| Incentives for litigation |
|
surprised when the aam aadmias well as some soft- nosed industrialists believe their rhetoric — a triumph of hope over experience. It will soon be the turn of the believers to be surprised. The balloon of promises will be slowly squeezed till all the hot air is let free. Contrary to the common notion, it is not just the aam aadmiwho are prone to trust and act on assurances of politicians; down- to- earth businessmen also have their weak moments. They sink crores of rupees expecting tax holidays, subsidies or infrastructure when the new government comes to power. But governments often backtrack or are unable to keep their word regarding incentives. This leads to litigation. By the time the appeals trundles to the Supreme Court, with strolleys overflowing with dogeared files, the government might have changed twice. Three judgments of the Supreme Court this month showed how incentives turned into bitter litigation lasting years. In all the cases, the respective high courts had gone wrong on the government’s change of policy despite earlier promises. In one case, SVA Steel Re- rolling Mills vs State of Kerala, the state government promised continuous power supply for five years to new units to attract investment. When there was a power shortage, the government modified the terms of the scheme and stated that when there was reduction of supply to the extent of 50 per cent or more, such period would be added to the period of five years. The industries challenged the change of policy in the high court and lost. On appeal, the Supreme Court ruled that the benefit period should be extended even for days when the supply was above 50 per cent but not 100 per cent promised. Many units cannot function without full uninterrupted power supply and they would also incur several incidental costs. “Before laying down any policy which would give benefits to its people, the state must think about the pros and cons of the policy and its capacity to give the benefits,” the judgment said. “ Without proper appreciation of all the relevant factors, the state should not give any assurance, not only because that would be in violation of the principles of promissory estoppel but it would be unfair and immoral on the part of the state not to act as per its promise.” In the second case, sales tax exemption given to units for using raw materials to manufacture goods was the point of discord. The Supreme Court set aside the judgment of the Jharkhand high court which had stated that Steel India Ltd was not eligible for sales tax exemption granted to certain industries under an incentive scheme. The state revenue authorities had denied the benefit to the firm, which purchased raw materials such as steel scraps and produced out of them agriculture and household articles. They maintained that no new commodity came into existence and there was no “ manufacture”. The court rejected the argument and directed the authorities to issue tax exemption certificates. In the third case, the Rajasthan government had classified units into new, large- scale, prestigious and very prestigious. The eligibility was further linked to districts, types of units, the extent of exemption from tax and the maximum exemption available in terms of percentage of fixed capital investment. All these made fertile ground for jaw- breaking arguments for 15 years in the case, Commercial Tax Officer vs Binani Cements. The court took a medium line. In several such instances, the court has castigated governments that promised bounties for feigning memory loss. Incentive policies are left to lapse since notifications are not issued. In one such case, the court reviewed the whole case law on broken assurances and criticised the state: “ The Bihar government cannot be permitted to rely on its own lapses in implementing its policy to defeat the just and valid claim of the company. The state cannot be permitted to take advantage of its own wrong.” On the industrial policy lapsing, the judgment said, “ if the excuse is accepted, it would put premium on and accord a justification to the wholly arbitrary action of the government in not issuing the notification in accordance with the industrial policy.” ( State of Bihar vs Kalyanpur Cements). While the Supreme Court recently asked the Election Commission to draft guidelines on manifestos to bring in accountability, political parties have asserted that their right to make promises is fundamental to democracy. When old cabinet resolutions are rescinded, ignored, bypassed or quietly shelved, large investments might go waste and employees suffer. Very few firms are capable of fighting a debilitating legal battle with governments that change. The affected industries cannot raise their grievances in the legislature, as development issues like these are now clouded by pepper spray. Taking politicians’ word with a handful of salt will prevent after- effects. Courts are strewn with promises made by politicians during election time and it’s not just the common man who is prone to such fake assurances MJ ANTONY |
|
--
This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.
__._,_.___
No comments:
Post a Comment