The Calcutta High Court has held that the Joint Secretary to the Government of West Bengal (respondent) has adopted an overly strict and technical interpretation of the West Bengal Incentive Scheme, 2013 (WBIS 2013), which defeats the beneficial object of the incentive framework. Once the petitioners (manufacturing units) are found eligible under the Scheme and have been granted benefits thereunder (Power Subsidy), their eligibility for being granted the “Interest Subsidy” ought to have been construed liberally and purposively.
Accordingly, the High Court quashed the order of the respondent authority in denying the benefit of ‘Interest Subsidy’ to the petitioners under the West Bengal Incentive Scheme, 2013, and directed that the petitioners, having been held eligible under the Scheme pursuant to the relaxation granted by the competent authority, are entitled to be granted the “Interest Subsidy” on the term loan availed and utilised for the project in question, in accordance with Clause 10 of the said Scheme. The respondent authorities were directed to immediately allow and disburse the “Interest Subsidy” within a period of eight weeks.
A Single Judge Bench of Justice Rai Chattopadhyay observed that the credit liability undertaken by the petitioners at the time of implementation of the project was ultimately reimbursed with the aid of the term loan issued by SIDBI. Therefore, the respondent’s finding that the petitioner’s project has been an ‘own financed’ one, and thus ineligible for “Interest Subsidy”, is erroneous, unfounded, a result of non-application of mind, and arbitrary in nature.
The Bench noted that there is a clear verdict by the respondent authority regarding the eligibility of the petitioners under the Scheme of 2013, as evidenced by the letter dated April 12, 2017, and the fact that the petitioners have already been granted “Power Subsidy” under the same Scheme. The Bench held that once eligible, the substantive requirements under the Scheme are fulfilled, and the scope or procedural conditions of the Scheme are subject to liberal interpretation to secure the same from defeating the purpose of the legislation.
Further, the Bench emphasized that WBIS 2013 is a beneficial incentive scheme intended to encourage industrial growth and financial viability of emerging projects. The Bench observed that procedural or technical requirements should not be construed so rigidly as to deny substantive benefits, particularly when the essential conditions stand fulfilled. Since the petitioners did ultimately avail a term loan from SIDBI that was integrally connected with the project and incurred interest liability, the substantive condition stands satisfied.
The Bench also asserted that once relaxation has been granted, the respondent cannot, in a fragmented manner, extend the benefit of eligibility under the Scheme and simultaneously deny a core component thereof, unless expressly prohibited. The interpretation adopted by the respondent results in rendering the relaxation illusory and ineffective, defeating the doctrine of harmonious construction. The respondent’s argument that the loan must precede the commencement of production amounts to elevating a procedural sequence into a substantive disqualification, which is neither expressly mandated nor consistent with the object of the Scheme.
Additionally, the Bench observed that the impugned order dated February 22, 2019, amounts to a reinterpretation of the respondent’s earlier order dated April 12, 2017, practically nullifying its effect. An authority cannot reinterpret its own earlier order in a way that effectively nullifies or defeats its original intent, as this amounts to arbitrariness.
Briefly, the petition is directed against an order issued by the Joint Secretary to the Government of West Bengal, which refused the prayer of the petitioners for the grant of “interest subsidy” on a bank loan under the West Bengal Incentive Scheme, 2013 (WBIS 2013). The respondent authority contended that the necessary preconditions for availing “Interest Subsidy” under the Scheme, namely, vetting of the project report prior to implementation and availing of a bank loan before setting up the project, were not fulfilled, thereby categorizing the petitioner company as an ‘own financed unit’ ineligible for the benefit.
The petitioner company, a recognized small manufacturing unit, had initially applied for a loan from the Central Bank of India on March 1, 2014, which was sanctioned but not availed. Subsequently, the petitioners applied for a term loan to the Small Industries Development Bank of India (SIDBI) on January 19, 2015. During the pendency of this application, the petitioner procured machinery from M/s. Hindustan Steel Industries on credit, with an understanding that the bank would directly disburse the cost amount to the vendor upon loan sanction. The manufacturing activity and commercial production commenced on February 10, 2015. The SIDBI later appraised the project report on April 2, 2015, issued a “Letter of Intent” on April 24, 2015, and disbursed an upfront term loan of Rs. 3 crores on June 8, 2015, out of which Rs. 98 lakhs were directly disbursed to the vendor.
The petitioners applied for the incentive on October 13, 2015, which was initially refused on December 7, 2016, on the ground that commercial production started before the approval of the project, violating sub-para 7.1 (iv) of the Scheme. However, vide a letter dated April 12, 2017, the Special Secretary to the Government of West Bengal relaxed the condition of eligibility, stating that SIDBI’s appraisal and approval would be taken into consideration to make the unit eligible under the scheme, relaxing the provision laid down for own financed units. Despite this, when the petitioners applied again on October 5, 2018, the respondent refused the “Interest Subsidy” component via the impugned order dated February 22, 2019, stating that the relaxation did not guarantee eligibility for all components and the unit was deemed an own-financed unit.
Appearances:
Advocates Siddhartha Banerjee, Shaunak Ghosh, Rajib Mullick, Shreyashi Maity, and Sonia Mukherjee, for the Petitioner
AGP T.M. Siddiqui and Advocate Suddhadev Adak, for the State
Advocates S.K. Singhi, Riti Basu, Piyali Pan, and Diptendu Acharya, for the Respondent No. 4
