AZAD JAMMU AND KASHMIR GOVERNMENT VS MESSRS SPINTEX LIMITED
1998 P T D 3200
[Supreme Court (AJ&K)]
Present: Basharat Ahmad Shaikh and Muhammad Yunus Surakhvi, JJ
AZAD JAMMU AND KASHMIR GOVERNMENT
through Chief Secretary, Muzaffarabad and 4 others
Versus
Messrs SPINTEX LIMITED
Civil Appeal No.50 of 1997, decided 25th March, 1998.
(On appeal from the judgment of the High Court, dated 4-6-1997 in Writ Petition No.45 of 1996).
(a) Estoppel--- ----Promissory estoppel ---Principle.
Principle of promissory estoppel seems to be that if one party has, by his words or conduct, made to the other a clear promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is, in fact, so acted upon by the other party that promise would be binding on the party making it and he should not be entitled to go back upon it, if it would be inequitable to allow him to do so. This principle is also applicable to the Government---[M. P. Sugar Mills Ltd. v. State of U.P. AIR 1979 SC 621 overruled].
Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others PLD 1991 SC 546; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917; Union of India v. Godfrey Philips India Ltd. AIR 1986 SC 806; Hughes v. Metropolitan Rly. Co. (1877) 2 AC 439; Birmingham and District Land Co. v. London and North Western Railway Co. (1888) 40 Ch. D 268 and Central London Property Trust Limited v. High Trees House Limited (1956) 1 All ER 256 ref.
(b) Sales Tax Act (III of 1950)---
----S.7---Azad Jammu and Kashmir Government Notification No.FD E/11/(1) Tax II, dated 22-10-1988---Exemption---Effect of the Notification was that the exemption was to come to an end on 30th of June, 1996 irrespective of the date of production of any particular unit---Any brochure issued giving incentive for exemption cannot have sanctity of a promise even if it is assumed that same had been distributed before the initial idea of setting up of plant attained finality.
(c) Finding of fact---
-----Proof---Question of fact must be independently proved---Finding of fact cannot be based on conjectures and surmises but must be based on admissible evidence.
(d) Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974)---
----S.44---Writ petition---Procedure---Writ of any kind cannot be issued to a State functionary unless he is arrayed as respondent and is given adequate opportunity to present his case.
Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others PLD 1991 SC 546; Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917 and M. P. Sugar Mills Ltd. v. State of U.P. AIR 1979 SC 621 ref.
(e) Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974)---
----S. 44---Writ petition---Procedure---Court has to go by the pleadings of the parties and should not allow the parties to travel beyond that---Mere fact that a photostat copy of some document was appended with the writ petition would not warrant that same should have been brought under consideration by the Court.
Union of India v. Godfrey Philips India Ltd. AIR 1986 SC 806 fol..
(f) Azad Jammu and Kashmir Rules of Business, 1985---
----R.15---Consultation with Finance Department---Legal requirement---No Department of the State can issue an order without previous consultation with the Finance Department which directly affects the finance of the Government or which, in particular, involves relinquishment, remission or assignment of revenue, actual or potential---Submission of any such proposal directly to the Prime Minister being illegal, consequent approval by the Prime Minister was also illegal under the Rules of Business.
(g) Azad Jammu and Kashmir Rules of Business, 1985---
----R.15---Consultation with Finance Department Cabinet and not the Prime Minister alone can overrule the opinion of the Finance Department.
(h) Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974)---
----S.44---Writ jurisdiction of High Court---Nature and scope---Order of Prime Minister which was clearly against law could not be enforced by High Court in its writ jurisdiction which was equitable in nature and could not be exercised to implement illegal order even if that be of the Prime Minister.
Hughes v. Metropolitan Rly. Co. (1877) 2 AC 439 ref.
Umar Mahmood Kasuri and Ch. Muhammad Afzal, Advocates for Appellants.
S. M. Zafar and Syed Zahid Hussain, Advocates for Respondent.
Dates of hearing: 22nd and 23rd December, 1997.
JUDGMENT
BASHARAT AHMAD SHAIKH, J.---The respondent, M/s. Spintext Limited, is a public limited company having its head office at Mirpur, and carries on the business of manufacturing of polyester yarn. A writ petition was filed by the respondent on 11th of June, 1996 wherein it was prayed that the Government Notification issued on 22nd of October 1988 may be declared illegal and void, and the Azad Government and other functionaries arrayed as respondents in the writ petition be directed to take all necessary steps to ensure that no sales tax is levied upon the goods manufactured by the company before the expiry of eight years' period from the date of commencement of production i.e. 19th of June, 1991. Calculated from this date, the period of eight years is to end on 18th June, 1999. The standpoint of appellants is that the exemption from payment of sales tax was available for a period of eight years commencing from 1st of July, 1988 and it ended on 30th of June, 1996, and that the date on which the respondent company started production was in no way relevant. A learned Judge in the High Court has accepted the writ petition by upholding the plea that the Government had held out a promise that if an industry was to be set up in AJK during a specified period it would be given eight years exemption from sales tax from date of production and by further upholding the plea that the Government was bound to fulfil the promise under the concept of promissory estoppel. Consequently the High Court has issued a writ to the effect the appellants are not entitled to recover sales tax from the respondent company an the goods produced by it for a period of eight years commencing from the date of production. In addition to that, the High Court has also issued a writ that the appellants are bound to implement the orders of the Prime Minister granting exemption for eight years as aforesaid and has directed that an appropriate order shall be issued by the Chief Secretary and Secretary Finance. Operative part of the judgment is as follows:--
" 75. As upshot of the foregoing discussion and the analysis of the case-law on the subject, the petition is allowed with the following discussions:--
(a) The respondents are not entitled to recover the Sales Tax from the petitioner on the goods produced by it for a period of 8 years from 19-6-1991;
(b) The respondents are also bound to implement the order of the Prime Minister granting the exemption and for this purpose, an appropriate order shall be issued by the Chief Secretary and Secretary Finance;
(c) The amount of Sales Tax realized so far, shall be refunded to the petitioner within a period of two months from the date of this judgment; and
(d) The interest demanded will not be payable if the order is implemented within the time stipulated by the order of this Court. In case the orderis not implemented by the concerned authorities, the interest, at Bank rate will be payable from the last date fixed for the implementation of the order. "
The judgment of the High Court has been challenged before this Court with leave of the Court by Azad Government of the State of Jammu and Kashmir, Secretary Industries and Commerce, Azad Jammu and Kashmir Council, Under Secretary in the Finance Department of the Azad Government and Collector Sales Tax who were arrayed as respondents before the High Court.
We have heard Mr. Umar Mahmood Kasuri in support of the appeal while Mr. S. M. Zafar appeared for the respondent company.
The case set up by the respondent company in the writ petition was that the Azad Government of the State of Jammu and Kashmir announced a policy for industrial investment offering various facilities and incentives to the investors. One of the incentives was that the industries set up from the period of July 1988 to June 1991 will be exempt from payment of sales tax for a period of eight years from the date of commencement of their production. 1t was claimed that in response to the incentive just mentioned an industrial unit under the name of Spintex Limited was set up for manufacturing of polyester yarn at Mirpur which started production on 19th f June 1991. However, when the exemption notification was issued on 22nd of October, 1988 it laid down that the exemption shall be effective for a period of eight years commencing from the date of production. The policy statement is the name given by the respondent company to a brochure issued by the Directorate of Industries and Commerce of the Azad Government of the State of Jammu and Kashmir. A photostat copy of the brochure was one of the annexures in the High Court.
The case of the respondent company, which has found favour with the High Court, was that the policy statement created promissory estoppel and the Government was bound to give to the respondent company full eight years exemption from sales tax from the date of production. It was stated in the writ petition that the Azad Government of the State of Jammu and Kashmir having made a clear and unequivocal representation that if an industry is set up in Azad Jammu and Kashmir the Government shall exempt the industry from payment of sales tax for a period of eight years from the date of commencement of production, it was bound to act on this promise because the plant was set up in response to the abovestated promise. It was the case of the respondent company that the doctrine of promissory estoppel is well established all over the world and has been enforced in Pakistan by the Supreme Court which has held in the judgments pronounced in the cases titled "Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan" (1992 SCMR 1652), "Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others" (PLD 1991 SC 546), "Al-Samrez Enterprise v. The Federation of Pakistan" (1986 SCMR 1917) and some other cases that if any Government makes a representation to any person and that person acts accordingly then the Government is bound to fulfil his promise failing which the Courts can, in exercise of their Constitutional jurisdiction, direct the relevant Government to take necessary steps for implementing that promise or can declare any act of the Government taken contrary to such promise as illegal.
Before the High Court a large number of cases from Indian jurisdiction were also cited in addition to the judgments of the Supreme Court of Pakistan to which a reference has been made above. The High Court has held that the doctrine of promissory estoppel was applicable to 'the present case and the Government was bound to accord exemption prayed for. In para. 60 of the judgment of the High Court it is stated that:--
"60. On the basis of the aforesaid discussion, it is held that the petitioner is entitled to the exemption from the sales tax for a period .of 8 years from the date of starting production i.e. 19-6-1991, on the basis of the principles laid down in A.I.R. 1968 SC 718, A.I.R 1979 SC 621 and 1992 SCMR 1652 "
From the above, it may be stated that the learned Judge in the High Court was mostly, if not wholly, persuaded by the aforementioned judgments, two of which are from Indian jurisdiction. It seems appropriate here to point out that the case reported as " M.P. Sugar Mills Ltd. v. State of U. P." (A.I.R. 1979 SC 621) is no longer good law m India in so far as it laid down that it is not necessary, in order to attract the applicability of doctrine of promissory estoppel, that the promisee should suffer in detriment and what is necessary is only that the promisee should have altered his position in reliance on the promise. This view was overruled by Supreme Court of India in "Union of India v. Godfrey Philips India Ltd."(A.I.R.1986 SC 806).
Apart from enforcing the doctrine of promissory estoppel, the High Court has also held that doctrine of legitimate expectency, which is almost to the same effect as the doctrine of the promissory estoppel, was also applicable to the case.
Before us the learned counsel for the appellants did not dispute the soundness of the doctrine of promissory estoppel as propounded by the Supreme Court of Pakistan. His whole argument was that the doctrine was not applicable to the present case. Therefore, what we are called upon to decide in the present appeal is whether the doctrine is applicable to the present case or not.
The doctrine of promissory estoppel is new to Azad Jammu and Kashmir and has been pressed into service for the first time in the present case by the High Court. In the judgment under appeal the High Court has discussed at length a large number of cases from the Supreme Court of Pakistan and Supreme Court of India but, as mentioned above, followed "The Union of India and others v. M/s. Anglo Afghan Agencies etc." (AIR 1968 SC 718), "M/s. M.P. Sugar Mills v. State of U.P. "(AIR 1979 SC 621), "Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan" ',1992 SCMR 1652). Out of them in the case of Army Welfare Sugar Mills Ltd. all previous judgments of the Supreme Court on the point of promissory estoppel have been referred and analysed at Jength. The origin of the doctrine of promissory estoppel has been traced to the case of "Hughes v. Metropolitan Rly. Co." (1877) 2 AC 439 and "Birmingham and District Land Co. v. Landon and North Western Railway Co." (1888) 40 CH D 268) decided about hundred years ago by the House of Lords. The doctrine was enforced again in 1947 by Mr. Justice Denning, as he then was, in his judgment in "Central London Property Trust Limited v. High Trees House Limited" (1956) 1 All ER 256. This doctrine has also been given the name of "equitable estoppel", "quasi estoppel" and "new estoppel" and is based on equity. This principle is followed in the United States of America and in India. It has also been given recognition in Pakistan in recent years through pronouncements of the Supreme Court of Pakistan. As enunciated by Judges of the superior Courts principle of promissory estoppel seems to be that if one party has, by his words or conduct, made to the other a clear promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is, in fact, so acted upon by the other party that promise would be binding on the party making it and he should not be entitled to go back upon it, if it would be inequitable to allow him to do so. It is unanimous view of the Judges of the superior Courts in Pakistan that this principle is also applicable to the Government. So far as its exposition is concerned the learned Judge who decided the case in the High Court has truly appreciated the doctrine of promissory estoppel and to that extent we uphold it. As noted above, the appellants did not take any exception to the doctrine of promissory estoppel before the High Court. Even in this Court the appellants have taken the same position. As is apparent from the memorandum of appeal, the plea raised by the appellants is that the doctrine of promissory estoppel, as also the concept of legitimate expectation, is not applicable to the present case. We, therefore, proceed to examine that question.
Sales Tax Act was enacted in Pakistan in 1951 and was subsequently adopted in Azad Jammu and Kashmir by referential legislation. The respondent company owns an industrial unit in Mirpur (AJK). It manufactures polyester yarn which is subject to payment of sales tax. However, under section 7 of the Sales Tax Act, 1951, the Government is empowered to exempt any goods or any person from the tax payable under the aforesaid Act. On 22nd of October, 1988 the Azad Government of the State of Jammu and Kashmir issued a notification that all goods produced by industries set up between 1st July, 1988 and 30th June, 1991 anywhere in Azad Kashmir shall be exempt from the sales tax. The notification was to be effective for a period of eight years commencing from 1st of July, 1988. The obvious effect of the notification was that the exemption was to come to an end on 30th of June, 1996 irrespective of the date of production of any particular unit. This notification was challenged by the respondent company in the writ petition on the ground that the brochure under reference held out a promise that the newly set up industries would be entitled to exemption from sales tax for eight years from the commencement of production. Since the case of the respondent company was that it had set up its plant in Azad Kashmir in response to the promise contained in the brochure, the date on which the brochure was published was the most important point to be resolved by the High Court.
In para. 9 of the judgment under appeal the learned Judge in the High Court observed that the first question which was to be resolved was the date or the period when the brochure was published but, before we advert to the finding of the High Court on this point we would like to notice the stand taken by the respondent company on this point. Position taken by the respondent company on this point was in para. 2 of the writ petition which consists of clauses (a) to (k). Clauses (b), (c), (f) and (g) are relevant and are re-produced below:
"(b) In and around the year 1988 the Government of Azad Jammu and Kashmir (Respondent No.10) announced a policy for industrial investment offering various facilities and incentives to the Investors. (copy of the Policy Statement is attached as Annexure "C")
(c)The Clause 3-A of the Policy Statement provided an exemption from whole of the Sales Tax to the industries set up during the period of July, 1988 to June 1991, for a period of eight (8) years starting from the date of commencement of their production.
(f)The petitioner having set up its unit within the prescribed period i.e. July 1988 to June 1991 and having taken definitive steps and fulfilled all the necessary requirements enumerated in the said Policy was entitled to avail the aforesaid exemption from the sales tax and income for eight years from the date of production i.e. from 19-6-1991 to 19-6-1999.
(g)The Respondent No.2, in pursuance of the aforesaid Policy, issued 'a Notification No.FD-E/11(1) Tax, dated 22-10-1988. However, this Notification stated that exemption of sales tax shall be available for eight years starting from 1st July 1988 (as opposed to the said policy which provided for such Exemption to be available for a period of eight years from the date of commencement).
(Copy of the Notification is attached as Annexure E)"
Policy statement mentioned in the averments reproduced above is the brochure of which a photostat copy forms Annexure C in the High Court tile (hereinafter called as the brochure). The averments reproduced above are to the effect that the promise which created estoppel was made through the brochure "in and around the year 1988". The effect of averments made in clauses (b) and (g) reproduced above is that the brochure holding out the promise was issued first and then exemption notification was issued in pursuance of the brochure on 22nd of October, 1988.
In order to determine the date of publication of the brochure the High Court conducted inquiry by recording evidence, apart from perusing the documents, which were already on the file. Documents forming part of an inquiry held by the learned Judge in the High Court in absence of the parties in another context were transferred to the file of the writ petition with the consent of the learned counsel for the parties. The learned Judge came to the conclusion that the brochure was printed in November 1989. This finding is contained in para. 10 of the judgment which will be presently reproduced. This finding is vehemently contested before us by the learned counsel for the appellants by contending that the brochure was published many months later in 1990 but even if the finding given by the High Court is assumed to be true it shows that the stand taken by the respondent company that the brochure was published in and around the year 1988 firmly stands falsified. It is the exemption notification of 22nd of October, 1988, challenged in the writ petition, which was published in the year 1988. There is no other order or promise in that year since the brochure was. as found by the High Court, published in the end of November 1989. The whole edifice of the case pleaded by the respondent company thus fell to the ground when the learned Judge in the High Court, after a thorough probe, reached the aforementioned finding of fact. This finding has been challenged by the appellants by claiming that in fact the brochure was issued many months later but this finding has not been challenged by the respondent. This finding falsifies the claim that the promise was made in and around 1988 that eight years exemption shall be counted from the date of production. It also falsifies the claim that exemption notification was issued after the brochure because the brochure, as found by the High Court, was published in November 1989 but the exemption notification had already been issued more than a year earlier on 22nd of October, 1988. The only promise made by the Government in 1988 was contained in the notification of 22nd of October, 1988 and the Government has not gone back from the promise as its position remain unchanged. It appears that the learned Judge in the High Court did not notice that the stand taken on both these points stood falsified by the finding recorded by the learned Judge. This matter goes to the root of the case because the whole case of the respondent company was based on this question of fact.
We may now turn to the objection raised by the appellants about the finding given by the learned Judge in the High Court that the brochure was published towards the end of November, 1989. The finding is contained in para. 10 which is necessary to reproduce. It is as follows:
"10. The initial impression as shown in the order dated 16-12-1996 is not correct because on the basis of record, it is proved that the brochure was printed twice. The record of Industries Department relating to the brochure was also summoned. There is a note dated 22-11-1989 showing that 'proof' of the brochure was received by the Press which was found correct, except two words. From this it can be concluded that the brochure was printed in November 1989 as after preparation of 'proof' much time was not needed for printing process."
It was vehemently contended by the learned counsel for the appellants that the finding about the date of publication was conjectural. The only fact which was proved was that on 22nd of November, 1989 the proof reading of the brochure had been completed. From this fact it was concluded by the learned Judge that the brochure was published in November 1989.
In our opinion the learned counsel for the appellants is correct in his submission. If the proof reading of the brochure had been completed before 22nd of November, 1989 it cannot be assumed that the brochure was printed in November 1989. It is a question of fact which must be independently proved, but no proof is on the record. It is well-settled that a finding of fact cannot be based on conjectures and surmises. It must rather be based on admissible evidence. The finding is therefore unsustainable that the brochure was published in November, 1989. However, the finding that proof reading of the brochure was completed on 22nd November, 1989 is undisputed and even otherwise based on solid evidence.
On the other hand, on behalf of the appellants, our attention has been drawn to Annexures I and II in the High Court file which have been overlooked by the High Court Annexure I (on page 120 of the High Court file) is a letter written on 25th of June, 1989 by the Director of Industries and Commerce addressed to the Controller Government Printing Press in which request was made for publication of the brochure. It was requested in the letter that the cost incurred on the publication may be intimated to the Directorate of Industries so that money could be transmitted to the printing press before the close of the financial year. Annexure II (page 121 of the High Court file) is a letter written on 10th of March, 1990 by the Directorate of Industries and Commerce to the Manager Government Printing Press in continuation of the letter of 25th of June, 1989 in which it was stated that the brochure has been sent for republication and an amount of Rs.10,000 was paid through a crossed cheque on 29th of June, 1989. It was requested that the total expenditure incurred on the publication of the brochure may be intimated to the Directorate of Industries so that the price per copy of the brochure may be fixed which could be charged from the investors. The letter does not show that printed copies of the brochure had been received in the Directorate of Industries, but even if it is assumed that it was so the letter shows that the brochure had not yet been distributed, and at that stage its price was being fixed. Thus it stands proved that it was distributed at a date subsequent to 10th of March, 1990. In other words the brochure could have, if at all, reached the sponsors of the respondent company in April 1990 at the earliest. The exemption notification had been issued sixteen months earlier.
Now we turn to the time when it was decided to set up a plant at Mirpur. The record shows that Spintex Limited was incorporated under the Companies Ordinance 1984, as adopted in Azad Jammu and Kahsmir, on 17th of February, 1990. It is stated in the Memorandum of Association of Spintex Limited that the company was being incorporated to set up an industrial undertaking in Azad Kashmir to manufacture all kinds of synthetic yarn. Land measuring 119 Kanals and 17 Marlas for setting up of its polyester plant was purchased through a sale-deed registered on 22nd of February, 1990.. The Fard 'Intikhab' was obtained earlier on 4th of February. Incorporation of the company and the sale-deed cannot lie carried out in a short time. These steps were the culmination of along exercise and chain of activities which had to be gone through in common course. The first document which throws light on this subject is a letter written on 16th of October, 1989 by Mr. Badruddin, J. Feerasta, Managing Director of Rupali Polyester Limited having Head Office at 19-Main Gulberg, Lahore, who is also now Managing Director of the subsequently incorporated respondent company, Spintex Limited. The letter is addressed to the Director of Industries of Azad Government in which he stated that "We are now planning to set up an industrial undertaking for manufacture of Polyester Filament yarn from imported chips ..Upon inspection we have observed that the land in the proposed industrial estate is not suitable for our purpose. " The letter concluded as follows:
"We, therefore, wish to inform you that if your good self is in a position to identify and allot us, either from Government holding or through acquire in private holding, a plot of land measuring 35 acres for our Industry, then we are willing to set up our Project in Mirpur. "
This letter was accompanied by another document of great importance known as Project profile' which consists of two pages. On going through the details given in this document it becomes amply clear that when the letter was written on 16th of October, 1989 the project preparation had already reached the final stage because it contains every detail of the project including the implementation schedule. It is stated therein that the project cost will be Rs.730 million, 450 skilled/unskilled persons will be employed in the project and its production capacity will be 7350 tons per annum. It also stated that since the total project cost was less than one thousand million no formal approval of the Government was necessary. According to the project schedule acquisition of land and its development was to be carried out between November 1989 to February 1990 while the machinery contract was to be completed before January 1990. This letter was written on 16th October, 1989 while the proof reading of the brochure was completed on '2nd of November, 1989.
On the record there is another letter written on 16th of November, 1989 on behalf of Spintex (Pvt.) Limited. The subject of the letter is allotment of a plot at Mirpur for setting up of a polyester yarn manufacturing industry. Since the letter throws light on the stage of preparation of the project it is appropriate to reproduce it.
"(A) Further to our Letter No. R.L./468/1420, dated October 16, 1989 and our meeting with the Facility Board dated 14-11-1989, we would like to thank you for the hospitality extended to us. We have requested for following during the meeting.
(1) Land 50 Acres
(2) Electricity 500 KW for 1-1/2 years.
(3) Furnace Oil 700 tons per years.
(4) Telephone 12 lines.
(5)Octroi Exemption for a period of five years.
Upon our detailed checking we found some mistakes in our calculations, and now we need some changes in the above items as follows:
(1)Land 50 Acres.
(2)Electricity 500 KW for 1/12 years
(3)Furnace Oil 10,532 tons per year.
(4)Telephone 12 lines.
(5)Octroi Exemption for a period of five years.
(B)Further to our Feasibility Report submitted during Facility Board Meeting dated 14-11-1989, in section 3 items 3.1, names of sponsors in seriatim may be read as under:
(1)Mr. Allaudin, J. Feerasta
(2)Mr. Nooruddin B. Feerasta
(3)Mrs. Aziza A. Feerasta
We would like to point out that by mistake the name was written as Mr. Nooruddin B. Feerasta (Sr.) instead of Mr. Nooruddin B. Feerasta (Jr.). "
The letter reproduced above shows that the sponsors of the project had already held a meeting with the Facility Board of Azad Jammu and Kashmir on 14th of November, 1989. It also shows that in the meeting feasibility report of the project was placed before the Facility Board and was discussed. It follows that even the feasibility report was ready before 14th of November, 1989. Since feasibility report of a project like polyester plant cannot be prepared within a short time it can be safely inferred that the idea of putting up this plant had matured many weeks, if not months, before Facility Board meeting held on 14th of November, 1989. Leaving aside all other details, the meeting of the Facility Board of Azad Jammu and Kashmir, which was attended by the sponsors with complete feasibility report, was held on 14th of November, 1989 on which date, as found by the High Court, even the proof reading of the brochure had not taken place. It should go without saying that the brochure had not yet been printed. The date of incorporation of the company is 17th of February, 1990 while the sale-deed was executed on 22nd of February, 1990. A short period which elapsed between the meeting of the Facility Board on the one hand and the dates of incorporation and execution of the sale-deed on the other hand unmistakably show that things went according to the plan which had been firmly finalized much before the first letter of Mr. Badruddin, J. Feerasta written on 16th of October, 1989, which is earlier than the proof reading of the brochure. These facts clearly negative the stand taken by the respondent company that it is due to the offer made in the brochure that the plant was set up.
The exemption notification challenged in the writ petition was issued on 22nd of October, 1988. The letters mentioned above and the different stages of preparation evidenced by these letters are all subsequent to 22nd October, 1988, the date of exemption notification. It is clear to us, therefore, that the plant was set up in response to the incentive given, in the exemption when the brochure had not been written.
There is a broader aspect of the matter which is of great significance. In Pakistan a notification under section 7 of the Sales Tax Act was issued on 26th of June, 1988 which was to the following effect:
"Notification No. S.R.O. 529(1)/88, dated 26th June, 1988.--- In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1st of July, 1988, and the 30th June, 1991, in the following areas shall be exempt from the tax payable under the said Act.--
(i)Province of Balochistan except in Hub Chowki area;
(ii)The North West Frontier Province.
2.Sales Tax under the said Act shall also not be levied on such goods produced or manufactured by the industries set up in the Federally Administered Tribal Areas, Northern Areas administered by the Administrator, Northern Areas and Azad Kashmir during the period specified above.
3.This Notification shall be effective for a period of eight years commencing from the 1st July, 1988.
(Explanation.---For the purposes of this Notification the expression "set up" shall mean the date on which the industry go into production including trial production, which date shall be intimated, in writing, by an intending manufacturer to the authorised officer of Central Excise and Sales Tax at least fifteen days before commencing such production.]"
This notification shows that a policy decision was taken at the Federal level that exemption from sales tax will be given for a period of eight years from 1st of July, 1988 to the industries set up in Azad Jammu and Kashmir during the specified period.
On 22nd of October, 1988, the Azad Government of the State of Jammu and Kashmir also issued a notification on the same lines. It reads as follows:
"Notification No.FD-E/11(1) Tax-II dated 22-10-1988.--- In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), as inforce in Azad Jammu and Kashmir, the Azad Government of the State of Jammu and Kashmir is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1st July, 1988 and 30th June, 1991, anywhere in Azad Kashmir shall be exempt from the tax payable under the said Act.
(2)This notification shall be effective for a period of eight years commencing from 1st July, 1988."
A comparison of the two notifications would show that exemption from sales tax in Azad Jammu and Kashmir had already been declared in the notification issued by the Federal Government, and the Azad Kashmir notification was in pursuance of the policy decision mentioned in the notification of Federal Government. It also shows that the exemption from Sales tax was available for eight years commencing from 1st of July, 1988 which was to come to an end on 30th June, 1996 irrespective of the dates on which production was commenced by industries set up during the specified time.
These two notifications were issued in continuation of the policy decisions taken at the Federal level. Being outstanding businessmen in Pakistan, the sponsors of the respondent company should have in ordinary course known about this policy decision which was clearly to the effect that the exemption from sales tax will come to an end on 30th of June, 1996 and will not be available for eight years from the date of production. These notifications were issued under a statute and their ignorance was neither pleaded nor is legally acceptable. These notifications did hold out a promise which bound the Government and created promissory estoppel that has, however, been fulfilled.
It is also our view that in presence of the clear provisions made in the notification of 22nd of October, 1988 that the exemption from sales tax will come to an end on 30th of June, 1996 the brochure cannot have the sanctity of a promise even if it is assumed that it had been distributed to the businessmen in Pakistan before the initial idea of setting up of a plant at Mirpur attained finality. In presence of the notifications issued in Pakistan as well as in Azad Jammu and Kashmir the brochure published under the authority of the Directorate of Industries of Azad Jammu and Kashmir would have given rise to the question as to how the Directorate of Industries was holding out a promise which was contradictory to the two notifications under reference. However, in the correspondence conducted by the sponsors of the respondent-company with the authorities of Azad Jammu and Kashmir referred earlier, no question about this aspect of the matter was raised. In fact this matter was not agitated till 11th of July, 1991, the date on which the first letter was written by the respondent-company to the Director of Industries to agitate this point.
For the reasons stated above it stands disproved that the respondent acted on the promise made in the brochure. The doctrine of legitimate expectency is also not applicable for the same reason.
The High Court has also directed the Chief Secretary and Secretary Finance to issue an appropriate order to implement the order of the Prime Minister giving exemption to the respondent company. In the writ petition no such direction was prayed for. In fact a perusal of the writ petition shows that there is no averment about the aforesaid order of the Prime Minister. However some photostat copies were attached with the writ petition and the learned Judge in the High Court felt advised to requisition the relevant files to checkup the authenticity of the documents. The photostat copies forming part of the High Court file show that Prime Minister of Azad Jammu and Kashmir accepted a proposal submitted to him by Secretary of Industries and Commerce through the Minister of Industries that notification of 22nd of October, 1988 may be amended to the extent that exemption from sales tax may be given for eight years from the date of production. We will deal with the legality or otherwise of this order, but we must begin by noting that the High Court committed two procedural mistakes going to the root of the case in issuing a direction that the Secretary Finance and the Chief Secretary should implement the order passed by the Prime Minister. The basic point is that the Chief Secretary and Secretary Finance were not arrayed as respondents in the writ petition There were five respondents before the High Court which were as follows:
(1)Azad Government of the State of Jammu and Kashmir through, its Chief Secretary.
(1-A)Secretary Industries and Commerce, Azad Jammu and Kashmir Government, Mazaffarabad.
(2)Azad Jammu and Kashmir Council through its Secretary, Azad J andK Council Secretariat, Islamabad.
(3)Under Secretary Finance, Government of Azad Jammu and Kashmir, Muzaffarabad.
(4)Collector Sales and Taxation, Azad Jammu and Kashmir Government Muzaffarabad.
It will be seen that the Chief Secretary was not arrayed as respondent and is only mentioned as the officer on whom the notice addressed to the Government was to be served. It is well-settled that a writ of any kind cannot be issued to a State Functionary unless he is arrayed as respondent and is given adequate opportunity to present his case. There is a chain of judgments of this Court on this point. Some of them are Liaquat Ali v. Municipal Corporation 1997 CLC 692; Barkat Hussain v. Sardar Misri Khan PLD 1992 SC (AJ&K) 45, Muhammad Nazir v. Muhammad Ashraf (PLD 1987 SC (AJ&K) 16), Abdul Hamid v. Muhammad Zatneer (1990 MLD 1617) and Muhammad Resham Khan v. Chairman Inspection Team (1990 CLC 1355).
The second precedural mistake is that a Court has to go by the pleadings of the parties and should not allow the parties to travel beyond them. The order of the Prime Minister, which the learned Judge has ordered to be implemented does not find any mention in the writ petition. The mere fact that a photostat copy of the order was appended with the writ petition does not warrant that it should have been brought under consideration. This Court has upheld this' principle in an unreported case Civil Appeal No.36 of 1994 "titled Raja Muhammad Azam v. Azad Jammu and Kashmir Cooperative Bank Ltd. and others". The relevant portion may be usefully reproduced:
"38: Ch. Muhammad Riaz Alam submitted that the very constitution of the Commission of Inquiry is linked with the publication of the notification in the official gazette, and therefore, the High Court should have quashed the setting up of the Commission as well as the proceedings taken by it. On the other hand Raja Muhammad Hanif Khan submitted that although the certificate issued by the Government Printing Press was attached with the writ petition but there was no averment to that effect in the writ petition. He relied on the known principle that only that evidence can be read while pronouncing a decision which is in support of an averment in the pleadings and that no person can be allowed to produce evidence beyond his pleadings.
39.So far as para. 17 is concerned the contention of Raja Muhammad Hanif Khan is correct that there was no averment in the writ petition that notification had not been published in the official gazette. This point does not find mention in the judgment of the High Court which shows that this point was not raised before the High Court. It is well-settled that only that evidence can be considered by the Court while deciding a case which is in support of the pleadings of the parties. In absence of pleading to that effect no decision can be recorded on this point. No other convincing reason has been advanced before us to show that the High Court was not right in holding that order setting up the Commission Inquiry was bad in law. We, therefore, maintain para. 17 of the High Court judgment. "
Even on merits the High Court fell in legal error in ordering the implementation of the order of the Prime Minister. The order was passed in the background that Secretary Industries wrote a note on 25th of August, 1994 in which he stated that M/s. Spintex Limited should be given benefit of exemption from sales tax for a period of eight years from the date it started production and for that purpose notification of 22nd of October, 1988 should be amended. In para. 3 of the note it is specifically mentioned that the matter was taken up with the Finance Department but that Department had not agreed with this proposal. He proposed to the Minister, Industries that the sanction of the Prime Minister may be obtained for the aforementioned amendment in the notification of 22nd of October, 1988. The Minister sent the file for approval of the Prime Minister who approved it. Mr. Umar Mahmood Kasuri, the learned counsel for the appellants, rightly contended that under sub-rule(1) of Rule 15 of the Rules of Business 1985 no Department of the Azad Government of the State of Jammu and Kashmir can issue an order without previous consultation with the Finance Department which directly or indirectly affects the finance of the Government or which, in particular, involves remission or assignment of revenue, actual or potential. The sub-rule is as follows:
"15. Consultation with Finance Department.---(l) No Department shall, without previous consultation with the Finance Department, authorise any orders, other than orders in pursuance of any general or special delegation made by the Finance Department, which directly or indirectly affect that finance of the Government or which in, particular, involve,
(a)Relinquishment, remission or assignment of revenue, actual or potential, or grant of guarantee against it or grant of lease of land or mineral, forest of water power rights,
(b)expenditure for which no provision exists;
(c)a change in the number of grading of posts or in terms and conditions of service of Government servants or their statutory rights and privileges which have financial implications;
(d)levy of taxes, duties, fees, or cesses;
(e)floatation of loans;
(f)re-appropriations within budget grants;
(g)alteration in financial procedure in the method of compilation of accounts or of the budget estimates;
(h)interpretation of rules made by the Finance Department. "
It is obvious that the proposal was covered by sub-rule (1) reproduced above but still it was submitted for approval of the Prime Minister which was an illegal exercise. The consequent approval accorded by the Prime Minister was also illegal. Under the Rules of Business by-passing of Finance Department in such matters is not allowed.
Not only that, the order passed by the Prime Minister was illegal also in view of sub-rule (3) of the same Rule which runs as follows:
"(3) No proposal, which requires previous consultation with the Finance Department under sub-rule (1) but in which the Finance Department has not concurred, shall be proceeded with unless a decision to the effect has been taken by the Cabinet. Formal orders shall, nevertheless, issue only after the Finance Department has exercised scrutiny over the details of the proposal."
It is clear from the sub-rule extracted above that if it was necessary to over-rule the Finance Department it could only be done by the Cabinet and not by the Prime Minister. Since the order of the Prime Minister was clearly against law, it was not right for the High Court to enforce it in exercise of its Constitutional jurisdiction, which is equitable in nature and cannot be exercised to implement an illegal order even if it be of the Prime Minister. It was held by this Court in "Major Muhammad Aftab Ahmad (Retired) v. Azad Jammu and Kashmir Government" (1992 SCMR 307) as under:
(iii)Even if it is assumed for the sake of arguments that the Prime Minister had made the order for the appointment of the appellant to the post of Superintendent of Police still it cannot be given effect to or enforced by way of issuing writ directing the respondent to issue the order of his appointment to the said post as it is a settled law that the writ jurisdiction cannot be exercised to direct a person to give effect to an unlawful order of any authority even though it is competent authority to pass such an order in a lawful manner. Since, as said earlier, the appointment of the appellant could not be made to the post of Superintendent of Police under the rules the orders of the Prime Minister claimed by the appellant to be the orders of his appointment to the said post being violative of the relevant rules were unlawful and consequently were not enforceable by the High Court in its writ jurisdiction which is discretionary in nature and its exercise is always refused where the ends of justice and facts of the case do not justify and call for to do so."
For the reasons enumerated above, the direction given by the High Court that order of the Prime Minister for amendment of the notification of 22nd of October, 1988 was not warranted and we have no hesitation in setting it aside.
As an upshot of the above analysis, the appeal is accepted and the writs issued by the High Court are recalled. Consequently the writ petition filed by Spintex Limited shall stand dismissed. Costs will follows.
M.B.A./279/SC(AJ&K) Appeal accepted.