Inordinate delay in processing complete subsidy applications under NMFP constitutes a compensable committed liability under promissory estoppel.

In brief

The question

1. Whether the Respondents were justified in rejecting the petitioner’s claim based on the delayed submission of documents required for the release of funds as opposed to those required for the approval of the proposal

The court held

The Court set aside and quashed the Speaking Order dated 15.12.2023 as arbitrary and unreasonable

It also directed

The Court held that the Respondents are estopped from denying the benefits of the NMFP scheme to the Petitioner and directed Respondents No. 2 and 3 to constitute a Committee within six months to evaluate the Petitioner's 2014 application based on original application documents (Clause 9)

01Facts

The petitioner, a bakery unit, applied for a financial grant-in-aid for technology upgradation and expansion under the National Mission on Food Processing (NMFP) Scheme on 26.03.2014

p. 13

The District Industries and Commerce Centre (DICC) recommended the proposal on 27.03.2014, certifying compliance with documentation requirements

p. 14

However, the State authorities failed to process the application before 01.04.2015, the date the Central Government delinked the NMFP from Union Budget funding

p. 29

In a previous round of litigation (WP(C) 8249/2017), the Court directed the State to consider the petitioner's representation

p. 17

On 15.12.2023, the Respondent rejected the claim via a Speaking Order, citing that the application was "incomplete" because a Surety Bond and CA Certificate were submitted only on 16.04.2015, after the scheme's delinking, and therefore no "committed liability" existed

pp. 27-29

02Issues

i.1. Whether the Respondents were justified in rejecting the petitioner’s claim based on the delayed submission of documents required for the release of funds as opposed to those required for the approval of the proposal

p. 27 / para. 42

ii.2. Whether the petitioner's claim falls under the ambit of "Committed Liabilities" which the State was directed to honor post-delinking of the scheme

p. 43 / para. 69

03Law Applied

Doctrine of Promissory Estoppel, which prevents a party from backing out of a promise when the other party has acted upon it to their detriment

pp. 41-42

Wednesbury Principles of Reasonableness, asserting that a decision is void if it considers irrelevant material or ignores relevant material

p. 40

Obligation to eschew irrelevant considerations as established in Soni v. Union of India and the test for irrationality in Rameshwar Prasad (VI) v. Union of India

p. 40

NMFP Guidelines (2013-17), specifically distinguishing between Clause 9 (documents for application) and Clause 8 (documents for release of installments)

pp. 32-33

04Reasoning

The Court found that the Petitioner had submitted all documents required under Clause 9 of the Guidelines for the consideration of the proposal by 29.03.2014

p. 31

The Respondents' primary reason for rejection—the "late" submission of a Surety Bond and CA Certificate in April 2015—was found legally flawed because those documents are only required under Clause 8 for the release of funds after a sanction is granted

pp. 32-33

The Court noted that the Respondents failed to process the application for over a year despite having the necessary materials

p. 34

By taking out loans and investing capital based on the scheme's promise, the Petitioner triggered the Doctrine of Promissory Estoppel

pp. 42-43

The Court further determined that the term "Committed Liabilities" in the Central Government's delinking letter dated 27.03.2015 must include entities that changed their position based on the scheme's representation, regardless of whether formal SLEC approval was finalized, provided the delay was due to administrative inaction

p. 43