State's appeal dismissed over financial cap on Investment Promotion Assistance under Special Package of Incentives scheme

HC dismissed State's appeal regarding imposition of financial cap on IPA (Investment Promotion Assistance) for a company under Special Package of Incentives. The company was entitled to IPA at 75% of VAT and CST paid for five years without any cap based on Fixed Capital Investment, as per eligibility certificate dated May 18, 2010. Court held that Additional Chief Secretary's order dated February 14, 2019 imposing financial cap was based on irrelevant materials and incorrect interpretation of government order dated March 2, 2006. State's action was found to be mala fide and arbitrary, designed to defeat company's legitimate claim for balance amount under the special package.

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Issues Involved:
1. Whether the Special Package of Incentives granted to ACL stipulated any overall financial cap based on Fixed Capital Investment for release of IPA.
2. Whether the State's contention that IPA over and above FCI is opposed to public policy is valid.

Summary:

Issue 1: Financial Cap on IPA

The Court examined the Special Package of Incentives granted to ACL under the West Bengal Incentive Scheme, 2000 (WBIS, 2000). The package provided Industrial Promotion Assistance (IPA) at 75% of VAT and CST paid in the previous year without any financial cap. The State's argument that total incentives should not exceed 100% of Fixed Capital Investment (FCI) was rejected. The Court held that the special package did not stipulate any overall financial cap based on FCI for the release of IPA. The Court emphasized that any restrictive clause should have been explicitly included in the special package, which was not the case.

Issue 2: Public Policy and IPA Over FCI

The State argued that granting IPA over and above FCI would be against public interest, citing Section 23 of the Indian Contract Act, 1872. The Court found no evidence to support the claim that the terms of the Special Package were unreasonable or unfair to the extent that they would shock the Court's conscience. The Court noted that the State had acted upon the order dated 02.03.2006 for a considerable period and should not be allowed to unilaterally resile from its commitments. The argument that releasing IPA over FCI would be opposed to public policy was not substantiated with adequate material or pleading.

Conclusion:

The appeal by the State of West Bengal was dismissed, and the Single Judge's order directing the State to disburse the balance amount of IPA to ACL was upheld. The Court found the State's attempt to impose a financial cap on IPA and its public policy argument to be without merit.

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