M/S. SUN BEVERAGES (P) LTD. versus THE STATE OF UTTAR PRADESH AND ORS.

Citation: [2003] SUPP. 6 S.C.R. 420 · Decided: 28-11-2003 · Supreme Court of India · Bench: P. VENKATARAMA REDDI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS. SUN BEVERAGES (P) LTD. 
v. 
THE STATE-OF UTTAR PRADESH AND ORS. 
NOVEMBER 28, 2003 
•B 
[P. VENKATARAMA REDDI AND DR. AR. LAKSHMANAN, JJ.) 
Industrial Laws: 
Industrial Development-Formulation of Scheme for the grant of 
. C subsidy to industrial unit-Unit set up in zero industrial area treated as 
pioneer unit within the terms of the scheme and registered with Director 
General of Technical Development (DGTD) as Medium Scale Indust1y-
Sanction of subsidy-Subsequent notification of the Government of India 
altering the definition of Small Scale and Medium Scale Indus fly-Unit de-
'D 
registered as Small Scale lndustly-Noticefor refund of subsidy-Justifi-
cation of-Held: Unit practicing no fi·aud or misrepresentation in obtain-
ing sanction/eligibility of subsidy and also there is no provision under the 
Scheme or agreement that unit granted subsidy to remain as DGTD unit 
for a period of jive years- but unit de~recognised as DGTD Unit due to 
change in the definition of Small Scale Indus fly-Hence State not entitled 
E to seek refund of subsidy. 
State Government formulated a scheme for grant of subsidies to 
various industrial .units for giving an ·impetus to the industrialisation 
of the backward areas -
zero industrial areas of the State. The unit 
F :bad to be a pioneer unit-having investment of more than Rs.I crore 
and established after 01.10.1982 and was -to be registered with ithe 
Director General of Technical· Development for the grant of subsidy 
Appellant's unit was set up in the zero industrial area. :fts· investment 
in plant and machinery exceeded Rs. 20 lacs and was registered with 
DGTD .as a Medium Scale ·Industry. As it fulfilled the conditions 
G prescribed under the scheme, it was sanctioned subsidy ofRs.15 lacs 
to be paid in ·two instalments. Appellant's unit and ·the respondent-
State entered into an agreement under which the mode and method of 
payment of subsidy was prescribed. Thereafter the Government of 
India altered the definitions of Small Scale and Medium Scale Industry 
H and increased the limit of investment in plant and machinery for Small 
420 
.J 
SUN BEVERAGES (P) LTD. v. STATE 
421 
Scale Industry from Rs. 20 lacs to Rs. 35 lacs. One year after the A 
sanction and payment of subsidy, appellant's unit was de-registered as 
a Medium Scale Industry. Appellant applied for registration to Direc-
tor oflndustries, U.P. as a Small Scale Industry. As the appellant's unit 
ceased to be a ·Medium Scale Industry before the expiry of the period 
of five years, respondent-State issued notice for the refund of the B 
subsidy. It also issued a recovery certificate for recovery of amount as 
arrears of land revenue. Appellant filed writ petition challenging the 
recovery proceedings. High Court dismissed the petition holding that 
there was breach of the terms granting subsidy as the unit was de-
r<'.gistered by DGTD, and the respondents are entitled to recover 
subsidy with interest. Hence the present appeal. 
C 
Respondent-State contended that the appellant on his own freewill 
applied for de-registration; that the appellants were no more entitled 
to be registered under DGTD; and that since the constitution of the 
Company had undergone change and under the changed conditions the D 
respondents were entitled to recover the subsidy given to the appellant. 
Allowing the appeal, the Court 
HELD : 1. The respondent-State have acted arbitrarily and 
contrary to the terms of the Scheme and the Agreement and on the E 
basis of unwarranted assumptions in seeking to recover the amounts 
given as subsidy to the appellant. (435-B·CJ 
2.1. In the instant case, appellant's unit was registered as small 
scale industry in view of the revised notification of the Gover.nment of F 
India. Even though the investment of the appellant in the machineries 
was more than Rs. 35 Iacs, but the machineries utilized for manufactur-
ing was less than Rs. 35 lacs, the appellant was. compelled to get it 
registered as Small Scale Industry Unit, instead of a DGTD Unit. The 
requisite registration certificate was granted to the appellant register-
ing the appellant as a Small Scale Industry Unit, but it continued to be a G 
pioneer unit in terms of the scheme to which the subsidy had been granted 
to the appellant. Further, the respondents could not point out that there 
was any change in the investment, assets, production, land, building, 
plant and machinery of the appellant and also that there had been 3llJ' 
ch

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