s case and apply the same to the facts arising in this case.( 314 $n Pathan +ohammed 1uleman Rahemat;han +oh4

1uleman Q1pecial Lea!e Petition 7#9 3o4 32'(A of 2(13% decided on 22nd 3o!ember% 2(13R% the 1upreme #ourt made the following obser!ations in para ? of its judgment% which are worth noting,. But we cannot lose sight of the fact that it is the 7overnment which administers and runs the tate! which is accountable to the people. tate=s welfare! progress! re5uirements and needs of the people are better answered by the tate! also as to how the resources are to be utili%ed for achieving various ob"ectives. If every decision taken by the tate is tested by a microscopic and a suspicious eye! the administration will come to standstill and the decision makers will lose all their initiative and enthusiasm. #t hindsight! it is easy to comment upon or critici%e the action of the decision maker. ometimes! decisions taken by the tate or its administrative authorities may go wrong and sometimes it may achieve the desired results. Criticisms are always welcome in a Parliamentary democracy! but a decision taken in good faith! with good intentions! without any e$traneous considerations! cannot belittled! even if that decision was ultimately proved to be wrong.(

324

We shall now deal with the decision of the 1upreme #ourt

on which strong reliance has been placed by +r4 ):a% in

Page 46 of 53

C/WPPIL/96/2013

CAV JUDGMENT

support of his !ociferous submission that the policy of the 0o!ernment to pro!ide loan to the respondent 3o43 amounts to refund of ta6% which is impermissible in law4 334 $n *mrit -anaspati #o4Ltd4 5s4 1tate of Punjab% reported in CC 9))! a brochure was issued by the 0o!ernment

2)--43 4

of Punjab% enhancing its new policy declaring that the incenti!e and concession% one of those being refund of 1ales.ta6% would be a!ailable to those persons who would set up selecti!e large. scale industries in the focal point4 *cting on such declaration of the policy by the 1tate 0o!ernment% the appellant company approached the 0o!ernment and e6pressed its interest in setting up 5anaspati manufacturing unit in the 1tate4 The appellant purchased the land and !arious other material at a cost of Rs4 1' lac and had also placed an order for purchase of plant and machinery of !alue of Rs4 3' lac4 B!en rules were framed by sanctioning of the President of $ndia% which pro!ided for refund of sales and purchase ta6 to new and e6panding industries4 Thereafter% the 0o!ernment% all of a sudden% changed its policy% much to the prejudice of the appellant4 The sudden change of the policy declared by the 0o!ernment was challenged before the Eigh #ourt4 The learned 1ingle 2udge of the Eigh #ourt directed the 1tate 0o!ernment to refund the sales.ta6 and interstate 1ales.ta64 The 0o!ernment challenged the order passed by the learned 1ingle 2udge before the /i!ision -ench% by way of a Letters Patent *ppeal% and the /i!ision -ench of the Eigh #ourt% e6ercising The jurisdiction under Letters Patent% set aside the order passed by the learned 1ingle 2udge% directing refund of sales.ta64 matter was carried by the company before the 1upreme #ourt4 -efore the 1upreme #ourt% the principal argument was the

Page 47 of 53

C/WPPIL/96/2013

CAV JUDGMENT

principle of promissory estoppel4

$t was argued before the

1upreme #ourt that the representation made by the 1tate 0o!ernment resulted in a binding agreement and therefore% the 0o!ernment could not ha!e resiled from its promise4 )n the point of promissory estoppel% the 1upreme #ourt% on the basis of the materials on record% too; the !iew that the rights of the parties were go!erned by the old and not the new policy4 The #ourt also obser!ed that the appellant was ne!er intimated that the 0o!ernment had changed its policy in respect of refund of 1ales.ta64 Eowe!er% the 1upreme #ourt too; the !iew that the promissory estoppel being an e6tension of principle of e"uity% the basic purpose of which is to promote justice founded on fairness and relie!e a promisee of any injustice% perpetuated due to promotor>s going bac; on its promise% is incapable of being enforced in a #ourt of law if the promise which furnishes the cause of action or the agreement% e6press or implied% gi!ing rise to a binding contract is statutorily prohibited or is against public policy4

3 4

Thus% it appears that although the 1upreme #ourt

obser!ed that the 0o!ernment was bound by the principle of promissory estoppel% yet if the promise by the 0o!ernment regarding an incenti!e was otherwise statutorily prohibited or was against the public policy% then the same would not be enforceable in the #ourt of law4 3'4 +r4 ):a see;s to rely on the following obser!ation made

by the 1upreme #ourt in *mrit -anaspati #o4Ltd4 2supra3 which we "uote as under,. )0. ...... .... ,hat then was the nature of refund

Page 48 of 53

C/WPPIL/96/2013

CAV JUDGMENT

which was promised by the government> ,as such promise contrary to law and against public policy> Could it be enforced in a court of law> Ta$ation is a sovereign power e$ercised by the tate to realise revenue to enable it to discharge its obligations. Power to do so is derived from entries in Lists I! II and III of the eventh chedule of the Constitution. ales ta$ or purchase ta$ is levied in e$ercise of power derived from an #ct passed by a tate under ?ntry :9 of List II of &IIth chedule. It is an indirect ta$ as even though it is collected by a dealer the law normally permits it to be passed on and the ultimate burden is borne by the consumer. But =the fact that the burden of a ta$ may have been passed on to the consumer does not alter the legal nature of the ta$= 2.alsbury=s Laws of ?ngland! &ol. :4! paragraph 40.093. Therefore even a legislature! much less government! cannot enact a law or issue an order or agree to refund the ta$ realised by it from people in e$ercise of its sovereign powers! e$cept when the levy or realisation is contrary to a law validly enacted. # promise or agreement to refund ta$ which is due under the #ct and realised in accordance with law would be a fraud on the Constitution and breach of faith of the people. Ta$es like sales ta$ are paid even by a poor man irrespective of his savings with a sense of participation in growth of national economy and development of the tate. Its utili%ation by way of refund not to the payer but to a private person! a manufacturer! as an inducement to set up its unit in the tate would be breach of trust of the people amounting to deception under law. )). ?$emption from ta$ to encourage industriali%ation should not be confused with refund of ta$. They are two different legal and distinct concepts. #n e$emption is a concession allowed to a class or individual from general burden for valid and "ustifiable reason. @or instance ta$ holiday or concession to new or e$panding industries is well known to be one of the methods to grant incentive to encourage industrialisation. #vowed ob"ective is to enable the industry to stand up and compete in the market. ales ta$ is an indirect ta$ which is ultimately passed on to the consumer. If an industry is e$empt from ta$ the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as
Page 49 of 53

C/WPPIL/96/2013

CAV JUDGMENT

compared to others. Therefore! both the manufacturer and consumer gain! one by concession of non'levy and other by non'payment. uch provisions in an #ct or Aotification or orders issued by 7overnment are neither illegal nor against public policy. )4. But refund of ta$ is made in conse5uence of e$cess payment of it or its realisation illegally or contrary to the provisions of law. # provision or agreement to refund ta$ due or realised in accordance with law cannot be comprehended. Ao law can be made to refund ta$ to a manufacturer realised under a statute. It would be invalid and ultra vires. The Pun"ab ales Ta$ #ct provided for refund of sales ta$ and grant of e$emption in circumstances specified in ections )4 and 80 respectively. Aeither empowered the 7overnment to refund sales ta$ realised by a manufacturer on sales of its finished product. 6efund could be allowed if ta$ paid was in e$cess of amount due. #n agreement or even a notification or order permitting refund of sales ta$ which was due shall be contrary to the statute. To illustrate it the appellant claimed refund of sales ta$ paid by it to the tate 7overnment on sale made by it of its finished products. But the ta$ paid is not an amount spent by the appellant but realised on sale by it. ,hat is deposited under this head is ta$ which is otherwise due under provisions of the #ct. 6eturn of refund of it <r its e5uivalent! irrespective of from is repayment or refund of sales ta$. This would be contrary to Constitution. #ny agreement for such refund being contrary to public policy was void under ection 48 of Contract #ct. The constitutional re5uirements of levy of ta$ being for the welfare of the society and not for a specific individual the agreement or promise made by the government was in contravention of public purpose thus violative of public policy. Ao legal relationship could have arisen by operation of promissory estoppel as it was contrary both to the Constitution and the law. 6ealisation of ta$ through tate mechanism for sake of paying it to a private person directly or indirectly is impermissible under Constitutional scheme. The law does not permit it nor e5uity can countenance it. The scheme of refund of sales ta$ was thus incapable of being enforced in a court of law. )8. @allacy of such constitutionally inhibited policy!
Page 50 of 53

C/WPPIL/96/2013

CAV JUDGMENT

sacrificing public interest resulting in illegal private enrichment is e$posed by claim of refund for nearly 6s. 4 crore! for a period of three years! only! when total investment in establishing the unit was 6s. ).: crore! Levy of ta$ to raise revenue for promoting economic growth of the tate reduced itself in enhancing 2sic to3 the profit margin of the manufacturer and the sales ta$ stood converted into income of the appellant. uch contrivance of law even though bona fide is legally unenforceable.B

3@4

$n our opinion% the decision of the 1upreme #ourt in *mrit $n the said case

-anaspati #o4Ltd4 2supra3 has no application worth the name% so far as the case at hand is concerned4 before the 1upreme #ourt% the policy of the 1tate 0o!ernment was to refund the sales.ta6 which would be paid by the industries to the 1tate 0o!ernment on sale made by it of its finished products4 The #ourt too; the !iew that the same was not permissible% being contrary to the #onstitution4 3A4 $n the present case% as discussed abo!e% the amount of

loan paid by the 0o!ernment to the respondent 3o43 does not amount to refund of ta64 *s obser!ed by the 1upreme #ourt itself in *mrit -anaspati #o4Ltd4 2supra3% that e6emption from ta6 to encourage industriali:ation should not be confused with refund of ta64 of ta64 ta64 $n the same manner% deferment of ta6 to encourage industriali:ation should not be confused with refund The amount in the present case paid by the We ha!e 0o!ernment to the respondent 3o43 is a loan and not refund of There is a fine distinction between the two4 discussed this aspect at length in our earlier part of the judgment and we need not reiterate the same4 3?4 Thus% to our mind% the decision of the 1upreme #ourt
Page 51 of 53

C/WPPIL/96/2013

CAV JUDGMENT

referred to abo!e does not help the petitioner in any manner in ma;ing good his case that the impugned Resolution of the 0o!ernment amounts to refund of ta6% which is impermissible in law and contrary to the pro!isions of the #onstitution of $ndia4 3&4 $n the o!erall !iew of the matter% we are not at all

con!inced with the issue raised by the petitioner in public interest and that too after a period of almost four years from the date of passing of such Resolution4 $t has been brought to our notice that pursuant to the Resolution dated 1st 2anuary% 2((&% passed by the 1tate 0o!ernment% the respondent 3o43 has already set up a plant to manufacture 2%'(%((( cars on two shifts basis and 3%'(%((( cars on three shifts basis at 1anand4 The plant was successfully commissioned in 0ujarat and Tata 3ano cars rolled out of the 1anand plant in *pril% 2(1(4 The 0o!ernment of 0ujarat% $ndustries and +ines /epartment has also constituted a high le!el committee for monitoring of the implementation of the 3ano project4 *s on 31st /ecember% 2(12% the respondent 3o43 had already in!ested a sum of Rs4 3%?&1 crore for phase.$ of the Tata 3ano car project at the plant at 1anand4 The in!estment amount would increase further as the in!estment period a!ailable to the respondent 3o43 for ma;ing the phase.$ in!estment is yet to e6pire4 (4 Mor the foregoing reasons% we do not find any merit in

this public interest litigation and the same deser!es to be rejected4 14 The petition fails and is rejected4 Eowe!er% in the facts

and circumstances of the case% there shall be no order as to

Page 52 of 53

C/WPPIL/96/2013

CAV JUDGMENT

costs4

(BHASKAR BHATTACHARYA, C.J.)

(J.B.PARDIWALA, J.)
Mohandas

Page 53 of 53