STATE OF ORISSA AND ORS. versus MANGALAM TIMBER PRODUCTS LTD. ETC.

Citation: [2003] SUPP. 5 S.C.R. 476 · Decided: 11-11-2003 · Supreme Court of India · Bench: R.C. LAHOTI, ASHOK BHAN · Disposal: Dismissed
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Judgment (excerpt)

A 
ST ATE OF ORIS SA AND ORS. 
v. 
MAN GALAM TIMBER PRODUCTS LTD. ETC. 
NOVEMBER 11, 2003 
B 
[R.C. LAHOTI AND ASHOK BHAN, JJ.] 
Administrative Law : 
Promissory Estoppel--On representation of State Government company 
C established an industry in the State as per terms contained in Industrial 
Policy-Accordingly, raw material supplied to industry at a fixed price--
Industry selling its products at a rate based on price of raw material supplied 
to it-Later Government proposing to revise retrospectively the price of raw 
material to the detriment of Industry-Proposal struck down by High Court-
D Government contending that as there was no contract in writing principle 
of promissory estoppel would not apply-Held, State Government having 
persuaded the company to establish an industry and the latter having acted 
on the solemn promise, purchased raw material at a fixed price and also sold 
its products by pricing the same taking into consideration the price of raw 
material, the former cannot be permitted to revise the terms for supply of raw 
E material adversely to the interest of the company and effective from back date 
and place the company in a situation which it will not be able to resolve--
Even, prima facie, it was not a case of an error in calculation committed by 
State Government of which it was not aware-Besides, State cannot take 
advantage of its own omission. 
F 
G 
H 
Sales Tax Officer and Anr. v. Shree Durga Oil Mills and Anr., (1998) 1 
SCC 572 and Sharma Transport Rep. By D.P. Sharma v. Govt. of Andhra 
Pradesh and Ors., (2002) 2 SCC, 188, cited. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. !0664 of 1996. 
From the Judgment and Order dated 16.5 .95 of the Orissa High Court 
in O.J.C. No. 7341of1993. 
WITH 
C.A. No. I 0665 of 1996 
476 
STATE OF ORISSA v. MANGALAM TIMBER PRODUCTS LTD. 
477 
Raj Kumar Mehta for the Appellant in C.A. No. I 0664/96. 
Radha Shyam Jena (NP) for the Appellant in C.A. No. I 0065/96. 
Dushyant A. Dave, Ramesh Singh, Ms. Gauri Rasgotra and Suman J. 
Khaitan for Mis. Khaitan & Co., for the Respondent in C.A. No.10664/96. 
Ramesh Singh, A.T. Patra and Nipun Malhotra for Mis. O.P. Khaitan & 
Co., for the Respondent in C.A. No. I 0665/96. 
The following Order of the Court was delivered : 
A 
B 
C.A. No. 1066411996 
C 
A decision taken by the Government of Orissa on 27.4.1989 to revise 
with effect from back date the terms for making available raw material to the 
respondent has been struck down by the High Court of Orissa as violative 
of the principle of promissory estoppel. The state of Orissa is in appeal by 
~~~~ 
D 
On the representation made by the State of Orissa as contained in their 
Industrial Policy of the year 1980 and 1983 the respondent was persuaded to 
establish its industry in the state of Orissa. On 27 .4.1989 the State Government 
proposed revision of certain terms which resulted in revision of rate of royalty 
and the method of stack measurement adversely to the interest of the E 
respondent. The respondent was not obviously agreeable and protested. The 
representation of the respondent ultimately prevailed with a high level 
committee of the State Government and on 3.10.1989 a decision was taken to 
not to alter the terms for supply of raw material on which the respondent had 
acted and established its industry. The industry continued to function, F 
consumed the raw material and sold its finished products to the buyers in the 
market. The pricing of the finished product was done by taking into account 
the rate of royalty and the method of stack measurement as proposed by the 
respondent and agreed upon between the parties. On 2.9.1993, the State 
Government again proposed to make a revision with effect from a back date, 
i.e., 1st April, 1998. This proposal was challenged by the respondent by filing G 
the writ petition in the High Court which has been allowed and the 
communication dated 2.9.1993 containing the impugned revision has been 
struck down by the High Court. 
It is submitted on behalf of the State of Orissa that there was an error H 
478 
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R. 
A of calculation made by the State and that what the State proposed to do was 
only to correct the erroneous method of calculation. Then, the Government 
of India was not agreeable to re-plantation by private party like the respondent 
and so the re-plantation had to be undertaken by the State which involved 
additional cost to it. It is also submitted that strik
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