1992 PLP 1119 (MLD)

SALAHUDDIN MIRZA, J.‑‑‑ The petitioners were given permission, vide Government of Sindh, Industries and Mineral Development letter, dated 19th December, 1989 to start a sugar mill at Kadhan, District Badin but vide order, dated 26‑2‑1991 the sanction was withdrawn by the Department and the contention raised in this petition is that at this stage ‑sanction could not be withdrawn, specially when no show‑cause notice was given to the petitioners before withdrawing the same. The brief facts of the case are that the Government of Sindh vide their letter, dated pith December, 1989 (Annexure 'B') granted permission to the petitioners to establish a new sugar mill in the name of Mirza Sugar Mill Limited at Kadhan District Badin. The petitioners were to fulfil a number of conditions laid down in para 3 of the 'Letter of Sanction' and sanction No.3(b) envisages that the petitioners would submit to the Government a firm commitment regarding financing of the project from one of the recognised financial institutions and this firm commitment would be conveyed to the Government within a period of six months from the date of the letter of sanction'. The petitioners duly fulfilled all the terms and condition laid down in the `letter of sanction'. To meet condition No.3(b), the petitioner obtained such firm commitment from the Pakistan Industrial Credit and Investment Corporation Limited vide their letter, dated 8th April, 1990 (Annexure 'C') and by entering into `purchase and sale agreement' with the said Pakistan Industrial Credit and Investment Corporation Limited (PICIC) on 23rd April, 1990 (Annexure 'D‑1'). The petitioners thereafter deposited certain title deeds with the Pakistan Industrial Credit and Investment Corporation Limited vide memorandum of deposit of title deeds dated 24th ,April, 1990 (Annexure 'E‑1'). The petitioners then executed demand Promissory Note in the sum of Rs.33,30,42,113 in favour of Pakistan Industrial Credit and Investment Corporation Limited. Thereafter the directors of the petitioners executed `Directors' Guarantee for `Mortgage Expenses' in favour of Pakistan Industrial Credit and Investment Corporation Limited. The case of the petitioners is that after so heavily investing in the construction of the sugar factory and after implementing nearly 35% of the project the petitioners have. acquired vested rights in the said sanction for the establishment of the sugar mill. According to the petitioners, similar sanctions granted to other sugar mills during the same year (1989) have not been cancelled and the respondents are discriminating against the petitioners and their action attracts Article 25 of the Constitution. It is further stated by the petitioners that no reasons whatsoever had been given in the impugned letter, dated 26th February, 1991 (Annexure `N') for withdrawing the said sanction. It is further stated by the petitioners that the action of the respondents is oppressive and mala fide as it is calculated into financially ruin the petitioners who have incurred irrevocable financial commitments by obtaining loans by the loan.? giving agencies of Respondent No.2 and also from Foreign Suppliers.

2. The respondents have filed parawise comments and the gist of `their defence is that the petitioners were required under para. 3(b) of the letter of sanction (Annexure `B') to obtain firm commitment of the `entire financial assistance required' within a period of six months which the petitioners failed to do and, therefore, the respondents were within their rights to withdraw the sanction.

3. Learned counsel of the petitioners pointed out that in furtherance of the Letter of Sanction dated 18‑12‑1989 (Annexure `B') the petitioners have taken a number of irrevocable steps, committing themselves financially to the completion of the project. He listed the following steps taken by the petitioners in this regard:‑‑ (i)???????? The petitioners executed the 'Purchase; and‑ Sale Agreement' with . Pakistan Industrial Credit and Investment Corporation Limited (PICK'‑) on 23rd April, 1990 vide Annexure 'D‑1'. However, before this ag1ccrlcnt could be executed with PICIC, the petitioners had to pay to it a sum of Rs.10,15,750 by way of project examination fee and also paid commitment charge of 3/8 of 1% per quarter on the undisbursed portion of the financial assistance. Apart from this, mark up amount so far paid to PICIC comes to Rs.47,59,039 and a further sum of Rs.16,80,518 was paid to PICIC by way of Letter of Credit commission charges. (ii)??????? The petitioners deposited title deeds with PICIC vide `Memorandum of Deposit of Title Deeds', dated 24‑4‑19<)0 Annexure `E‑1'. (iii)?????? The petitioners mortgaged with PICIC 113.23 acres of their land vide Schedule 11 to `Memorandum of Deposit of Title Deeds'. (iv)?????? The petitioners executed `Demand Promissory Note' in favour of PICIC in the sum of Rs.33,30,42,113 vide photo copy Annexure `E‑2'. (v)??????? The Directors of the petitioners executed their personal guarantee in the said sum of Rs.33,30,42,113, stipulating that if the petitioner? company did not pay its debts, then the Directors would be personally responsible for the same. (vi)?????? The petitioners then obtained from Habib Bank Limited an undertaking to give a bank guarantee for Japanese Yen 62,07,30,000 with its interest in the sum of Japanese Yen 23,29,25,848 in favour of Messrs Nissho Iwai Corporation of Singapore which was to supply certain components for the establishment of the mills of the petitioners. (This bank guarantee was not completed because of the cancellation of the sanction as is evident from the letter of Habib Bank, dated 8‑5‑1991 (Annexure `P‑1' filed with M.A. No.1424/9 on 30‑5‑1991). (vii) ???? The petitioners entered into a contract with Messrs Nissho Iwai Corporation of Singapore. This contract could not be completed because Habib Bank had backed out vide its letter, dated 8‑5‑1991 on the ground of the withdrawal of the sanction by the Government and its draft is appended to Annexure `F‑1'. (viii) ???? The petitioners then entered into an agreement with Messrs Indus Super Builders of Karachi for the construction of the mill premises. This agreement (Annexure `G‑1') was executed by the parties thereto on 12th May, 199() and from clause 4(a) of the agreement the total cost of the construction is estimated at Rs.9.375 million out of which Rs.1.875 million was payable to the contractors upon execution of the contract and which has since been paid. (ix)?????? The petitioners entered into an agreement with Messrs Izhar Construction (Pet.) Limited of Lahore for the construction of the residential colony of the mill at the total cost of Rs.47.5 million out of which Rs.14.25 million were pay0ble on the execution of the agreement which was executed on 12th May, 1990 (Annexure `G‑1'). (x)??????? The petitioners then entered into at' agreement with Messrs Abidi Business Associates of Karachi for erection of machinery at the site of the mill. This contract was executed on 16th June, 1990 (Annexure `H'). This contract is for a total consideration of Rs.99,30,000. (xi)?????? The petitioners then entered into a contract with Messrs Heavy Mechanical Complex (Pet.) Limited Taxila for purchase of locally manufactured machinery for the mill (Annexure `J‑1') for a total consideration of Rs.230 million (Rs.23 crore). (xii) ???? The petitioners then on 29‑7‑1990 opened a letter of credit through PICIC in favour of Messrs Heavy Mechanical Complex (Pet.) Limited Taxila in the sum of Rs.19,91,50,000 (Annexure `J‑2'). (xiii) ???? The petitioners also arranged water supply for the mill as is evident from the letter dated 24‑6‑1990 from the Executive Engineer, Akram Wah Division Tando Muhammad Khan (Annexure `M'). (xiv) ??? The petitioners also obtained electric connection for the mill as per averments made in the petition which averments were not denied by the respondents in their parawise comments. (xv)????? The petitioners have also filed a number of photographs of site of the mill showing that the construction Work is at an advanced stage and even some machinery has arrived at the site and under the process of installation (Photographs Annexures `K‑1 to K‑15').

4. The contention of learned counsel of the petitioners is that the petitioners have acted upon the letter of sanction dated 18‑12‑1989 (Annexure `B') and in furtherance thereof they have undertaken a number of steps just enumerated above and have incurred heavy financial obligations and that on the date of cancellation, nearly 35%n of the project was completed, as is evident from photographs of the site Annexures `K‑1 to K‑15', and by the end of 1991 the mill of the petitioners would have gone into production but for the withdrawal of the sanction which has brought to a grinding halt the entire project of the petitioners and that the petitioners now have a vested interest in the sanction accorded to them for setting up the mill and that the respondents cannot at this stage withdraw the said sanction, specially without issuing a notice to the petitioners and giving them an opportunity of being heard.

5. In support of their contention, learned counsel of the petitioners has relied upon a number of reported judgments and one unreported judgment of this Court. The first is Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 S C M R

916. This was a case in which Ch. Muhammad Aslam etc., were permitted to import 126 trucks but subsequently this permission was withdrawn and the Government had taken the stand that it possessed untrammelled powers to control the imports under section 3(1) of Act (XXXIX of 1950) but it was held that by the time the permission was withdrawn, Messrs Ch. Muhammad Aslam and others had already secured vested rights in the import of trucks and, therefore, notwithstanding the untrammelled powers of the Government, the Government could not withdraw the permission at the stage when it did. The next judgment is PLD 1991 SC 546 Pakistan through Ministry of Commerce and 2 others v. Salahuddin and 3 others P L D 1991 SC

546. This judgment lays down the doctrine of promissory estoppel and it was held that this doctrine no doubt does not extend to legislative and sovereign functions of the State but it certainly does extend to its executive actions. In para. 17 of this judgment the limitation under which the doctrine of promissory estoppel applies to the executive actions of the State are given and it was pointed out by learned counsel of the petitioners that the present case does not fall into any of the limitations laid down in para. 17 of the judgment. Lastly, we were referred to an unreported judgment of this Court, dated 10‑12‑1989 in Nazir Ahmad Qureshi v. Government of Sindh and another Constitution Petition No.D‑960 of 1988 in which the petitioner had alleged the violation of the principle of loco poenitentiae (or of animus revertendi) on the ground that the exemption from appearing in a certain examination, granted to a Mukhtiarkar, having been acted upon, the Government could not retrace its steps and withdraw the exemption. The brief facts of this unreported judgment arc that petitioner Nazir Ahmad Qureshi was absorbed in the cadre of Mukhtiarkar and was exempted from passing the Revenue Qulifying Examination on condition that he would lose previous seniority in service and his seniority would be counted.from the date of notification.‑ The said Mukhtiarkar was accordingly absorbed in the new cadre on the above‑mentioned condition which he had accepted and it was held in the judgment that once the grant of exemption had been acted upon and the Mukhtiarkar having thus lost his seniority and lien in his previous' cadre, the Government could not withdraw the said exemption. We were also referred to West Pakistan Industries (Control or Establishment and Enlargement) Ordinance 1963 (Ordinance IV of 1963) and it was pointed out that section 4 of the Ordinance provided that where the establishment of a new industrial undertaking or enlargment of ane xisting industrial undertaking is likely to be commenced or has been completed in contravention of the provisions of this Ordinance, the Government was under obligation to give to the person responsible there for an opportunity of being heard before directing him to desist from establishing an industrial unit or enlarging an existing industrial unit without due permission or to stop further construction and to remove the un authorised undertaking or part thereof and on the basis of this section 4, learned counsel of the petitioners argued that if the Government could not proceed even against a concern which was establishing or enlarging an industrial unit unauthorisdely and without any permission whatsoever, unless such person or concern was given an opportunity of being heard, then the Government have no justification to proceed against the petitioners, without giving them a show‑cause notice and providing them an opportunity of being heard, when they were establishing an industrial unit in accordance with the permission granted to them and had at no stage taken any steps in an unauthorised manner.

6. Learned AA.‑G. appearing for the respondents only referred to paras. 4 and 8 of the parawise comments in which the defence taken is that per para. 3(b) of the letter of sanction the petitioners were expected to obtain firm commitment, within six months, of `entire financial assistance required but this the petitioners had not done and, therefore, the impugned action was justified.

7. After taking into consideration the facts of the case and submission of learned counsel of the parties, we are of the view that the petitioners, having' taken a number of steps in furtherance of the letter of sanction, dated 18‑12‑1989 Annexure `B' and having incurred financial liabilities, as enumerated above, have acquired vested rights in the sanction for the establishment of the mill in accordance with the letter of sanction. We are also of the view that it is incorrectly stated in paras. 4 and 8 of the comments that para.3 (b) of the letter of sanction (Anncxure'B') obliged the petitioners to obtain firm commitment of `entire financial assistance required'. Para. 3(b) does not stipulate that the petitioners would obtain firm commitment of entire financial assistance required'. As a matter of fact, it stipulates `a firm commitment regarding financing of the project from one of the recognised financial institutions.' Para 3(b) does not speak of `entire financial assistance required'. The petitioners have sufficiently met the condition laid down in para. 3(b) when they entered into an agreement of financial assistance with Pakistan Industrial Credit and Investment Corporation Limited vide their letter, dated 8th April, 1990 (Annexure `C') and by entering into purchase and sale agreement Annexure `D‑1' with Pakistan Industrial Credit and Investment Corporation Limited (PICIC). The fact that the respondents cancelled the sanction vide their letter, dated 26th February, 1991 (Annexure `N') without even giving the petitioners an opportunity of being heard speaks for the mala fides of the action taken against the petitioners.

8. We would, therefore, allow this Constitutional petition and hold that the petitioners having taken so many steps in furtherance of the Letter of Sanction and having incurred financial liabilities as shown above have obtained vested rights in the sanction and the respondents cannot now revoke the sanction when almost 35% of the project was completed, specially when such a drastic action was taken without even giving the petitioners an opportunity of explaining their position. The letter of Government of Sindh in the Industries and Mineral Development Department No.ll‑6‑139/89, dated 26th February, '', 1991 (Annexure `N') is, therefore, declared to be null and void and without lawful authority and of no legal effect.

9. These are the reasons for the short order announced on 10‑6‑1991 after the conclusion of the hearing. A.A./M‑1480/K?????????????????????????????????????????????????????????????????????????????????? Petition accepted.