Read Order: Jaswinder Singh v. Union of India and others 

Monika Rahar

Chandigarh, May 28, 2022: While dealing with a writ petition filed by an aggrieved farmer whose application for availing benefits of a subsidy scheme announced by the National Horticulture Board was rejected by the Board even after he complied with the terms of the scheme, the Punjab and Haryana High Court has held that the NHB falls within the ambit of the term State used in Article 12 of the Constitution of India and it cannot arbitrarily apply new norms to reject a claim for subsidy.

The Bench of Justices M.S. Ramachandra Rao and H.S. Madaan added, “The principle of promissory estoppel is also attracted in the instant case since on the assumption of receiving subsidy on fulfillment of norms prescribed in the Scheme (P1), the petitioner had approached respondent No.4-Bank, obtained a loan, completed the project and thus changed his position.”

The National Horticulture Board [NHB] (third respondent) initiated various Credit Linked Capital Investment Subsidy Schemes to encourage private investment in specified activities, areas and technology in relation to horticulture activities. One such scheme was: ‘Scheme-I: Development of Commercial Horticulture through Production and Post Harvest Management of Horticulture Crops’. 

The petitioner, a farmer, came to know about the said Scheme and decided to set up a project of ‘Rose Cultivation under Poly/net house’ on his land, under the said Scheme and he also availed a term loan from the fourth respondent (Bank) for his project, as was required by the operational guidelines of the NHB under the above Scheme. 

According to the petitioner, the loan was disbursed from 2016 onwards and the petitioner completed the construction/erection of the shade net house in March 2017 and started Rose cultivation at the project site. The petitioner submitted a financial subsidy claim under a direct category without LOI through the Bank for the said project, after completion of the project and disbursement of term loan for the cultivation of roses in his land under the Scheme referred to above, and whatever information was sought by NHB was also submitted. 

The NHB constituted a Joint Inspection Team comprising its representatives and those of the State Department of Horticulture, Govt. of Haryana and the lending bank to inspect and submit a report and make appropriate recommendations as per prescribed guidelines of the NHB. 

After inspection, the Joint Inspection Team submitted its report based on which the Joint Director and the Deputy Director of the NHB recommended the Project Approved Committee [PAC] PAC to consider and approve the back-ended subsidy of Rs. 46.90 lakh to the petitioner but, the PAC, however, ‘deferred’ its decision for a revisit for confirming the technical specification of shade net house by a committee of NHB. It also mentioned “lacking documents/documentation will be examined by the concerned Division.”

On a further visit, the technical expert confirmed the technical specification of the shade net house as per NHB standards and found rose crops also. He stated that the project was viable and recommended for approval of subsidy as per NHB guidelines. But, the PAC of NHB in its meeting rejected the petitioner’s application for a final subsidy on the ground that the selected variety was not suitable for the cultivation of Rose for cut flowers and that appraisal of the project was also not done properly. The petitioner subsequently made representation to the Grievance Redressal Committee but, no action was taken thereon. 

So the petitioner filed the present Writ Petition to declare the proceedings of the PAC meeting to the extent it relates to the proposal of the petitioner as void and illegal; to quash the same by issuing a Writ of certiorari and to issue a Writ of Mandamus directing the respondents to release the subsidy of `46.90 lakh to the petitioner on the basis of the recommendation and report of the Joint Inspection Team in accordance with the guidelines of the NHB. He also sought compensation for the losses suffered by him on account of the interest charged by the Bank on the proportionate term loan amount of Rs. 46.90 lakh which is equal to the amount of the subsidy payable by the NHB. 

The respondent opposed the writ by contending that the Writ Petition itself was not maintainable and that any assistance by way of subsidy from the public exchequer can only be given in strict compliance and literal interpretation of the guidelines enumerated in the policy; and that the petitioner was erroneously interpreting the policy as per his own whims and fancies.  It was also argued that the subsidy schemes initiated by the third respondent were for the benefit of small, marginal and women farmers and not for the particular group/firm/organization as claimed by the petitioner. It was also contended that no citizen has a right to claim any subsidy. 

After considering these submissions, the Court analyzed all three grounds for rejection of the petitioner’s application, the first of which was the ‘selection of a variety not suitable for cultivation of rose-cut flowers’. In this regard, the Court added that the scheme nowhere mentioned what particular varieties of rose flowers or other flowers can be grown to claim subsidy under it. Further, the bench added that once both the Joint Inspection reports for the inspection stated that the petitioner’s project conforms to technical specifications as per NHB standards, the NHB could not reject the petitioner’s claim for subsidy on this ground. 

Regarding the next ground for rejection (‘Rose crop condition was found poor’), the Court was of the opinion that the first inspection report mentioned that ‘crop was in good condition’, and that even at the second inspection, the Joint Inspection team did not say that the crop was in poor condition. It noted the existence of the rose crop. The Court added that the view that the crop was in poor condition was formed based on certain photographs taken at the time of revisit without the Joint Inspection team saying so, and this reason was not accepted by the Court. 

For the third reason (‘Appraisal of the project not proper’), the Court added that the petitioner’s case falls under the category of making a claim for full subsidy after taking a term loan and completing the project. For this category, the Court added that no financial appraisal report was needed and thus it was not open to the NHB to reject his claim on the ground that the ‘financial appraisal report was not proper’. 

Also, the Court added that the Bank had advanced a substantial amount after appraisal of the project and it was its duty to place the said documents (agreement note) before NHB. Had the project not been apprised properly, the Bank would not have granted any loan to the petitioner at all, the Court held. 

Thus, the Court was of the opinion that the reasons given by the NHB for rejecting the petitioner’s subsidy claim were arbitrary, perverse, contrary to the record and the norms mentioned in the Scheme framed by the NHB and also violative of Articles 14 and 300A of the Constitution of India. 

The Court held that the NHB would undoubtedly fall within the ambit of the term State used in Article 12 of the Constitution of India, and if it had laid down certain standards or norms of eligibility for a benefit such as a subsidy, it cannot arbitrarily apply new norms to reject a claim for subsidy or ignore the norms laid by it in the very Scheme framed by it. 

It was also held that the principle of promissory estoppel is also attracted in the instant case since on the assumption of receiving subsidy on fulfillment of norms prescribed in the Scheme, the petitioner approached the Bank, obtained a loan, and completed the project, thus changing his position. Thus, the Court held that the Rules of equity, fairness and promissory estoppel require that the Court should set aside the impugned order on the ground of it being wholly arbitrary, unreasonable and contrary to the terms of the Scheme. 

Coming to the claim of the petitioner for compensation for the losses suffered by him on account of the interest charged by the Bank on the proportionate term loan amount of Rs. 46.90 lakh, the Court held that it required evidence and thus could not be adjudicated conveniently in a Writ Petition filed under Art.226 of the Constitution of India.

Thus, the petition was allowed while directing the National Horticulture Board to release the amount of Rs. 46.90 lakh the petitioner within four weeks from the date of this decision with interest @ 9% per annum from the date of the petitioner making such claim till the date of payment.  The cost of Rs 25,000 was also imposed on NHB. 

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