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Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK W.P. (C) No. 35666 of 2022 An application under Articles 226 and 227 of the Constitution of India. -------------- M/s.Om Oil & Flour Mills Ltd. ...… Petitioner -Versus- Union of India and Others ..…. Opp. Parties Advocate(s) appeared in this case :- _______________________________________________________ For Petitioner : M/s. S.K.Padhi, Sr.Advocate & Mr. D.P.Dash, Advocate For Opp. Parties : Mr. B. Moharana, Sr.Panel Counsel, Mr. P.P.Behera, Advocate for O.P.1 Mr.M.K.Routray, Advocate for O.P.4 _______________________________________________________ CORAM: JUSTICE SASHIKANTA MISHRA J U D G M E N T 16.05.2025 SASHIKANTA MISHRA, J. The petitioner is a Public Limited Company incorporated and registered under the Companies Act, 1956. The present writ petition has been filed by it seeking the following reliefs :- “I) Admit this writ petition. II) Call for the records. Page 1 of 20 III) Issue Rule Nisi calling upon the O.P.Nos.1 to 3 along with their authorities to show cause as to why the subsequent changing terms and conditions imposed by the authorities in letter dated 21.03.2022 (under Annexure-5) and 06.04.2022 (under Annexure-6) shall not be withdrawn by the said O.Ps. and shall not be liable to be set aside by this Hon’ble Court. If the O.Ps. show no cause or show insufficient cause, the said Rule may be made absolute. Further, may kindly be pleased to issue appropriate writ/s in the nature of mandamus or any other appropriate form/s, directing the O.P. Nos.1 to 3 along with their authorities to allow the petitioner to withdraw/step out from the aforesaid ‘PLI’ Scheme and to release/refund the bank guarantee to the petitioner deposited vide document under Annexure-3 to the petition.” 2. Facts of the case, bereft of unnecessary details, are as follows :- 2.1. The Government of India in the Department of Food Processing Industries, vide Notification dated 02.05.2021, floated a Central Sector Scheme titled Page 2 of 20 ‘Production Linked Incentives Scheme for Food Processing Industry (In short, ‘the Scheme’). The object of the Scheme was to create global food manufacturing champions, promotion of Indian brands of food products, increasing employment opportunities for off-farm jobs, ensuring remunerative prices of farm produce and higher income to farmers. 2.2. The petitioner-Company submitted its application under the category of ‘large entity’. The General Manager, IFCL Ltd., which is the Project Management Agency, vide letter dated 03.12.2021 approved the application of the petitioner-Company under the Scheme for Category-I for sale based incentive for fruits and vegetables. 2.3. As per the terms and conditions of the letter of approval, the committed investment of the Company was to the tune of Rs.137.12 Crores. Further, as required, the petitioner-Company furnished bank guarantee of Rs.4,11,36,000/-, which is 3% of the aforementioned committed investment. Page 3 of 20 2.4. As per the approval letter, the rate of incentive (non-spices) was stated to be 10% (from financial years 2021-2022 to 2024-2025), 9% (for financial year 2025- 2026) and 8% (for financial year 2026-2027). The rate of incentive (spices) was to be 5% (from financial years 2021- 2022 to 2024-2025), 4.5% (for financial year 2025-2026) and 4% (for financial year 2026-2027). 2.5. After receiving the letter of approval, there being sudden decline in European trade market because of the Russia-Ukraine military conflict as well as Covid-19 pandemic, the Company faced fund flow crisis. 2.6. Under such compelling circumstances, the petitioner-Company submitted a representation to Opposite Party No.3 on 07.03.2022 expressing its inability to make further investment in branding and marketing (abroad) for financial year 2022-2023 and to reduce the committed investment by Rs.82.00 Crores and to revise the bank guarantee accordingly. This was intended to enable the petitioner to utilize the differential bank guarantee towards working capital. Page 4 of 20 2.7. However, before commencement of the Scheme, Opposite Party No.3, vide letter dated 21.03.2022 changed the relevant conditions of the previous approval letter and imposed further conditions by revising the investment from Rs.82.00 Crores to Rs.315.00 Crores, which was not in consonance with the application submitted by the petitioner under the Scheme. Moreover, the terms were quite onerous for the petitioner. That apart, the revision was made without considering the grievance raised by the petitioner earlier. Thus due to such unilateral decision, the petitioner-Company was put to serious pressure. 2.8.
Legal Reasoning
Subsequently, on 16.07.2022 there was a fire accident in the petitioner’s factory resulting in loss of more than Rs.5.00 Crores. Under such circumstances, the petitioner was constrained to request the authorities to permit it to withdraw from the Scheme and to release the bank guarantee, vide letter dated 19.07.2022. By letter dated 23.09.2022, the office of Opposite Party No.1 intimated that the request of the petitioner had been acceded to, by permitting it to withdraw from the Scheme Page 5 of 20 with further intimation that the bank guarantee shall be invoked within ten days. 2.9. Facing the threat of encashment of bank guarantee, the petitioner-Company had no other option but to inform the authorities of its decision of re-considering to continue in the Scheme as per the initial terms and conditions, vide letter dated 29.09.2022. Pursuant to such communication, the petitioner’s request was accepted by withdrawing the earlier letter granting permission to withdraw from the Scheme. 2.10. According to the petitioner, though its representatives apprised the authorities during several interactions about the genuine difficulties faced by it in implementing the Scheme, no action was taken but the authorities were bent upon invoking the bank guarantee. The petitioner was, therefore, constrained to approach this Court in the present writ petition with the prayer as quoted above. 3. The stand of the O.P.-authorities, as reflected in the counter filed by Opposite Party Nos.1 to 3, is that the Page 6 of 20 petitioner was originally selected as an entity under the Scheme and its proposal was approved on certain terms and conditions. By letter dated 17.05.2022, the petitioner requested to drop out from the Scheme and to release its bank guarantee expressing its inability to incur expenditure on branding and marketing abroad. In the meeting held on 18.07.2022 with the Ministry Officials, the Company again requested for release of the bank guarantee. However, as per Clause-15.1.10 of the Scheme, the bank guarantee is to be invoked if the selected applicant declines the offer of approval under the Scheme at any stage. As such, it was decided by the competent authority to invoke the bank guarantee and permit the petitioner to withdraw from the Scheme, vide communication dated 23.09.2022. Surprisingly, the petitioner expressed its desire to continue in the Scheme and to cancel the action of invocation of bank guarantee, which was an unconditional request. Nevertheless, the same was accepted by the authority and the Company was allowed to continue the Scheme. As per the Scheme, Page 7 of 20 in case an applicant wants to opt out from the Scheme without complying with the investment condition, the bank guarantee is required to be invoked. The petitioner further requested to be included in the Scheme, which is nothing but a tactic to evade its responsibility under the incentive Scheme. 4.
Legal Reasoning
Heard Mr. S.K.Padhi, learned senior counsel with Mr. D.P.Dash, learned counsel for the petitioner, Mr. B. Moharana, learned senior panel counsel with Mr. P.P.Behera, learned counsel for the Union of India and Mr. M.K.Routray, learned counsel appearing for Opposite Party No.4-Bank. 5. Mr. Padhi, learned senior counsel for the petitioner argued that the project was a non-starter inasmuch as the Company, despite best efforts, could not run it for reasons beyond its control. The Russia-Ukraine war followed by the situation arising out of Covid-19 pandemic created serious impediments in implementing the project. Added to the above, there was a major fire accident in the petitioner’s establishment resulting in loss Page 8 of 20 of Rs.5.00 Crores. The Company was, therefore, not in a position to implement the project. These aspects, though brought to the notice of the O.P.-authorities, were not considered in the proper perspective by them. Since the Scheme contains a Force Majeure clause, the threat to invoke bank guarantee without considering the Force Majeure conditions is entirely unjustified. Moreover, the project not having taken off at all, the petitioner did not avail any incentive whatsoever. Under such circumstances, invoking the bank guarantee would amount to unjust enrichment on the part of the O.P.- authorities. Mr. Padhi further argued that the unilateral change in the terms and conditions of the original approval letter has caused serious operational impediments, for which the petitioner has no other option than to opt out of the Scheme. Since on the earlier occasion, though such request was acceded to yet, there was a threat of invoking the bank guarantee by the authorities. The petitioner is therefore, constrained to approach this Court for a direction to the authorities to Page 9 of 20 permit it to opt out of the Scheme and to release the bank guarantee. 6. Mr. B. Moharana, learned senior panel counsel for the Union of India argued that the Scheme, particularly, Clause-15.1.10 permits the authorities to invoke the bank guarantee in case the applicant seeks to opt out of the Scheme. In the instant case, the petitioner initially requested to opt out of the Scheme, which was acceded to on the condition of invocation of the bank guarantee. The petitioner thereafter turned around and again requested for inclusion in the Scheme and to abide by the terms and conditions, which was also acceded to. While the matter stood thus, instead of acting upon its promise made on 29.09.2022, the petitioner has approached this Court apparently to wriggle out from its obligations under the contract. The allegation that the terms and conditions had been changed unilaterally cannot be accepted in view of the specific clause providing for such amendment as per Clause-18.8 of the Scheme. Since the petitioner requested for continuing in the Scheme unconditionally, the same Page 10 of 20 was accepted and the Company was allowed to continue. Now the Company cannot be permitted to take a different stand altogether and seek to opt out again from the Scheme. In such event, the bank guarantee has to be invoked. Mr. Moharana further submitted that as per the settled position of law, the principle of undue enrichment has no application in case of invocation of bank guarantee. 7. The facts of the case, as narrated above, are not disputed inasmuch as the petitioner having been selected as an entity under the Scheme, its project was approved by letter dated 26.03.2022 on certain terms and conditions. The petitioner acting in terms of the letter of approval also furnished bank guarantee to the tune of 3% of the committed investment. The letter of approval was further revised by letter dated 06.04.2022. The terms and conditions of the revised approval were not acceptable to the petitioner-Company, for which by letter dated 17.05.2022, it expressed its inability to continue with the Scheme and requested the Implementing Agency to drop it Page 11 of 20 from the Scheme and to release the bank guarantee. It is relevant to note that in the letter dated 17.05.2022, there is no mention whatsoever of the so-called force majeure conditions, such as Russia-Ukraine war or the Covid-19 pandemic. The reasons cited are exclusively confined to the change effected to the original approval letter regarding payment of incentives on spices and non-spices. It would be relevant to re-produce the last portion of the letter dated 17.05.2022 herein below :- “We have not availed any incentive under this scheme. In view of the above facts and major changes in your approval letter Dt.06.04.2022 from the 1st approval letter dt-03.12.2021 as mentioned above we are unable to take the risk of making huge investment for a very small benefit of sales-based incentive on spices only. Since you have revised the incentive payable committed in your approval letter Dt.03.12.2021 and limited to spices only vide your letter Dt.06.04.2022 we regret our inability to continue with the scheme and request you to kindly drop us from the scheme and release the Bank Guarantee.” Page 12 of 20 8. There appears to have been a meeting on 18.07.2022 of the Company with the officials of the Ministry wherein the reason for withdrawal from the Scheme, as mentioned in the letter dated 17.05.2022, was reiterated. This was followed by an e-mail sent on 19.07.2022 wherein, apart from reiterating the reasons already cited, it was informed that a major fire accident had occurred in the factory on 16.07.2022 resulting in loss of Rs.5.00 crores. Considering such request, the Ministry of Food Processing Industries in its letter dated 23.09.2022 accepted the request for withdrawal and intimated that as per Clause-15.1.10 of the Scheme, the bank guarantee shall be invoked. Surprisingly, upon receiving the above communication, the petitioner- Company sent an e-mail on 27.09.2022 to the Joint Secretary of the Ministry stating that if the bank guarantee is invoked, the Unit would become sick and ultimately be closed and that 1000 employees would be rendered jobless. Two days later, another letter was issued on 29.09.2022 by the Company to the Deputy Secretary of Page 13 of 20 the Ministry stating that the situation had been re-analysed and it was assured that the committed investment would be achieved. As such, the earlier letters were requested to be withdrawn and the action initiated by the Authorities was required to be cancelled. The petitioner’s request, as above, was accepted by the Ministry, vide letter dated 10.11.2022. 9. It is under the above circumstances that the petitioner has approached this Court again seeking to opt out of the Scheme on the ground that the revised approval is not acceptable to it. It would be proper at this stage to refer to the relevant Clauses of the Scheme. “15.1.10- If a selected Applicant is found to be ineligible at any stage, or if it has not complied with notifications, orders, Guidelines etc. issued under the Scheme, or declines the offer of the approval under the scheme at any stage, for any reason, the Incentive claim of such selected Applicant shall be forfeited. The bank guarantee shall be invoked following which the offer letter issued shall stand cancelled. Page 14 of 20 18.8- These guidelines shall be amended/ modified at any time during continuance of the Scheme and such amendment/modifications shall be binding to all the Applicants, including the Selected Applicants, during the tenure of the Scheme.” 10. Thus, on a plain reading of the Clauses, it is evident that the Scheme provides an option to the applicant to decline the offer of approval at any stage ‘for any reason’. If such option is exercised, the bank guarantee shall be invoked. Therefore, this Court is unable to accept the argument of Mr. Padhi that not having received any incentive whatsoever under the Scheme by the Company, the bank guarantee cannot be invoked. In fact, the invocation of the bank guarantee does not appear to have any nexus with receipt of incentive. Be that as it may, the Scheme, as already mentioned, also provides a Force Majeure Clause, which is re-produced below :- “3.16- Force Majeure: Extraordinary events or circumstances beyond human control such as events described as an act of God (like a natural calamity) or events such as a war, strike, public Page 15 of 20 health emergency, riots, crimes (but not including negligence or wrong-doing, predictable/seasonal rain and any other events specifically excluded).” 11. The provision of such Clause is obviously intended to overcome the difficulties arising beyond human control. Though much was argued with regard to the conditions in the European Market caused due to the ongoing Russia-Ukraine conflict and also the Covid-19 pandemic, the same not having been raised specifically by the petitioner-Company in any of its communications made with the Ministry, cannot be permitted to be raised or considered at this belated stage. Nevertheless, fact remains that a major fire accident occurred in the factory premises of the Company. The assertion that the fire accident resulted in loss of more than Rs.5.00 Crores has not been specifically disputed by the O.P.-Authorities. It goes without saying that fire accident can be treated as a force majeure event. Therefore, the provision under Clause-15.1.10 cannot be read entirely in isolation. In other words, force majeure clause having been provided in Page 16 of 20 the Scheme, the same cannot be ignored if circumstances so arise. Therefore, the reasonable interpretation would be that the power to invoke the bank guarantee, as provided under Clause-15.1.10 has to be read along with the force majeure clause, i.e., 3.16. It cannot be accepted that the Force Majeure clause has found place in the Scheme for no useful reason. Viewed differently, if such clause is not invoked when appropriate conditions are shown to exist, it would render the clause itself redundant, which cannot be the intendment of the framers of the Scheme. This Court finds that the facts relating to the fire accident vis-(cid:224)-vis the Force Majeure clause has not been specifically taken into consideration by the O.P.-Authorities even though the same was specifically indicated by the Company in its e- mail dated 19.07.2022. 12. Mr. Moharana, learned senior panel counsel argued that the petitioner having first sought for withdrawal from the Scheme and again expressed its desire to continue with the Scheme amounts to blowing hot and cold at the same time. Despite the same, the Page 17 of 20 Authorities allowed the petitioner to continue in the Scheme. 13. This Court finds force in the submission of Mr. Moharana as above, inasmuch as the petitioner has been certainly pre-varicating its stand. The argument that such a stand was taken under duress and coercion, as otherwise the O.P.-Authorities would have invoked the bank guarantee is too far-fetched and speculative to be accepted. The petitioner ought to have challenged the letter dated 23.09.2022 of the O.P.-Authorities at that point of time. Instead, what the petitioner seeks to challenge is the revised letter of approval, obviously, in view of the fact that the letter dated 23.09.2022 has since been withdrawn and replaced by the letter dated 10.11.2022 allowing the petitioner to continue. As regards the change in the terms and conditions of the original approval letter, it has been argued that the same were done unilaterally. This Court finds that as per Clause- 18.8, power is vested on the concerned Authorities to effect such changes. Of course, conferment of such power Page 18 of 20 does not give a licence to exercise the same arbitrarily. This is being said in spite of the fact that the petitioner has not demonstrated as to how the change of terms and conditions was arbitrary or otherwise not in consonance with the parameters of the Scheme. The petitioner has sought a direction to the O.P.-Authorities to withdraw the changed terms and conditions as per letters dated 21.03.2022 and 06.04.2022. This Court finds no reason to issue such direction. However, the alternative prayer of the petitioner to permit it to withdraw from the Scheme and for release of the bank guarantee can be considered. 14. In this regard, as has already been discussed, though Clause-15.1.10 permits the Authorities to invoke the bank guarantee even if the applicant seeks to opt out of the Scheme, yet the same cannot be done entirely ignoring the force majeure clause under Clause-3.16. 15. Thus, from a conspectus of the analysis of the facts, the provisions of the Scheme and the discussion made, this court is of the considered view that the O.P.- Authorities may consider granting permission to the Page 19 of 20 petitioner-Company to opt out of the Scheme. As regards invocation of the bank guarantee, this Court would direct the Authorities to take note of the force majeure Clause in view of the fire accident occurring in the petitioner’s Company and take an informed decision in the matter. 16.
Decision
The writ petition, is therefore, disposed of with the above observations and directions. 17. Necessary orders in this regard shall be passed by the O.P.-Authorities as early as possible preferably within a period of two months from the date of production of certified copy of this judgment by the petitioner. ……..………………….. Sashikanta Mishra, Judge Orissa High Court, Cuttack, The 16th May, 2025/ Manoj Signature Not Verified Digitally Signed Signed by: MANOJ ROUT K Designation: AR-CUM-SENIOR SECRETARY Reason: Authentication Location: ORISSA HIGH COURT Date: 16-May-2025 14:47:24 Page 20 of 20