STATE OF BIHAR Vs. KALYANPUR CEMENTS LTD

JUDGEMENT

(1.) This appeal has been filed by the State of Bihar challenging the judgment and order dated 24.04.2002 of the High Court of Judicature at Patna in CWJC No. 6838 of 2000, whereby, the High Court has allowed the writ petition filed by the respondent herein. The respondent - M/s. Kalyanpur Cement Ltd. (hereinafter referred to as 'the Company'), is a public sector company incorporated in the year 1937 as a Lime-producing Company. It is engaged in the business of cement manufacturing and marketing operations since 1946. It had commenced production with a capacity of 46000 metric tonnes. It underwent a series of expansion in 1958, 1968 and 1980. Nowadays, the Company is operating one-million- tonne cement plant. In view of the changes in the technology worldwide, it has set up a brand new state-of- art 'dry process' plant in 1994 at a capital cost of Rs. 250- 260 crores. This was made possible with financial assistance of World Bank and the All India Financial Institutions. Its advisor and financial collaborator is Holder Bank (HOLCIM) at Switzerland. The Company claims to be one of the very few large SCALE surviving industrial units in the State of Bihar. It is the only large SCALE industry in central part of the State. Over 2000 persons are in the employment of the Company. The Company claims that due to circumstances beyond its control such as recession in the cement industry as well as Government related problems; delayed decision in granting Sales Tax Deferment benefit the Company began to suffer heavy losses. This was accentuated by the non- availability of the sanctioned working capital from the financial institutions in the absence of the sale tax exemption under the Industrial Policy, 1995. There was continuous loss in production for a number of years. This has resulted in erosion of Net-Worth of the Company, as the total Net-Worth of the Company was less than its accumulated losses in December, 2002, it has registered with Board for Industrial and Financial Reconstruction (hereinafter referred to as 'BIFR') as a sick unit. It has been actually declared as sick Company by BIFR on 28.05.2002. Its reference case is pending with the BIFR. The Company in order to rehabilitate itself sought the assistance from financial institutions for restructuring package. The Company's proposal for financial assistance and restructuring has been approved by various financial institutions, in principal. However, the same has been made conditional on certain preconditions being met. One of the conditions imposed by the financial institutions was that the restructuring package would be made available only on the Company obtaining a Sales Tax exemption for a period of 5 years from the State Government, in terms of Industrial Policy, 1995. Accordingly, Company submitted an application to the State Government on 21.11.1997 for grant of Sales Tax exemption under the Industrial Policy, 1995 for a period of 5 years w.e.f. 01.01.1998. Thereafter, the matter remained pending for consideration by the State Government and the financial institutions. There were a series of joint meetings of the Government, Financial Institutions and the Company, over the next three years. In all these meetings, as well as correspondence categoric assurances were given that the necessary Sales Tax exemption notification would be issued shortly. However, no such notification was issued causing great hardship to the Company. It was, therefore, constrained to file writ petition (CWJC No. 6838 of 2000) in the High Court at Patna.

(2.) In this writ petition, the prayer was for issuance of the writ in the nature of mandamus directing the State of Bihar to issue necessary Notification under Clause 24 of the 1995 Policy. The claim of the Company was that Notification under Clause 24 of the Industrial Policy, 1995 ought to have been issued within one month of the release/publication of the Policy in September, 1995. Voluminous record was produced before the High Court in support of the submission that the Company is entitled to exemption under the 1995 Policy. The State of Bihar contested the writ petition by filing a counter affidavit. Supplementary counter affidavit was filed on behalf of the Government through Secretary-cum- Commissioner, Department of Commercial Taxes (respondent No. 4 in the writ petition) on 05.12.2000. In paragraph 5 of the aforesaid affidavit it is stated as under:

(3.) In paragraph 8 of the affidavit it is averred "That the deponent states that it shall be possible to issue necessary notification after approval of the proposal of the relevant notification by the Hon'ble Chief (Finance) Minister of the Cabinet." It is also stated in the affidavit "That the deponent has further requested the Secretary-cum-Commissioner, Department of Finance, vide letter dated 28.11.2000 to take necessary approval earliest as the same has to inform to the Hon'ble Court." Thereafter, yet another supplementary counter affidavit dated 09.01.2001 was filed by Shri Krishan Nand Roy, Assistant Commissioner, Commercial Taxes, Bihar. In the affidavit, it was contended that the State Government in a meeting under the Chairmanship of the Chief Minister held on 06.01.2001 has decided upon due deliberation not to grant any Sales Tax incentives to sick industrial units. Therefore, the claim of the Company has been rejected. The four stated reasons justifying the aforesaid decision were as under: