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Devi Multiplex & Anr. v. State of Gujarat & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 6478 of 2009)Decided 13 May 2015
Civil Appeal No. 6478 of 2009
Justice Anil R. Dave · Justice Uday Umesh Lalit

Background

The Gujarat Government's 1995-2000 "New Package Scheme of Incentives for Tourism Projects" gave multiplex/entertainment-complex developers like the appellants tax-holiday benefits, with Clause 10 allowing an extension of time to commence operations in case of genuine difficulty. A later Government Resolution (G.R.) dated 28.06.2000 purported to curtail this extension facility, and when the appellants' multiplex project was delayed by the 2001 Gujarat earthquake and 2002 communal riots, the State Level Committee refused further extension, holding it had lost the power to grant one because of the G.R. The Gujarat High Court upheld this refusal, holding the Scheme's operative period had ended on 30.11.2000.

Decision Breakdown

The Supreme Court held that because the original 1995 Scheme had been given statutory force through a notification under Section 29 of the relevant Act (which required any amendment to similarly be notified and laid before the State Legislature), the subsequent G.R., which was never converted into such a statutory notification, could not lawfully dilute or curtail the Scheme's Clause 10 benefits. It also invoked the principle of promissory estoppel, holding it would be unfair for the State to go back on the incentives it had promised to induce investment. The Court set aside the High Court's finding that the Scheme's extension facility had lapsed, held the State Level Committee still had the power to consider extension requests, and directed the Committee to assess within three months whether the appellants' request for extension was justified on the facts (including the earthquake and riots), with the same relief extended to all the connected appeals raising identical issues.

Lesson Learnt

A government cannot informally dilute or curtail benefits it previously granted through a scheme that has acquired statutory force, merely by issuing an executive resolution: any change of that kind must follow the same formal, legislatively-sanctioned process as the original notification, otherwise the original promise (and the principle against going back on it) continues to bind the State.

Official source (sci.gov.in)View Judgment (PDF)

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