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Structured Summary of the Opinion (Y.K. Sabharwal, J.)

Factual and Procedural Background

The petitioner, an exporter of readymade garments, challenged the respondents' withdrawal of Cash Compensatory Support provided under a Government of India policy announced on 29 March 1978. Respondent No.1 is the Union of India; Respondent No.2 is the Textile Commissioner, Ministry of Commerce and Industries; Respondent No.3 is the Indian Cotton Mills Federation (which processed and disbursed cash incentives); and Respondent No.4 is the Apparels Export Promotion Council (involved in policy implementation).

On 29 March 1978, Respondent No.2 communicated that the Government would contribute to the Indian Cotton Mills Federation's export promotion fund for the period 1 April 1978 to 31 March 1979 and specified cash incentive rates for cotton textile exports for 1978–1979. The petitioner alleges that, relying on that promise, it priced goods and entered into firm export contracts with foreign buyers.

A circular dated 6 January 1979 discontinued the Cash Compensatory Export Scheme with effect from 1 January 1979. The petitioner contended that the discontinuance was a breach of the earlier promise for the period 1 April 1978 to 31 March 1979 and that the petitioner had altered its position in reliance on the promise (pricing and contracting).

The petitioner invoked the doctrine of promissory estoppel and sought relief in this Court. The opinion notes that similar challenges to the same circular were considered by the Bombay, Madras and Karnataka High Courts and that in this Court the respondents did not file counter-affidavits despite the matters being pending for many years.

Legal Issues Presented

  1. Whether the withdrawal of the Cash Compensatory Support by Circular dated 6 January 1979 with retrospective effect from 1 January 1979, so as to affect already confirmed contracts, was illegal or in violation of the doctrine of promissory estoppel.
  2. Whether the petition is barred by delay and laches, given that the impugned circular was dated 6 January 1979 and the writ petition was filed in January 1982.
  3. Whether there existed a legal relationship or sufficient factual basis (including alteration of position) between the Government (Respondents 1 and 2) and the petitioner to invoke promissory estoppel.

Arguments of the Parties

Petitioner's Arguments

  • The petitioner relied on the Government's announced policy (29 March 1978) and the Cash Compensatory Scheme when pricing goods and entering into firm export contracts; as a result it altered its position and was entitled to the cash assistance for contracts entered into prior to 1 January 1979.
  • Withdrawal of the Scheme w.e.f. 1 January 1979 was a breach of the promise and would cause serious commercial loss, reputational harm, invocation of bank guarantees and other adverse consequences if the petitioner failed to supply under confirmed orders.
  • The petitioner invoked promissory estoppel and sought direction that the cash assistance be granted in respect of contracts made under the scheme prior to 1 January 1979.

Respondents' Arguments (as advanced by Mr. Joseph)

  • The writ petition is liable to be dismissed on grounds of delay and laches because the impugned circular dates from 6 January 1979 while the petition was filed in January 1982.
  • Reliance was placed on earlier orders (e.g., Crystaline Corporation v. Union of India and others; J.P. Export Pvt. Ltd. and others v. Union of India and others) to support the contention that belated petitions may be dismissed without relief.
  • Relying on Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (AIR 1979 SC 621), it was contended that there was no legal relationship between the Government and the petitioner and that the petitioner had not shown change of position in reliance on the Government's promise.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Vibgyor Textile International v. Union of India and another (Bombay High Court, 13 January 1984) Applied the doctrine of promissory estoppel to hold Government could not resile from representation that cash assistance would be available; held no equity or public interest justified rescission. The court expressed respectful agreement with the Bombay High Court's view that contracts entered into prior to 1 January 1979 could not be deprived of the scheme's benefit by retrospective withdrawal.
Pendse, J. — Writ Petition No. 1869 of 1979 (24 November 1983) Held that petitioners with contracts concluded prior to 1 January 1979 were entitled to the cash assistance; doctrine of promissory estoppel applied. Referred to and followed as precedent supporting the petitioner's entitlement for contracts concluded prior to 1 January 1979.
Madras High Court — Writ Petitions-1877, 1878 of 1979 (19 April 1984) Similar view (as recorded) applying promissory estoppel to protect prior contracts from retrospective withdrawal of assistance. Noted by this Court as expressing similar views and supporting the conclusion that withdrawal could not affect prior contracts.
Garments International Pvt. Ltd. and otthers v. Union of India and another — AIR 1991 Karnatka page 52 Recorded as another decision expressing similar views (i.e., protection for contracts concluded prior to withdrawal of the scheme). Noted by this Court as a similar authority supporting the petitioner's position.
Crystaline Corporation v. Union of India and others (C.W. No. 1765/80) Invoked by respondents as authority for dismissing belated petitions on ground of delay. Cited by respondents' counsel to support laches objection; Court distinguished the present case on facts and procedural posture and found the laches objection without substance here.
J.P. Export Pvt. Ltd. and others v. Union of India and others (C.W. No. 1019/92; decided 22 November 1983) Invoked in support of objection based on delay/laches. Referred to by respondents' counsel; Court examined circumstances and held that those decisions were distinguishable and did not bar relief in the present case.
Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, AIR 1979 SC 621 Relied on by respondents to argue absence of legal relationship between the Government and affected exporters and absence of sufficient change of position. Cited by respondents' counsel; Court rejected the submission on the facts here, noting the Government's role in placing funds with Respondent No.3 and that the petitioner had pleaded alteration of position (pricing) in reliance on the scheme.

Court's Reasoning and Analysis

The Court proceeded through the following analytical steps, grounded in the facts and authorities presented in the opinion:

  1. Preliminary factual findings: The Court noted the Government's announcement (29 March 1978) and the role of Respondent No.3 (Indian Cotton Mills Federation) in disbursing funds—establishing the practical mechanism by which cash incentives would have been paid. The petitioner specifically pleaded that it had priced goods and entered contracts in reliance on the announced scheme.
  2. Procedural posture and respondents' omissions: The Court observed that respondents 1 and 2 had not filed counter-affidavits despite the petitions being pending for over a decade, and that earlier opportunities to file affidavits and seek adjournments had been declined. The absence of a factual rebuttal weighed in the Court's consideration of the petitioner's pleaded reliance.
  3. Delay and laches argument: The Court recognized that laches is a discretionary doctrine and not an absolute rule of law; each case depends on its facts. The Court examined the respondents' reliance on prior orders dismissing belated petitions but distinguished those orders on their facts (some petitions dismissed at admission stage for unexplained delay). The Court found that the petitioner had offered explanations (including respondents' assurances and the nature of the dispute) and that there was no satisfactory showing that rights had vested in others to justify denying relief on laches grounds.
  4. Promissory estoppel and legal relationship: The Court considered respondents' reliance on Motilal Padampat to deny a legal relationship or change of position. It rejected that contention because (a) the Government had to place funds at the disposal of Respondent No.3 for disbursement under the announced policy, (b) it was not disputed that but for the withdrawal the petitioner would have been entitled to cash incentive, and (c) the petitioner had specifically pleaded that it altered its position by pricing goods with the scheme's benefits in mind. On these facts the Court found that the elements necessary to invoke promissory estoppel were present.
  5. Precedents and consistency: The Court reviewed and expressly agreed with earlier High Court decisions (Bombay, Madras, Karnataka) applying promissory estoppel to similar factual matrices and holding that the Government could not withdraw the scheme retrospectively so as to deprive exporters of benefits under contracts made before the withdrawal date.
  6. Relief fashioned: Applying the doctrine of promissory estoppel to the facts, the Court held the circular's retrospective effect as to already confirmed contracts was illegal. The Court quashed the circular insofar as it affected contracts entered into under the scheme prior to 1 January 1979 and directed a specific administrative process (examination and determination of each contract by Respondents 1 and 2 within six months, and grant of cash assistance for qualifying contracts within that period).

Holding and Implications

Holding:

The Court held that the withdrawal of the Cash Compensatory Support by Circular dated 6 January 1979 with retrospective effect from 1 January 1979, insofar as it affected already confirmed contracts entered into under the scheme prior to 1 January 1979, was illegal and in violation of the doctrine of promissory estoppel.

Consequent orders and direct effects on the parties:

  • The circular dated 6 January 1979 is quashed insofar as it affects the petitioner in respect of contracts entered into under the scheme prior to 1 January 1979.
  • The writ petition is allowed and the rule is made absolute; Civil Writ Petitions 291 and 666 of 1982 are allowed on the same terms.
  • Respondents 1 and 2 are directed to examine each contract mentioned in the writ petition and determine within six months whether the contracts were entered into under the Scheme and prior to 1 January 1979.
  • For qualifying contracts, cash assistance under the scheme shall be granted within the six-month period.
  • Parties are directed to bear their own costs.

Implications beyond the parties: The opinion confines relief to contracts entered into prior to 1 January 1979 and does not purport to establish a new generalized precedent beyond applying the doctrine of promissory estoppel to these facts. The Court expressly stated its respectful agreement with prior High Court decisions that reached similar conclusions; the opinion does not articulate broader novel legal principles beyond those applications.

    Old Village Industries Ltd v. Union Of India & Others .

    Y.K Sabharwal, J. (Oral):— The petitioner has challenged the action of the respondents in withdrawing the Cash Compensatory Support in respect of exports effected pursuant to the policy of Government of India announced on 29th March, 1978. The petitioner is exporter engaged in exporting readymade garments to various countries. Respondent No. 1 is Union of India. Respondent No. 2 is Textile Commissioner, Ministry of Commerce and Industries. Respondent No. 2, from year to year, announces various export incentives to which exporters are entitled on the exports made by them. Respondent No. 3 is Indian Cotton Mills Federation. It entertains and examines the applications of the exporters in the prescribed manner for cash assistance and distributes the various export incentives to which the exporters are entitled. Respondent No. 4 is Apparels Export Promotion Council, which inter alia has function of implementing the Government's policy as regards the exports.

    2. On 29th March, 1978, respondent No. 2 intimated to respondent No. 3 that the Government of India has decided to contribute to the export promotion fund of Indian Cotton Mills Federation from Ist April, 1978 to 31st March, 1979, the cash incentives at the rates mentioned in the said communication on the expert of cotton textile to be made during 1978-1979 i.e 1st April, 1978 to 31st March, 1979.

    3. The case of the petitioner is that relying on the promise held by Government of India that cash assistance will be available to the exporters on the export of readymade garments that would be exported by them in pursuance of the policy laid down by Government of India, it priced its goods for export taking into consideration the cash assistance which would be paid and entered into firm contract with various foreign buyers. A circular dated 6th January, 1979 was issued to discontinue the existing Cash Compensatory Export Scheme, w.e.f Ist January, 1979. The effect of the circular was that the Cash Compensatory Support to the exporters, on the export of all the items of cotton garments mentioned in the said circular, was to discontinue from Ist January, 1979. According to petitioner the discontinuance of the Cash Compensatory Support w.e.f Ist January, 1979 is in violation of the promise held by respondents 1 and 2 for granting cash assistance for export of readymade garments for the period Ist April, 1978 to 31st March, 1979. The petitioner claims that it was induced to enter into firm contracts with foreign buyers on account of the policy held out by Government of India at the time when it entered into contracts with foreign buyers and which was in force on the date of entering into such contracts and the petitioner had entered into those contracts and the prices were fixed taking into consideration the Cash Compensatory Support that would be available as per the policy. The petitioner says that respondents 1 and 2 have no right to withdraw the Cash Compensatory Support and divest the petitioner from right which had vested in it on account of promise held by respondents. In the words of the petitioner the impugned circular dated 6th January, 1979 had the following consequences on its export: “The petitioner could either commit breach of the contract with the foreign buyers and not to supply goods to the foreign buyers because of withdrawal of the Cash Compensatory Support by Government of India which, in turn, would have resulted invocation with their bank guarantee already given by the petitioner for the benefit of the foreign buyers and face heavy losses on account of the purchase of raw material and also on account of having entered into contracts with the suppliers of raw-material, fabricators, processors and dyers, employed staff as well as to bring bad reputation to its business and to the country and suffer incalculable loss of goodwill with its foreign buyers which would have been a national loss. The other consequences of this illegal circular was that the petitioner supply the goods to its foreign buyers at the price of confirmed order and save the reputation of the country - and goodwill of the business”. The petitioner has also pleaded that writ petitions have been filed by various exporters like the petitioner, and the respondents have been assuring that in view of the said writ petitions, the petitioner would be paid its dues without going to court but with no result as yet. Particulars of the two earlier writ petitions filed in the year 1980 have been given in the writ petition.

    4. The petitioner has invoked the doctrine of promissory estoppel. The petitioner claims that acting on the promise held out by respondents 1 and 2 it entered into firm contracts with foreign buyers and priced the goods to be supplied to the foreign buyers keeping in view the amount payable under Cash Compensatory Scheme and as it altered its position, the scheme could not be withdrawn in respect of contracts entered into prior to Ist January, 1979.

    5. The validity of the impugned circular also came up for consideration before Bombay, Madras and Karnataka High Court. The Bombay High Court while disposing of a batch of petitions on 13th January, 1984 (Vibgyor Textile International v. Union of India and another) held that the petitioners acted upon the representation of Government of India that they would get cash assistance to compensate their losses. Justice S.P Bharucha, as His Lordship then was, held that there is no good reason, no equity, no supervening public interest that justifies the conduct of Government of India in resiling from its representation. In this decision Reference was also made to the decision of Pendse, J, dated 24th November, 1983 in identical writ petition being Writ Petition No. 1869 of 1979, holding that in respect of contracts concluded prior to Ist January, 1979, the petitioners were entitled to the advantage of the cash assistance. It was also held that the fact that the goods were actually exported subsequnt to Ist January, 1979 was not enough to deprive the petitioners of it. The doctrine of promissory estoppel was applied. It was held that the contracts had been entered into on the assurance given under the Scheme and thus the Government was not entitled to withdraw such assurance/scheme with retrospective effect and deprive the petitioners of the advantage of the said scheme. It is also held that whatever the reasons that prompted Union of India to withdraw the scheme w.e.f Ist January, 1979, it could not affect the right of the petitioners to demand cash assistance in respect of contracts concluded prioer to 1st January, 1979. Petitioners were held entitled to the benefit of cash assistance under the scheme provided the Government of India was satisfied that the contracts had been entered into and concluded prior to Ist January, 1979 and were in pursuance of said scheme of cash assistance. I am in respectful agreement with the views expressed in the aforesaid decisions. Similar views have also been expressed by Madras High Court in Writ Petitions-1877, 1878 of 1979 decided on 19th April, 1984 and Karnataka High Court in Garments International Pvt. Ltd. and otthers v. Union of India and another AIR 1991 Karnatka page 52. As noticed earlier the challenge in all these cases was to same circular i.e Circular dated 6th January, 1979.

    6. I may also notice that though these writ petitions have been pending in this court for more than a decade yet respondents 1 and 2 have not filed any counter-affidavit. It is a case of no return. Similar is the position in other connected petitions. I may also notice that on applications filed by the petitioners for fixing actual date for hearing of arguments notices were served on the respondents through their counsel and by orders dated 2nd March, 1993, the petitions were directed to be listed on 26th April, 1993 but still the respondents did not file any counter-affidavit and under these circumstances request for adjournment of the case to file counter-affidavit was declined.

    7. Opposing the writ petition, Mr. Joseph, learned counsel for respondents 1 and 2, submits that the petition is liable to be dismissed on the ground of delay and latches as the impugned circular is dated 6th January, 1979 and the writ petition was filed in January, 1982. The rule which says that the Court may not enquire into belated and stale claim is not a rule of law but a rule of practice based on sound and proper exercise of discretion. Each case must depend upon its on facts. It will all depend on what the breach of the fundamental right and the remedy claimed are and how the delay arose. The principle on which the relief to the party on the grounds of laches or delay is denied is that the rights which have accrued to others by reason of the delay in filing the petition should not be allowed to be disturbed unless there is reasonable explanation for the delay. The real test to determine delay in such cases is that the petitioner should come to the writ Court before a parallel right is created and that the lapse of time is not attributable to any laches or negligence. The test is not to physical running of time. Where the circumstances justifying the conduct exists, the illegality which is manifest cannot be sustained on the sole ground of laches. It has not been shown what rights have been created in favour of respondents by lapse of time. Mr. Joseph, however, relies on the order made on Civil Writ No. 1765/80 in Crystaline Corporation v. Union of India and others and the orders made in C.W No. 1019/92 - J.P Export Pvt. Ltd. and others v. Union of India and others decided on 22nd November, 1983 in support of his contention as to delay and latches. As noticed herein before the petitioner has pleaded that other exporters like the petitioner had filed the writ petitions and the respondents have been assuring that the petitioner will be paid its dues without going to the Court. The said allegations have not been controverted by filing counter-affidavit. Further considering the nature of the disputes one does not expect the aggrieved person to immediately rush to court. Having regard to the facts and circumstances of the case it cannot be held that the petitioner is guilty of such delay which may justify refusal of relief to it. In regard to the aforesaid orders relied upon by Mr. Joseph, it may be noticed that C.W 1765/80 seems to have been dismissed at the admission stage without issuing notice to the respondents on the ground that the petition is belated. Similarly C.W.901/82 was dismissed on the ground that it was belated relying upon the orders made in C.W 1765/80 as preliminary objection was raised on behalf of the respondents in that regard. In the said case on preliminary objections being taken, the court permitted the petitioner to file additional affidavit to explain the delay but as it was not explained, the writ petition was dismissed at the stage of admission. In the present case, objection has been taken for the first time during the course of hearing. There is no substance in the objection.

    8. Next, relying upon the decision of the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. the State of Uttar Pradesh AIR 1979 SC 621, Mr. Joseph contends that there is no legal relationship between the Government and the petitioner and also that there is nothing to show that the petitioner altered its position relying upon the promise made by Government of India when the Government announced the Cash Compensatory Scheme. There is no substance in this contention as well. It is not disputed that the Government of India had to place at the disposal of respondent no. 3 the funds and on the basis of the policy announced, the cash incentive had to be disbursed by respondent No. 3. It has also not been disputed that but for the withdrawal of the Scheme petitioner would have been entitled to the cash compensatory incentive. In this view, the submission, that there is no legal relationship between the petitioner and respondents 1 and 2 is misconceived. The submission that the petitioner has not shown to have altered the position in relying upon the promises is again misconceived as the petitioner has specifically pleaded that relying upon the scheme they had priced the goods to be supplied to the foreign buyers.

    8. In view of the aforesaid discussion, I hold that the withdrawal of Cash Compensatory Support by circular dated 6th January, 1979 w.e.f Ist January, 1979 so as to effect already confirmed contracts is illegal and in violation of the doctrine of promissory estoppel. Accordingly, Circular dated 6th January, 1979 insofar as it effects the petitioner in respect of contracts entered into under the scheme prior to Ist January, 1979 is quashed. The writ petition is allowed and the rule is made absolute. Respondents 1 and 2 are directed to examine each of the contracts mentioned in the writ petition and determine within a period of six months whether the said contracts were entered into under the Scheme and whether they were entered prior to 1st January, 1979. In respect of contracts entered into under the scheme prior to Ist January, 1979, petitioner would be entitled to cash assistance under the scheme which shall be granted within the period of six months. Civil Writ petitions 291 and 666 of 1982 are also allowed in the above terms. Parties are left to bear their own costs.

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    Old Village Industries Ltd v. Union Of India & Others .
    (Apr 30, 1993)