In a setback to the Uttar Pradesh government, the Supreme Court on Tuesday refused to interfere with the Allahabad High Court’s order that termed an abrupt suspension of a 2004 policy to attract investments in the sugar sector “arbitrary” and done “without the application of mind”.
A bench headed by Justice AK Sikri, without expressing any opinion on merits, remanded the Bajaj Hindusthan matter back to the cane commissioner for fresh consideration as per law.
Bajaj is seeking various incentives which were promised under the policy initiated by the state in 2004. However, the UP government told the Supreme Court that “rescinding the benefits under the Sugar Policy of 2004 was valid in law” and the HC ought to have considered that the state government’s order of July 7, 2007, was a policy decision and hence was not amiable to the HC’s jurisdiction.
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It also contended that the state is “entitled to withdraw, alter or amend its policy decision, if such a decision of withdrawal is taken in overwhelming public interest”. Besides, the state exchequer was facing a “heavy financial burden of about R3,500 crore”, which forced it to revoke the Sugar Policy in “overwhelming public interest”, the state government stated in its appeal against the HC order.
The state government said there was no eligibility certificate granted for offering incentives, so no exemption could be granted and the issue of promissory estoppel, too, did not apply in the Bajaj’s case.
Bajaj senior counsel SK Bagaria and counsel Sanjeev Singh argued that the court should remand the matter and let the cane commissioner take a call whether the company fulfilled the criteria. The lawyers further argued that Bajaj had made a huge investment of around R3,000 crore and set up units across the state in 2005 on the basis of the sugar policy.
To lure investors, the Mulayam Singh Yadav-led UP government had firmed up the policy under which eligible mills were entitled to incentives, including exemption from entry tax on sugar, trade tax on molasses, stamp duty and registration charges on purchase of land, purchase tax on cane and reimbursement on transport of sugar, and a capital subsidy of 10% on the investment made. However, just within a week of Mayawati coming to power in 2007, the policy was “scrapped” through an executive order, leaving the mills that had taken huge loans to fund the expansion strapped for funds. While some mills that had made early investments under the policy, including Bajaj Hindusthan, had been granted the incentives for a while, many others couldn’t reap the benefits.
Now, the Akhilesh Yadav government is opposed to providing incentives announced by the Mulayam Singh Yadav government.
Criticising the state’s move, the Allahabad High Court had in 2014 ruled in favour of Bajaj primarily on three counts: The doctrine of promissory estoppel that mandates the state to fulfill its promise; the court’s ruling that a legislative enactment made by a notification under a statute can’t be cancelled through an executive order;
and non-withdrawal of notifications under which various exemptions and incentives were proposed to be extended.