Andhra Pradesh Rayons Limited vs The Government of Andhra Pradesh and others

M. N. Rao, J.—In this writ appeal from the unsucessful petitioner in Writ Appeal No. 4034 of 1985 the questions for consideration concerns the applicability of the doctrine of equitable estoppel. The appellant Andhra Pradesh Rayons Limited (for short ''the company) is a company, represented by its Secretary and the 3rd respondent herein is a shareholder of the company. The company was originally a public sector corporation owned by the State Government. It was engaged in the manufacture of synthetic rayon for which the raw material, hard wood, was supplied by the State Government from the reserve forests at specified rates. A loose expression "royalty" was used in the correspondence for the sale consideration paid by the company. Subsequently the company was sold to private sector presumably due to the reason that it was incurring losses.

The writ petition was filed by the appellant and the third respondent herein questioning the legality of the order passed by the State Government in G.O.Ms. No. 108 Forests and Rural Development (for III) Department, dated 13-3-1985 by which the State Government decided to discontinue the 50% concession in the rate of royalty with effect from that date as a consequence of which the company was required to pay for the forest raw. material (hard wood) at the normal rates fixed by the Government in G.O. Ms. No. 538, dated 4-11-1981. By G.O.Ms. No. 992 Forests and Rural Development (for III) Department, dated 22-12-1977, the Government inter alia, fixed the royalty at Rs. 15 per metric ton in the case of "mixed wood with bark" (hard wood) allowing 50% concession on the average market rate of Rs. 30/-per ton and specifically laying down that "these rates will be in force for a period of five years from the date on which supply is commenced". By G.O. Ms. No. 319, dated 27-6-1989, the Government varied the condition to the advantage of the company extending the period to ten years; the relevant part of the said Government order read:

"2(ii) Andhra Pradesh Rayons Limited:

(a) The period of 50% concession in the rate of royalty of wood, to be supplied by Government to this industry shall be extended from 5 to 10 years, subject to review of the rate of royalty after 5 years, on par with the other newly developing industries. The order issued earlier in G.O. Ms. 992 Forests and Rural Development Department dated 22-12-1977 shall be deemed to have been modified to this extent."

It is not in controversy that the forest produce which is the raw material for the company was obtained from natural forests by the Government and sold to it. Subsequently by G.O. Ms. No. 538, dated 4-11-1981, the rates of royalty on the forest raw material were increased as detailed below.

Year Hardwood per MT (wef 1-4-80) Rs. 1980-81 100 1981-82 111 1982-83 123 1983-84 137 1984-85 152

On and with effect from 13-3-1980 the company was getting supplies of the raw material from the Government. When the Government demanded, even in the year 1980, royalty at the enhanced rates ignoring the five year period stipulated in G.O. Ms. No. 992 which was subsequently extended to ten years by G.O. Ms. No. 319, dated 27-6-1990, the company filed writ petition No. 1641, of 1984 which was allowed by the Court and the writ appeal preferred against that -- Writ Appeal No. 613 of 1984 -- ended in dismissal. The Division Bench observed, "...... it is not open to-the Government to claim that they are entitled to revise the rates notwithstanding what was agreed to and represented in G.O. Ms. No. 992, dated 22-12-1977..... it is not open to the State Government to claim revised rates of royalty with retrospective effect......"

The consequence of the judgment in the above writ appeal is that for a period of five years commencing from 13-3-1980 the date from which the Government started supplying wood to the company, the liability of the company to pay royalty, would be at 50% of the rate fixed per metric ton, The five year period expired on 12-3-1985 and further period of five years commencing from 13-3-1985 also expired on 12-3-1990.

The impugned Government order, as already noticed had discontinued 50% concession in the rate of royalty and called upon the company, to pay for the forest raw material at the normal rates. This Government order says that the "Government reviewed the matter in the light of the prevailing availability of the forest raw material and the guidelines communicated by the Government of India in their letter No. 1-25-82-FRY/FIPC, dated 4-9-1982, Ministry of Agriculture in regard to the fixation of royalty rates for forest produce.". These guidelines laid down that "supply of forest produce should not be at unconscionably low rates and the State should get fair return from the forest produce and the interest of ecology and environment should always be kept in view." The Central Board of Forestry also had recommended that in respect of natural forests the rate should be not less than the market value of the produce. The Government, therefore, considered that "there is no justification to continue any concession in the rates of forest raw material to M/s. Andhra Pradesh Rayons Limited beyond the period of first five years of supply". Accordingly, Government decided to discontinue the 50% concession in the rates of royalty on hard wood granted to the company with effect from 13-3-1983 :

The contention advanced for the company before the learned single Judge was that the Government had not reserved the right to leave open- the extent of the percentage of concession granted by G.O.Ms. No. 992, dated 22-12-1977, as modified by G.O.Ms. No. 319, dated 27-6-1980 and in any event the Government should be estopped from collecting the royalty at the enhanced rates by reason of the application of the principle of promissory estoppel. A learned single Judge of this Court rejected both the contentions expressing the view that the Government have revised its policy and decided to withdraw the concession because of the change in the circumstances. Aggrieved by that the present writ appeal was brought.

Sri Channabasappa Desai, the learned counsel for the appellant, has reiterated before us the same contentions which he urged before the learned single Judge. The learned counsel says that what all the Government could do was only enhancement of the rates but not withdrawal of the percentage of concession. Stated differently, the argument advanced is that the Government can increase the rate of royalty but the company is entitled to pay only 50% of the increased royalty rate for the currency of the ten years covered by the two Government orders --G.O.Ms. No. 992 and G.O.Ms. No. 319.

We are unable to agree. The principle of promissory estoppel pertains to the realm of equity. If a public authority has made a promise it is bound by that when the same was acted upon by the person to whom it was made. The Supreme Court of India reiterated the applicability of the doctrine of promissory estoppel in public law in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., and while observing that the Indian law has gone far ahead of the narrow position adoptedin England, stated the rule: "It is now well settled that the doctrine of promissory estoppel is not limited in its application only to defence but it can also find a cause of action". This doctrine has no application in respect of legislature functions nor can a public authority be debarred from enforcing a statutory provision. Nothing which is contrary to law falls Within the domain of the _ doctrine. Being an equitable doctrine it must yield to equity. The same position was reiterated in Vasantkumar Radhakisan Vora Vs. The Board of Trustees of the Port of Bombay, .

We have to consider whether the doctrine of promissory estoppel was available to the company in the present case. The Managing Director of the company in his letter dated 14-2-1978 in reference Comml./ 12.11 / 281 / 78 to the State Government, while requesting for re- examination of the position in relation to the royalty for wood, had pleaded for according parity between the company and two other companies -- Sri Rayalaseema Paper Mills and Bhadrachalam Paper Board. In this letter he stated that the other two companies -- Sri Rdyalaseema Paper Mills and Bhadrachalam Paper Board had been given a concession of 50% of the royalty for a period often years and therefore requested the Government "to kindly review the matter in its perspective and extend the concession of royalty for wood at least for a perid of ten years on par with other companies". G.O.Ms. No. 319, dated 27-6-1980, by which the period of concession was extended from five to ten years specifically adverts to the aforesaid letter in the preamble portion as reference No. 1.

This request of the company for parity of status along with the other two companies in the matter of enjoyment of benefits, clearly falls in the realm of equity. It is not in dispute that the other two companies enjoyed concession to the extent of 50% in the rate of royalty as could be seen from G.O.Ms. No. 665, dated 15-7-1976. The concession of 50% accorded to the other two companies was later withdrawn by the State Government by G.O.Ms. No. 65, dated 9-2-1984. The operative of it read:

"Government, therefore, have decided to discontinue with 50% concession granted to M/s. Badrachalam Paper Boards in the rates of forest raw material."

That action of the Government was challenged by the Bhadrachalam Paper Boards in Writ Petition No. 7744 of 1984 which ended in dismissal. An appeal preferred against that to the Division Bench --- Writ Appeal No. 761 of 1984 also ended in dismissal. The Division Bench interpreting the words "reserve the right to review" in the relevant Government order concerning Bhadrachalam Paper Boards observed that these words "clearly disclose a decision to be arrived at by the Government on its own and not in consultation with the petitioner. In order words, the decision is one within the subjective satisfaction of the Government. But, as we have said just now, the obligation still remains of arriving at an honest and fair decision, on a consideration of the relevant circumstances." After examining the note file and the consideration of the matter by the Council of Ministers as evidence from the record placed before the Division Bench, the conclusion was reached that the order withdrawing the concession did not suffer from any legal infirmity.

As already noticed, the company pleaded for parity with Sri Rayalaseema Paper Mills and Bhadrachalam Paper Boards in the matter of enjoyment of concesssion and when the same was accorded to the company by the Government it cannot claim that it is entitled to greater privileges than what were accorded to the other two companies. More than what the company had asked for, it was not entitled to get. What is the nature of the concession the Government could grant is a matter purely within the realm of administrative discretion but not rooted in any statute nor can the act of the Government be described as a quasi-judicial one. There is no question of any lis surface between the company and the Government when the former had requested for a concession in the rate of royalty. The principle of promissory estoppel which is rooted in the realm of equity, therefore, clearly has no application. Nothing was placed before us to show that the appellant-company was subjected to any hardship greater than what was suffered by the other two companies and, therefore, it is not possible for us to record a finding in this regard.

The learned counsel for the appellant has contended with vehemence that the basic requirement of giving notice before the concession was withdrawn had not been observed and therefore the impugned Government order must be struck down as violative of the principles of natural justice. We do not find any substance in this contention. G.O.Ms No. 319, dated 27-6-1980, by which the 50% concession in the rate of royalty was extended from five years to ten years itself confers power on the Government to review the position. The words "rate of royalty", in our opinion, take within their ambit not only the rate but also the extent of the concession. This conclusion flows from the fact that after referring to the 50% concession and its extent ion from five years to ten years, the Government order says that the same "shall be subject to review of rate of Royalty after five years". It is thus clear that what was subject to review was not only the rate of royalty, but also the extent of percentage in concession. It is, therefore, not open to the company to insist upon a notice before the review was made. The power to review was already specifically engrafted in the Government order and when that power was exercised the company could not complain that the same was in breach of natural justice.

It is settled law that when concession are granted even in exercise of statutory power the same could be withdrawn or revoked in public interest by the authority which granted the concessions [See Kasinka Trading and another, etc. etc. Vs. Union of India and another, .

In passing, one of the submissions made by the learned counsel is that so far as the appellant company is concerned the matter was not considered by the Council of Ministers, but in a routine manner the impugned Government order was issued. In order to ascertain the factual position we have asked the learned Government Pleader to produce the record and after going through the record we find no truth in this assertion. The Cabinet has specifically considered the question of withdrawal of concession to the appellant company.

For these reasons, affirming the judgment of the learned single Judge we dismiss the writ appeal. No costs.

Appeal dismissed.