TaxTMI 
TaxTMI 
1983 (5) TMI 218
X X X X Extracts X X X X
X X X X Extracts X X X X
....n helping price stabilisation acts in a manner contrary to its Raison d'etre and becomes counter-productive is aptly illustrated by the facts of this case. 4. The Gujarat State Financial Corporation ('Corporation' for short) is a corporation set up under Section 3 of the State Financial Corporation Act, 1951. It was an instrumentality devised to provide medium and long term credit to industrial concerns inter alia Hotel Industry. Respondent M/s. Lotus Hotels Pvt. Ltd. ('Company' for short) is a private limited company incorporated on October 7, 1971 under the Companies Act, 1956. The object clause of the memorandum of association shows that Company was incorporated mainly to carry on business of hotel, restaurent, cafe etc. The Company proposed to set up a 4-Star Hotel under the name and style of Lotus Hotels. One Shri Chandulal Jethalal Jaiswal is the promoter. After acquiring land, where the proposed 4-Star Hotel was to be set-up at Baroda, on December 7, 1977, the Company approached the Corporation for a loan of Rs. 30 lakhs and ommitting, for the time being, the correspondence exchanged between the parties, the Corporation by its letter dated July 24, 1978 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the information of the decision to the Company. There is some dispute between the parties about when the intimation about the resolution of the appellant was conveyed to the respondent but that is hardly relevant. 6. Ultimately, the respondent moved a petition under Article 226 of the Constitution in the High Court of Gujarat at Ahmedabad. A learned Single Judge issued a mandamus directing the appellant to disburse the promised loan to the Company forthwith in accordance with its letter of offer dated July 24. 1978 followed by the agreement dated February 1, 1979. The Corporation preferred L.P.A. No. 78/81. The Division Bench hearing the L.P.A. agreed with the conclusion reached by the learned Single Judge and dismissed the appeal. Hence this appeal by special leave. 7. Mr. R.P. Bhatt, learned Counsel who appeared for the appellant urged that the sanctioning of the loan by the Corporation in favour of the respondent was conditional upon the IDBI undertaking to refinance the loan and as IDBI declined to re-finance the loan, the Corporation cannot be compelled by a mandamus to grant the loan. It was also incidentally urged that the dispute raised between the parties is in the real....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is available from IDBI at 9% p.a. the rate of interest payable by the respondent to the appellant will be 121/2% p.a. otherwise it will be 13% p.a. In Clause 5 it is stated that commitment charge at 1% p.a. on the grant of loan not drawn out of the sanctioned amount shall be paid from the date as advised by IDRI if re-finance is sanctioned but in case re-finance is not sanctioned by IDBI commitment charge at 1% p.a. on the amount of loan Indrawn out of the loan sanctioned shall be paid from the expiry of 6 months from the date of sanction. Thus re-financing of the loan by IDBI was to have an impact on the rate of interest and the commitment charge and the sanctioning of the loan was not conditional upon re-finance from IDBI available. In fact consequences of IDBI not agreeing to re-finance loan are provided in the agreement. The Consequence was not that the appellant would be discharged from performing the agreement but it would only be entitled to higher rate of interest and liability to commitment charge from a certain date, but the agreement to advance loan would remain unaltered and binding. When these two clauses were pointed out to Mr. Bhatt, he could hardly pursue the point....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ituation, the principle of promissory estoppel would come into play. In Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of U.P. and Ors. this Court observed as under: The true principle of promissory estoppel, therefore seems to be that where one party has by his words of conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective whether there is any preexisting relationship between the parties or not. 10. Thus the principle of promissory estoppel would certainly estop the Corporation from backing out of its obligation arising from a solemn promise made by it to the respondent. 11. Jeet Ram Shiv Kumar & Ors. etc. v. State of Haryana & Ors. etc. . which slightly differs from the view....