Government not estopped from withdrawing promised assistance; unilateral adjustment deemed illegal.

The court held that the government was not estopped from withdrawing cash assistance promised to a company for exports under capital goods licenses. It was found that the company exported goods under the obligation of the import license, not solely based on the promise of cash assistance. The unilateral adjustment of cash assistance paid by mistake against future entitlements was deemed illegal and arbitrary, as disputes should be resolved through proper adjudication. The court allowed the appeal, setting aside the government's order and restraining the respondents from implementing the adjustment, while granting liberty for lawful recovery of the cash assistance.

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Issues Involved:

1. Entitlement to cash assistance for exports under capital goods licenses.
2. Adjustment of cash assistance paid against future entitlements.
3. Applicability of estoppel against the government.
4. Legality of unilateral adjustment by the government.
5. Maintainability of the writ petition under Article 226(1) of the Constitution.

Issue-wise Detailed Analysis:

1. Entitlement to Cash Assistance for Exports under Capital Goods Licenses:

The appellant company was granted an import license on June 11, 1962, subject to an export obligation of 15% of its total production. The Government of India issued a circular on August 17, 1966, granting cash assistance for specified engineering products, including cast iron spun pipes, at a rate of 20%. The company received a total of Rs. 2,81,267 as cash assistance for exports made between July 1966 and June 1967. However, on June 4, 1969, the Joint Chief Controller of Imports and Exports (JCCI&E) informed the company that no cash assistance was admissible against exports made in discharge of export obligations under capital goods licenses. The company contended that it relied on the circular and exported goods on the faith of receiving cash assistance, which was subsequently treated as trade receipts and subjected to income tax.

2. Adjustment of Cash Assistance Paid Against Future Entitlements:

The JCCI&E informed the company on December 28, 1970, that the cash assistance paid for exports between July 1966 and June 1967 was adjusted against future entitlements for exports made after April 1, 1969. The company argued that this adjustment was wrongful, illegal, unwarranted, arbitrary, and discriminatory. The respondents contended that the cash assistance was paid by mistake and was adjusted against future entitlements as the company was not entitled to such assistance for exports made under export obligations.

3. Applicability of Estoppel Against the Government:

The company argued that it altered its position to its detriment based on the government's promise of cash assistance and thus the government was estopped from withdrawing the assistance. The court held that the company did not export goods based on the promise of cash assistance but under the obligation of the import license. The court found no representation of an existing fact that could raise an estoppel or a representation of a future act enforceable at law or in equity. The entry of cash assistance as trade receipts and payment of income tax thereon was based on the company's mistaken conception and not on any representation by the government.

4. Legality of Unilateral Adjustment by the Government:

The court examined whether the government could unilaterally adjust the cash assistance paid by mistake against future entitlements. Section 72 of the Contract Act, 1872, mandates the repayment of money paid by mistake. However, the court noted that when there is a dispute about mutual claims, unilateral adjustment is not permissible. The government must resolve such disputes through adjudication under the process of law. The court found the government's action of adjusting the cash assistance without resolving the dispute to be arbitrary and without the sanction of law.

5. Maintainability of the Writ Petition under Article 226(1) of the Constitution:

The respondents contended that the company had not established any legal right that could be remedied by a writ under Article 226(1) of the Constitution. The court held that the company's entitlement to cash assistance after April 1, 1969, constituted its property, and the adjustment of this property without authority of law violated Article 31(1) of the Constitution. Thus, the writ petition was maintainable.

Judgment:

The court concurred with the findings that there was no estoppel against the government and that the company could not claim any legal right against the adjustment based on the promise of cash assistance. However, the court set aside the government's order adjusting the cash assistance and restrained the respondents from giving effect to the same. The respondents were granted liberty to recover the impugned cash assistance in accordance with the law. The appeal was allowed, and the Rule was made absolute without any order for costs.

Separate Judgment:

G.N. Ray, J. agreed with the judgment delivered.

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